Miles and Points Archives - Page 9 of 10

Mar 01 2017

Irrational Investment Influence

I’ve been thinking about irrational investment influence a lot lately (a term I just made up – one not nearly as catchy as funge). Here’s how I define irrational investment influence.

Irrational investment influence (n.) – when a buyer feels pressure to extract maximum value out of a purchase they have already paid for. Often stress inducing pressure.

If you think about it, this happens often, but what really kicked off this line of thought was Stefan Krasowski’s (Rapid Travel Chai) comment on my probably badly named but I’m not going to change it now post “Dos and Don’ts on your first day at Walt Disney World“.

He wrote, “As a non-parent who occasionally visits Disney I often wonder how many visits are set up for what parents want their kids to want rather than what the kids want. The huge mental and financial investment parents make on such trips creates tremendous pressure. It seems that most kids would be happier just to play in a hotel pool most of the vacation.”

When you've spent lots of time or money on a trips or status, you might experience some irrational investment influence. What that is and how to avoid it. — Wait – why did you drag me here again?

This is so true! When you’ve made such a big commitment, you put yourself and your kids through stressful situations to make it “pay off”. Since you have assigned your experience a certain amount of worth, monetarily and mentally, you can feel pressure to make it “worth it.” To me, this is irrational investment influence.

There’s also another side to irrational investment influence. When you’ve paid a lot of money for something, you can also be biased into rating your experience higher than you thought! Look no further than my post yesterday about why staying at a Disney resort is worth it. It’s a perfectly valid question to ask whether I think it’s worth it because I paid more for it. Psychology is a funny thing.

Anyway, here are some examples that I thought of where irrational investment influence can play a big role and my thoughts on the best way to combat it.

Example 1: Disney World

Look, everyone knows I love Disney World. I’ve probably lost readers because I won’t shut up about it. But Disney World definitely requires a great deal of commitment. Forget the cost (which remember can be very tough to travel hack) – if you don’t invest a lot of time in planning your Disney vacation you might just end up waiting three hours to see Anna and Elsa and do little else (true story, not mine).

So parents (or even adults) have put in a lot of time to planning the “perfect trip” and feel the pressure to make it come off perfectly. That can cause a lot of stress, especially when you find out your four year old suddenly fears almost every single ride! (True story, mine). You’ve spent a bunch of money to go to Disney World and suddenly your kid doesn’t want to do anything. You’ve made the perfect touring plan but it gets blown up when you need to stop to say hi to Pluto on Main Street (don’t do it!). Disney World, like Stefan commented, creates a lot of irrational investment influence.

Since you’ve spent so much you might be tempted to believe your entire trip was magical too. Heck, you get told that every step of the way. So you might have an overinflated sense of how fun your time was there – just because you don’t want to admit to yourself that it wasn’t fun. Beware irrational investment influence!

Example 2: 25 Hyatt stays in 2 months for 2 years Globalist status

People have bent over backwards the last two months (or at least sideways) to rack up 25 stays at Hyatt properties. This gives them Globalist status for two years which should be pretty great!

Now I can’t speak for people who have done this, but I can tell you quite honestly that if I had two years of Globalist status I’d experience irrational investment influence out the wazoo. I’d probably have had to pay $1500 in mattress runs give or take to have made the 25 stays. I would have invested a lot of time, energy, and money in making 25 stays in 59 days (!). Suddenly I’d be feeling pressure to:

Stay in Hyatts as much as possible the next two years
Travel more so that I could stay in Hyatts more to make that $1500 I spent “worth it”
Enjoy those stays because they cost so much dag nabbit!

I know my personality and that’s exactly how I felt. Heck, I felt that way when I “earned” Diamond status by being awake and on Twitter on the right night at the right time. AKA even when Diamond cost me nothing I felt those three things, imagine how I’d feel with time and money invested! So I encourage all you new Globalists out there to avoid irrational investment influence – just have fun with it!

Example 3: Points don’t care how much you paid for them

Here’s a simple reminder (courtesy of Saverocity’s newest blogger indyfinance). Once you’ve earned your points, they don’t care how much you pay for them. Don’t get caught trying so hard to redeem them for maximum value that you don’t redeem them at all. Just redeem them! If you don’t, your cost/benefit ratio is infinity. Personally, I find if I earn at less than a cent per point I can generally redeem liberally without worrying about getting the raw end of the deal. Just my general rule of thumb.

How to combat irrational investment influence

I’m not saying irrational investment influence is bad, by the way. I think of it as a natural psychological phenomenon. But I do think it’s important to be aware of it so you can be rational about the value you are getting.

1. Remember your investment is a sunk cost

For me, I first try to remind myself that any investment I have made is a sunk cost. Sunk cost basically means – you’re not getting that money (probably) or time (definitely) back and whatever you do from this point on will not change that. Practically it means you just have to enjoy yourself! We can’t ride Seven Dwarves Mine Train because you’re scared even though you’re tall enough and I have a FastPass for it and I really want to go? OK let’s just go enjoy this Dole Whip together and appreciate the quality time we get to spend together! (Is what I should have said.) Worrying about how much something cost or how much time I spent on it will just detract from the experience. I have a post planned for Disney World with a child who isn’t into the rides – there’s tons of stuff to do.

Update: a helpful Facebook comment reminded me the technical term is loss aversion and the sunk cost fallacy, though I’m not sure loss aversion covers the psychological pressure to enjoy yourself.

Update 2: Wikipedia is fun!

2. Try to remain objective about your experience

Secondly, I try to constantly remind myself to be objective. Like, OK, I love eating chicken fingers on this cruise every single night after dinner (I’ll let you decide whether that’s a true story or not). But if I’m being honest the chicken fingers are just OK. That doesn’t take away from the value of the trip at all since I’m enjoying the heck out of eating them! Or hey, I won’t be surprised if Hyatt still applies its benefits a bit unevenly. That’s fine, too! I don’t need to irrationally pretend otherwise.

At least for me, I find that when I’m not being objective I end up feeling the most disappointed. I keep telling myself how much fun I’m having until I can’t lie to myself anymore.

3. Remember your travel priorities

Finally, I remind myself about my personal travel priorities. I love getting a great deal, Disney World, suite upgrades, and first class flights. But I love my family more. Was I disappointed I didn’t get ride 7DMT on my last trip? Of course, but M and I had so many other great experiences together and that’s what matters in the end. And hey, maybe she’ll still ride it with me one day.

I travel hack so that our family can have fun breaking out of our everyday routines. We get to experience new places and environments for less money. So however much a given trip costs, low or high, I need to remind myself that the goal is spending time together as a family on the road. Sometimes I succeed in this reminder, sometimes I fail, but I always find that the more I ignore my irrational investment influence, the more I enjoy the trip.

Final Thoughts

My guess is everyone has similar experiences though they may have better ways of coping. It’s the classic “I bought my kid this toy and all they want to do is play with teh box” thing. I gave examples that especially play on my tendencies – Disney and things like status I tend to be more irrational about than other things (like I couldn’t care less about what kind of car the rental agency gives me). What holds the greatest irrational investment influence over you or what did I miss?

Feb 26 2017

Load prepaid gift cards to Amazon to get rid of small balances

Here’s a quick hit for your Sunday morning. Maybe you knew this already or maybe someone wrote about this already, in which case why didn’t you tell me? 🙂

Anyway, I loaded $150 of Amazon gift cards this morning (compensation for my Delta delay this month) and when I was done I noticed this graphic:

It’s extremely likely that I knew this once and forgot. Regardless, I had a Staples prepaid card worth $7.98 (printer paper rebate) just sitting around so I figured I’d try it out. It’s an extremely straightforward process.

First, after starting at the above page, I clicked “Reload your Balance”. I then added my payment card in as a payment method, which annoyed, but oh well.

I then needed to input my billing address; I just used my home address. My guess is for some prepaid cards you need to actually register them, though I haven’t played around with that. After that, I just reloaded my balance normally using my new card for exactly $7.98. After that, I was told it might take up to five minutes. It indeed took five minutes!

Anyway, one less tiny gift card denomination for me to worry about. When I was heavy into 5backs, I’d find myself with all sorts of random denominations left on my cards because I’d use the 5back for walking around money. I’d always end up draining with multiple swipes but that was kind of annoying. So it’s good to have another source, especially one I can use at home!

If you find yourself with prepaid cards that have sort of useless balances on them and want to save the headache, Amazon is a simple way to deal with that. Just don’t forget to delete the payment method after so your payment list doesn’t get too cumbersome! Now go enjoy your Sunday. 🙂

Feb 17 2017

Why you shouldn’t combine Thank You point accounts

Update: Points were returned to me within a day.

If you’re like me, it’s possible you have multiple Thank You point earning credit cards. A couple of years ago, when I first got into Thank You points, I thought the ability to combine Thank You point accounts was great. I figured it was like Ultimate Rewards, I can just see all my points together and transfer them back and forth as needed.

Here’s a little story about why you shouldn’t combine your accounts.

After you combine your Thank You accounts, it’s impossible to tell which card your points have come from. Citi just “conveniently” combines everything into one number. This doesn’t matter until you inevitably want to cancel one of your cards.

After you cancel a Thank You point earning card, you have 60 days to redeem points associated with that card before they expire. The problem is, you have no idea how many points that is thanks to Citi’s Thank You point website.

It's generally a bad idea to combine your Thank You point accounts before you have to. Here's my story explaining why I avoid doing it. — There’s no telling which account your points came from post-combining

Here’s what happened to me. I cancelled the Thank You Premier card a few months back. After I cancelled I called Citi twice, asking them to confirm how many points I had associated with the card. I was twice told something on the order of 7,900 points, so I simply transferred 8000 points to Jetblue before 60 days was up.

Welp, I logged in today and my balance has dropped by over 30,000 points. Apparently there were more Thank You points associated with that account than the 7,900!

I called and after Mr. Unhelpful CSR forwarded me along, Helpful CSRs 2 and 3 said they will escalate my claim. Basically, they are going to go back and listen to our phone calls and if they hear the 7,900 number they will reinstate all the other missing ones. I’m not too worried, but I’m definitely annoyed at myself. All this could have been avoided by keeping my accounts separate in the first place.

One of the major reasons to combine in the past was to make sure all your points could access the Citi Prestige 1.6 cents per point uplift on American Airlines. Since that’s going away, there are fewer and fewer reasons to combine early. Combine when you need to combine, keep separate the rest of the time! That will be my Citi Thank You point mantra from here on out.

It's generally a bad idea to combine your Thank You point accounts before you have to. Here's my story explaining why I avoid doing it.

Jan 31 2017

How I decided between the multitude of travel options to Orlando

For some reason, domestic travel stresses me out more than international travel. Booking the travel, that is. The reasons for this are pretty simple – international travel presents way fewer options. If I’m trying to book a premium cabin with miles (which I try to do), then my options really boil down to how persistently I check award space.

Domestic travel between cities like Boston and Orlando, however, can be booked any number of ways:

Cash
Cash Equivalents (ThankYou Points, Ultimate Rewards, Membership Rewards, Flexperks)
Airline miles (fixed value)
Airline miles (region based)
Airline miles (distance based)
Gift cards

As I like to do from time to time, I’m going to break down my thought process and how I decided to book my flights. Surprise surprise, I screwed up! Oh well…

Parameters

I have reached the point in my life where traveling with kids, I now refuse to

a) fly with a connection (at least for destinations within 2-3 hours)

b) leave super early or super late

That meant that there were only four options: Delta, Jetblue, Spirit, or Southwest. Since I try to spend cash last (TM Free-quent Flyer), I dismissed Spirit immediately. This also helped me avoid any carry on bag fee calculations.

For various reasons, I also only needed to buy a one-way flight. That meant that Flexperks were probably out, since the cheapest award you can get is for a flight up to $400. The cash prices weren’t going to approach that.

Checking cash prices

Due to my parameters, I quickly cut down my options. Since UA and AA both don’t have direct flights, I eliminated distance based mileage options (British Airways or ANA). I’m not sitting on any gift cards to any of those airlines, so I eliminated that option as well.

booking travel — Hmm a few days out – these flights must not be too full since the prices haven’t gone up too much

I knew that the majority of my remaining options were going to be a function of the cash price for flights. Cash, cash equivalents, and fixed value points are all tied to the going rate for the flight you want.

So I threw my city pair and dates into my favorite flight search engines (Kayak and Google Flights) and found that the cheapest non-stop flight was around $175 (Delta). Jetblue was going at around $200 and I think Southwest was pricing out at like $240 (I threw this out after looking at the cost in both cash and points so I forget).

Converting cash prices to cash equivalents

Once I had the cash prices in hand, I set about looking at how much those flights would cost if I paid with cash equivalents. I’ve learned to not worry about how much I earned the miles for in general and instead just focus on how much value I’m getting at the time.

So the cost of these flights with cash equivalents was pretty easy to calculate:

Membership Rewards (Business Platinum): 17,500 cents / 1 cents per point = 17,500 MR points

ThankYou Points (Citi Prestige): 17,500 cents / 1.3 cents per point = 13,461 TYP

Ultimate Rewards Points (Chase Sapphire Reserve): 17,500 cents / 1.5 cents per point = 11,667 UR points

The Jetblue flight cost about 15-16,000 points, I can’t remember exactly. Anyway, at this point Ultimate Rewards were looking pretty good but I still had to check region based mileage programs.

Delta Air Lines, Boston’s hidden gem

I shall not continue beating the dead horse. But suffice it to say, Delta’s website showed three award seats available for 10,000 points each. This looked like a better deal to me than all of my other options, so I booked the tickets. I made sure to pay the taxes and fees with my Delta Gold card so that I’d get a free checked bag (a mistake I’ve made in the past).

10,000 points for $175 tickets felt like a great deal – especially since Delta miles feel less valuable than UR points, my next cheapest option. Getting a value of over 1.5 cents per point felt like a real win. Except.

My foolish mistake

At this point, savvy readers probably already know what I messed up. Robert Dwyer, ever the voice of reason, pointed this out to me after I had already booked. Since I have the AMEX Business Platinum AND Delta is my airline of choice, I could have gotten 50% back off a pay with points redemption.

Short version: I could have paid 17,500 points for the flight, but get 8,750 points back for a total cost of 8,750 MR points AND mileage earning. Dooooooooooooh.

Final Thoughts

I’m still shaking my head at myself for missing that. The great things about miles and points are you have a ton of options to save money, but having lots of options means you sometimes miss the obvious one. Hopefully, running through my thought process will help some of you avoid that mistake and help inspire you to think through all your options as you plan travel. And hey, even though I could have saved a few miles, I got a travel related post out of this and fulfilled the bossman’s wishes!

Jan 16 2017

How to start travel hacking when your budget can’t hack it

On the last Observation Deck podcast, I had the pleasure of talking to Jonathan Khoo and Joe Cortez about a wide variety of topics. I’ve always loved having Joe as a co-host because he’s not constantly trying to travel hack like Trevor or myself, he just genuinely loves talking travel. He asked a rather poignant question after Jon shared how his family had inspired a love of travel at an early age.

Joe asked, “For folks like me, who are starting…with a little bit of a disadvantage [socioeconomically] and have that wanderlust, want to see the world – how do they start?”

I appreciated his honesty and it actually hit on something I’ve been thinking about. I’d say that the majority of travel hackers, at least bloggers and those fairly active in the community, strike me as middle class and up. While I’m sure there are a number of notable exceptions, when people are talking about staying in Hyatt 25 times in 2 months (no judgment here just an example), we are at least starting at a baseline with some level of privilege or “advantage” as Joe phrased it.

I’ve long said that even without miles and points, my family would likely travel as much as we already do. We use miles and points to subsidize or upgrade our travel, and I think many people fall into that same category. Still, because I love travel so much, I’ve been thinking about what advice I’d give to someone who wants to get into the travel game who might be starting at an economic disadvantage? And for the record, I’m not saying everyone needs to travel, but if you want to and think you may not have the means, here are some ideas about how to get started.

1. Make travel a priority mentally, emotionally, and financially

Every family needs to prioritize their recreational budget. If you’re super rich, a lot of times you might be in a both/and situation. Or you’re deciding between taking a trip and putting money in your retirement account. If you’re on a tight budget, when it comes to recreation you might be staring down a lot more either/or situations.

If that’s the case and you still feel the wanderlust, then it’s important to make travel a priority. My daughter just got her first piggy bank. She loves putting money in there, but as a four year old, she doesn’t really have any major goals for the money! But we keep encouraging her to set that money aside (aka spare change she finds lying around the house), and…I dunno one day I’ll figure out how to explain to her the value of saving.

But like Joe Cortez said on the podcast, if you want to travel it’s good to be regularly saving to do so. I like having a separate travel bank account – if the money never makes it into my day to day account I’m never tempted to spend it and learn to live without it. Then I can use that account exclusively for my travels.

But ultimately I think it’s about priorities. Where there’s a will, there’s usually a way.

Lots of people want to travel hack, but sometimes they may not think they have the means to do so. Here are some ideas about how to get started. — Saving takes time and commitment

2. Work to get your finances in order

For most people, traveling regularly will likely take some measure of fiscal responsibility. There are too many factors at play here, but at the very least, I would say if you’re serious about travel hacking, you really want to avoid credit card debt. Many travel hackers utilize good credit scores for credit card sign up bonuses which springboard a lot of the travel that they do. Getting rid of debt can be difficult, but you probably don’t want your travel expenses to run into more debt. Figure out what the best fiscal plan is for yourself and your family as you try to enter the travel hacking world.

3. Familiarize yourself with deal sites and good deals

The good news? There are lots of great deals to be had: from flights, to hotels, to rental cars. By utilizing sites like Google Flights, airfarewatchdog, and The Flight Deal, you can save hundreds of dollars on flights. There are plenty of inexpensive hotel deals to be had and there are many ways to save on rental cars (for both, an easy thing you can do is keep checking prices and rebook if it drops. Autoslash will even do it for you for cars).

More importantly, like Jon said on the podcast, if you start searching for deals – even if you don’t plan on going anywhere – you start getting a feel for how much travel normally costs and how much you can potentially save when the deals come around. I used a misguided attempt at a metaphor related to jeans, but basically, you learn to recognize what is cheap and can make decisions accordingly. This information becomes even more important when you are working with a limited budget.

4. Learn to drown out the noise

As you get further and further into travel hacking, you’ll undoubtedly come across a ton of “influencers” (a term I’ve cribbed from mommy bloggers). There are blogs, there’s social media, there are conferences – you will be subject to tons of influence, both direct and indirect. It’s important to recognize these influencers have a variety of motivations and to use that knowledge wisely. For example, Free-quent Flyer made a pretty strong argument for ignoring the advice of affiliate bloggers who receive a commission when you are approved for a credit card through them. He himself would love for you to sign up for a subscription to support his work. My blog runs ads so of course I’m happy when people click on it, though unlike FQF, it’s just for beer money. Well, he probably uses all his money on beer too.

Influencers have a variety of motivations for the work they are doing; make your decisions armed with the knowledge of who is influencing you and why.

Another form of influence is that subtle influence that comes from having a community of people who all love to travel. What? X, Y, and Z are in Hong Kong? Maybe I need to be planning a trip? Someone found a new amazing deal to go to Europe? Maybe I should jump on it. I’ve written about the fear of missing out in the past, and that’s a very real thing, something I feel all the time. But in the end, if you’re trying to travel hack and working with very limited capital; drown out the noise and figure out what’s most important for you. Your goals should be your #1 influencer. Or like Dia and Matt say more colorfully, don’t worry about what everyone else is doing.

5. Use credit card sign up bonuses responsibly

Piggy backing off drowning out the noise, if and when you get into earning credit card rewards through sign up bonuses, make sure you use them responsibly. There are many facets of this but two at least jump out at me for those on a limited budget.

First, you don’t want to bite off more than you can chew. Make sure you can comfortable spend enough money to earn that sign up bonus without adding to your financial stress. The classic example is buying more than you normally would. Going out to lunch an extra time a week can add up quickly and the temptation can sneak up subtly.

The second obvious mistake is buying into the hype about X credit card and having no idea how to use the rewards you earn. The 100,000 point sign up bonus (still available in branch until March 12) on the Chase Sapphire Reserve is great, if you know how to use the rewards. Make sure you do your research and have a plan for the miles and points you earn. That fits right in with my next point.

6. Decide where you want to go and start saving towards it

If you want to travel hack, you have to have goals. Your goals don’t have to be incredibly specific (like “I want to go to Bucharest”), but they need to be specific enough to give yourself a road map for your plans. Some destinations are easier to hack than others. Find out what you need to do to get where you want to go and start saving cash, miles, or points to get yourself there. Find a good community of people who are willing to help, there is an amazing travel hacking community out there! Like I said at the top, if you want to travel hack you need to make it a priority, just like any other hobby in life. Which brings me to my final point.

7. Start small

Rome wasn’t built in a day, and travel hackers aren’t either. Techniques are constantly evolving, program terms are constantly changing; there’s a lot to keep track of! Just start small and get your feet wet. Like any hobby, it’s most difficult to get started, but once you do you’ll start learning, then traveling, and then all of a sudden you will be in a virtuous cycle. With each successive trip you might just find your wanderlust increases a little bit more. And that’s fine, maybe you’ll work your way up until the point where it’s a full time obsession!

Final Thoughts

Hopefully if you’re new to all this I’ve given you some good ideas about where to start. There are plenty of amazing resources out there, and I’m always happy to answer any questions you might have. I’m no financial expert, so take everything I say with a grain of salt, but I think even if you’re working with limited means, these steps should help get the ball rolling. Happy trails!