Thoughts Archives - Page 8 of 9

Feb 10 2015

If I had a million dollars… (“Free” money)

A friend of mine recently received a $1000 bonus at work and jokingly remarked, “I’m going to go spend this all on clothes now.” I laughed since there was a shade of truth to the comment, but it really stuck with me so I wanted to type up my thoughts and get some feedback.

Compounding my deep thoughts was the fact that on my drive home that day Barenaked Ladies came on the radio with “If I Had a Million Dollars.” That whole song is espousing the mentality of spending “bonus” money on nice things – the line from that song that really gets me is “We’d take a limousine, ’cause it costs more.” ‘Merica.

I mean, I probably would strongly consider buying a house... — I mean, I probably would strongly consider buying a house…

Let me start by saying I will never be mistaken for a “Mustachian“, I don’t have any pressing desire to retire early or even achieve complete financial independence – I kind of have the personality where if I didn’t have a job I’d completely waste all of my time. And if I had financial independence I’d probably just waste all my time at my job if I still had one.

I’d say my instincts are still more to save first though, I don’t mind spending money on nice things but I’m also not going to waste money on things for mere convenience (though that standard has been getting a bit more lax with the kid and simplicity/convenience has been winning out more).

Also let it be said that I have a wife who thinks I waste money on everything. The point to this is not that I agree with her that my spending is wasteful, but that while I believe I am likely a bit more frugal than average, my wife ensures that our household is definitely more frugal than average (at least in my estimation). Blah blah blah okay moving on.

There’s something psychologically interesting about getting free, bonus, unexpected, or whatever you want to call it money. At least for me, my natural inclination goes something like this:

– Wow, free money

– I should spend this on something cool since I didn’t expect it and it’s above budget so I can “splurge”

– Oh, but wait, maybe I should save this money

– But that’s kinda no fun, I mean, it was unexpected and free after all!

– Alright fine, I’ll just splurge a little, say, 10-20% of the lump sum, and then save the rest

– New video games!

I don’t think I’m too unusual. The psychological draw of free money is so great that people don’t have any problem throwing money at lottery tickets or purposely withholding more taxes so that they receive a refund in April.

Even when I save the free money I get (and I tend to do this more often than not), something about the money being “free” has an effect on me. Like, what I should and would do is invest the extra money where the rest of my money is – in regularly rebalanced low cost index funds. But if I got a $1000 bonus, I might tell myself, “Hmm…they’ve been opening a lot of Whole Foods lately, maybe that’s worth a $1000 investment.” Semi-true story there, by the way.

Hmm...one of these would be nice — Hmm…one of these would be nice

Or maybe I’d use the $1000 to update the tile in my bathroom. Or buy a new TV. Etc. etc. I’m not saying any of these are bad ways to spend the money, I just find it interesting that these are the ideas most people default to instead of paying down debt or saving.

Speaking of which, I will posit there is one “bad” use of a $1000 bonus – using it for anything besides your credit card debt if you have any (which you shouldn’t!). I wouldn’t necessarily automatically pay my mortgage, student loans, or even a car down with a bonus (it’d be prudent I think but completely unfun, also depending on your returns there is a debate to be had), but buying a $1000 TV while paying 18% on $1000 of credit card debt is just ridiculous.

As my thoughts meandered, I also wondered if this concept of “free” money and its psychological effects extend to the world of points and miles. My guess is it does – at least it does for me. I thought of at least three ways I treat points and miles as free money.

First, I use them to book tickets that I would never pay with cash. Because of this, my subconscious often treats these tickets as “free”, even if they’re really not. Nevermind how much a trip actually costs in cash, there’s also the time and effort required to get the points.

Intercontinental Berchtesgaden — We splurged on this a little more than we needed to

Though deep down I know better, I often justify some spurious costs on a trip because I know my flight was “free”. Sometimes this is change fees to get a better flight (which I’ll justify to myself instead of just sucking it up, although as a parent it’s become easier to justify). Other times this will be splurging on a hotel or an experience.

The other way I treat miles and points like “free” money is on the other extreme – the part of me that puts “free” money in the bank wants to hoard my miles. Since it’s so easy to quickly build point balances these days, I’m often tempted to save these “free” miles to use at a later date.

Unlike real money, however, investing in miles is a fool’s errand. Aside from the fact that we keep getting hit by devaluation after devaluation, miles have no real monetary value – in fact if you pass away nobody can even inherit them. When you save real money, you can invest it and earn a good return on it. Sitting on miles you’re just liable to “lose” money in a devaluation.

Cathay Pacific First Class with a toddler — It’s tough not to splurge on first class

The third way I use miles and points as “free” money is that I use them to splurge. I generally tend to use my miles to redeem for premium travel – first class, business class, really anything but coach if I can avoid it. Just like someone might want to buy a fancy outfit with a work bonus, I like to use my miles to get fancy seats on airplanes.

Final Thoughts

Pardon the rambling, I just had a lot of thoughts and decided to type them out. I’d love to what people like to do with their “free” money and miles – judgment free zone!

Jan 28 2015

How much will British Airways Executive Club Program Changes hurt?

It's not like I was using Avios for BA First anyway — It’s not like I was using Avios for BA First anyway

Every time there is a devaluation in the miles and points world, the general message out there is that the sky is falling. While British Airways’ most recent Executive Club changes certainly may fall into that category for some people, these changes aren’t too big deal a deal to me.

Summary of Avios Earning Changes

– You’ll earn less less for low cost economy fares and more for high cost premium ones

– The minimum Avios you can earn on a flight are going down for the lower fare classes

– Minor devaluation to earning tier points (major if you fly JFK-LHR regularly for business), which I’ve never bothered to understand in depth anyway

Summary of Avios Redemption Changes

Old chart:

New chart:

– Peak and off-peak rates have been introduced

– Economy peak rates are the same cost as the old economy rates

– First class rates have gone up across the board, both peak and off-peak. Example: my CX F flight that cost 105,000 Avios would now cost 140,000

– Short haul business class rates in Zones 1-3 are slightly cheaper off-peak and the same cost as the old chart for peak flights

– Starting in Zone 4, business class rates will be more costly than before regardless of peak or off-peak

– All partner awards will be priced as peak awards

– Some annoying changes to how you can change award tickets (you’ll have to call in more)

– Elimination of free domestic add-on flights in the UK on short haul flights

– Executive Club guarantee of two business and four economy seats on every flight starting when the schedule opens (355 days)

My Thoughts on the Changes

Changes and devaluations suck, but are these really that big of a deal? I personally never redeem Avios for longhaul flights, though they were a nice option in a pinch. But the reality is they weren’t a good currency for premium long haul redemptions, and this isn’t changing that.

It’s also not like I was redeeming a ton of Avios for British Airways flights – the fuel surcharges were a killer.

Say goodbye to this for 50K RT in J (gcmap.com)

The biggest “devaluation” to my personal burning structure is the increase in cost of the BOS-DUB Aer Lingus flight from 25,000 to 37,500 Avios – that hurts. It’s still cheaper than any other business class flight to Europe but it still stings. If you want to book that, do it by April 28!

Still, even that is mitigated by the fact that British Airways just bought Aer Lingus and will probably start imposing fuel charges on that route after they are fully integrated anyway.

What hasn’t changed is the value of Avios for short haul domestic flights on American (and US). That’s what I have been and will continue to use my Avios for in the future.

Final Thoughts

I haven’t hit upon every detail of the changes, but like I said, at first glance they don’t seem too distressing to me. You might be in a different situation, if so, that sucks – devaluations always do. Still, take some time to process – the sky isn’t necessarily falling, just decreasing in altitude a little bit. Guess we now know why Membership Rewards was running that transfer bonus…

Jan 02 2015

Five Reasons to Travel with a Toddler

Our trip to Asia is winding down, but before we go I’ve been reflecting a bit about whether it was worth all the trouble dragging our about to be 2-year old halfway around the world. It hasn’t been easy and we’ve never been out past 9 PM (which is like the opposite of what one would usually do in Hong Kong or Taiwan).

At some point in Taipei Jess asked me if knowing what I know now, I’d take this trip again. I’m happy to say that now my answer is a definitive yes. Here are my personal reasons why.

Everything is new and amazing to a toddler

1. Problem solving is fun for me

Although you might have an impression of me as a problem creator (guilty), I enjoy problem solving which takes up about 80% of my energy as a parent. Travel inherently involves a bit of problem solving – figuring out how to navigate a new country in the most efficient (both cost and time) way possible can create a real challenge.

You need to be a lot more strategic about your pathing with a toddler in tow

Balancing a toddler’s needs on top of all that adds a whole other layer that, while stressful, I find really fun dealing with. It’s fun because the rewards of “figuring it out” can be seen on the smiling face of my child which makes it feel worth it.

Case in point: it took a lot of maneuvering to get us there, but the end product of going to Hong Kong Disneyland today was a lot of this:

2. You still get to eat well regardless

Traveling with a toddler definitely slows us down, but the one area that suffers the least is eating. Sure, you don’t get to go to any fancy restaurants, but there is plenty of amazing food to be had that your toddler can enjoy with you (as long as you’re willing to do some advance research/problem solving!)

We even managed to hit up two Michelin starred restaurants on this trip, Din Tai Fung in Taipei and Tim Ho Wan in Hong Kong.

Quite possibly my favorite Char Siu Bao (pork bun) of all time

I mean sure, they’re not your typical fancy schmancy Michelin stars, but the food is still amazing and memorable. And in a worst case scenario you can take food back to your hotel room – I guarantee if you do it right it’ll still be better than what you eat at home! What we eat, at least. 🙂

3. The chance to introduce your kid to new cultures is worth it

Or in the case of this trip, her forbears culture. This trip has helped legitimize our decision to speak mainly Mandarin to M, since she’s been surrounded by it since we got to Asia. I also think that there is that “wow” factor for her, especially here in Hong Kong. All the people, all the lights, all the…boats…all these things have been really stimulated (and overstimulating!) our daughter.

Hong Kong has turned M into a big fan of boat rides

But I know one of the best parts of the trip for Jess was the chance for M to not only meet relatives, but the time we visited the house where her father grew up. There’s something special about seeing your child in a place that has significant meaning for you, even if they don’t get it. Sometimes that’s worth the trip in and of itself.

4. Traveling together is a real bonding experience

Every time we travel together, it feels like M takes some major steps developmentally. But deep down I think it just feels that way because we get to spend so much time together. And it’s fun.

It’s fun for our daughter to see and experience new things, and it’s fun for us to be a part of that. I’m sure traveling is a bonding experience with kids of any age, but I think there’s something special about toddlers.

May or may not have had to give her a little nudge down

Sure, they’re just starting to have opinions but for the most part, everything is awesome to them. Whereas when you drag an adolescent around they’re probably just complaining all of the time. Well, maybe that was just me.

But when we ask M if she wants to try something new while we’re on the road, right now the answer is “yaaaaaah” 90% of the time. And that’s fun for all of us.

5. It beats being at home (most of the time)

I guess we could have spent the last 10 days lounging around at home. But I would have inevitably just drifted to my computer, M would have just been doing the same old same old, and Jess would probably be baking something amazing.

Hey, if they get bored, stickers work in any country

Being out here forces us to mix up our routine; that process isn’t easy but it’s definitely worth it. We get to see the world together as a family and have some memorable moments (both good and bad). Not too shabby.

Final Thoughts

What I’ve neglected to mention at all is how points and miles really have made this trip possible. It takes a lot of work and planning to fly business and to stay in confirmed suites, but that’s all things that make our travel easier (and less expensive!). For that I’m thankful.

Ultimately, while it may not be for everyone, I think traveling with a toddler is/was worth it. Especially when it’s 2 vs 1, which is what we’ve got. Feel free to check in with me again if it becomes a game of 2 on 2. Maybe I’ll change my tune…

Asia 2014 was different, but in many ways even better

Dec 29 2014

Hong Kong Money is So Unnecessarily Complicated

I’ve realized that dealing with a toddler, especially a jet lagged one, renders my “live” trip report near impossible. Even when I find the time, I’m too tired to go through all that effort.

BUT – I still can post some random thoughts quickly. We’ve made it safely to Hong Kong, though not without a bit of excitement. It’s been about six hours and I can honestly say it’s good to be back. For those who’ve never been, it’s kind of like New York on steroids with tons of more people and a lot more Chinese characters (both the language and the humans).

Cash is ordered from big to small - literally. I mean, I guess that's useful? — Cash is ordered from big to small – literally. I mean, I guess that’s useful?

What I’d forgotten about Hong Kong money (cash tender) is how unnecessarily complicated it can be. I was distributing cash between myself and Jess (as I do in every new city) and I was just blown away by the number, sizes, and shapes of the bills. I always forget it’s like this here.

So the money is made in all sorts of shapes and sizes, issued by different banks, plus coins, plus coins with frills, plus the old money, plus newly issued money, plus oh my gosh my wallet looks like it threw up on itself and it’s only been a few hours.

Case in point: here are three different twenty dollar bills.

Three different twenty dollar bills - why!? — Three different twenty dollar bills – why!?

Like – why? These bills represent two different bills issued by HSBC and one by Standard Chartered. And it’s not just the twenties – every single bill has multiple issues. It’s crazy. The color scheme is pretty standard, and I guess the different sizes help, but why!?

I’m not even exaggerating when I say that the bigger bills don’t even fit in Jess’ wallet.

Then there’s stuff like the 2 dollar coins, which are cool looking despite their unnecessary looking fringe. And then there are the < 1 dollar cent pieces! It’s enough to drive me crazy.

Of course, you’re probably asking why I’m using cash at all. Mostly because we were just tired and I was feeling lazy and because I had some. But I’m thinking of just loading the majority of my cash onto my Octopus card and calling it a day.

The Octopus card is so easy I might (gasp) rely on it more than my CC here

Actually, maybe the government doesn’t want us to use cash. If that’s the case, then I guess their funny money makes more sense. It’s just so weird to me, Hong Kong has one of the most developed economies in the world but the most badly designed (to me) cash system. Or maybe I’m just too dumb to get it.

Nov 02 2014

Act Quickly on Hot Deals that Fit YOU Best

If you are in the miles and points game for any period of time greater than, say, one month – eventually you’ll start to notice a lot of all caps and exclamation marks on Twitter or on blogs – “Hot deals! Act quickly! Won’t last! AMAZING!” But like big signs in retail stores – not all the advertised deals are truly that amazing (though some definitely are). To further confuse things, as any regular reader of the Saverocity family of blogs knows, sometimes these “deals” are advertised with conflicts of interest. I generally give everyone the benefit of the doubt, but when I have an affiliate link I’m always tempted to make it sound a little better than it is so I assume others are at the very least the same.

In the past week alone, there have been a couple of “deals” out there. AA released a bunch of award space on their new routes, while Aeroplan had a HUGE glitch where flights were pricing wrong – yikes for them. There was also a $1400 business class “deal” from LA to Europe. Now I put the word deal in quotes for all three of these because none of them were particularly well suited for my needs. I therefore skipped all three of these and didn’t bat an eyelash – but when I first got into this game I would have felt differently. The urgency with which these kinds of deals are presented can very easily lead one to feel like they missed out or to act hastily without carefully thinking things through. In a worst case scenario they can cause someone to lose money. I’m not immune to writing about them either.

I love deals and cannot wait to reap the benefits of BA First - but I thought about it for awhile before pulling the trigger — I love deals and cannot wait to reap the benefits of BA First – but I thought about it for awhile before pulling the trigger

The goal of this post is not to get you to ignore these deals – I jump on them all the time. For example, I booked the wife and myself into British Airways first class during that window of time when US Airways wasn’t charging fuel surcharges. What I’m hoping to accomplish in this post is to help you establish a framework for yourself through which you can view these deals. It’s about pulling the trigger on deals that best suit YOUR needs – not just acting due to FOMO. Here’s how I’d recommend approaching deals.

For starters, have an objective evaluation of your assets in your head at all times

I don’t think I can assess whether a given “deal” is good for me without an objective idea of my assets. I say assets because sometimes these deals that come around are award deals (miles as an asset), sometimes they are cash flights (cash as an asset), sometimes they are big discounts like Stop and Shop gas rewards (cash and time as an asset), while sometimes they are credit card sign up bonuses (cash, time, and miles opportunity cost).

So you need to know your assets, objectively, before you decide whether a deal is good for you or not. If you are really trying to travel for pennies due to budgetary constraints and/or a desire to be financially independent faster, $1400 business class flights to Europe or $1700 first class fares to Asia might not be the best deal for you. It’s an even worse deal if you’re going to end up in debt because of it.

If you can only put $1000/month on your credit cards and thus are generally only applying for one card at a time, then you want the BEST sign up bonuses out there. If snagging those flights on British Airways with no fuel surcharges depletes your entire US Air account – is that okay with you? And if you find a new manufactured spending deal, are you spending too much of your time doing it?

If you don’t know what your assets are and have an objective take on their worth you’re risking not making the best decisions when it comes to these deals.

Buying US Air miles can get you onto these partners - but is the price right for you? — Buying US Air miles can get you onto these partners – but is the price right for you?

A classic example is the good old “buy US Airways miles at 1.8 cents a piece”. Using myself as an example, here’s how I evaluated my assets for that deal (every single time it came up).

Do I have enough cash to purchase 100,000 miles at 1.8 cents a piece? If so, do I have enough miles for a business class flight overseas already? If yes, do I really need to buy more, giving me enough for two overseas trips? And if I buy miles so I have enough for two overseas trips, do I have enough time to take those trips in a timeframe that wouldn’t worry me about a devaluation? And, oh yeah, is it really worth it to me to pay $1800 to fly business class overseas; could that money be spent more wisely elsewhere?

For me, it’s important to ask these questions just to make sure I don’t get caught up in the hype of a “deal”. Everyone’s answers are going to come out differently (heck, everyone’s QUESTIONS should be different), but it’s the best way to avoid unnecessary waste.

Next, make sure you are clear about what your travel goals are

I’ve written about this as it pertains to signing up for credit cards, but it’s really important you know what your travel goals are. I have two goals for my family – to take at least one international trip a year (preferably two, one with child one without) and to take it in as much comfort as possible without breaking the bank. Goal 1 is more important to me than goal 2, we’d pay for coach if we had to. But if I can leverage miles and points to fly in a higher class of service, I’m always going to choose that. For me, 1 international business class trip is greater than 2 in coach. That’s just me.

When deals come along, I force myself to question whether that deal helps me meet my travel goals or not. Did I want to jump on the AA deal earlier today? Certainly, I have the miles and it’d get us to Europe. But getting in on that deal would also have broken my “as much comfort as possible” rule. I don’t mind an extra connection with Little M if it’s gonna get me in a higher class of service, but Boston to Los Angeles to London is going way beyond that. So I let that one go with absolutely no reservations.

My goal is to get this one to at least one new country a year - this was Italy 2013 — My goal is to get this one to at least one new country a year – this was Italy 2013

I do the same thing when great credit card bonuses come along. I’ve always thought the Southwest Companion Pass would be a great thing to have – but we don’t travel enough to make it useful. I’m starting to rethink my travel goals in general since Little M might force us to travel more domestically, but every time I’d have been able to get it via credit card sign ups it didn’t make sense with my travel goals at the time. And forget about earning via reselling – time is the asset I have the least of. You go though, Big Habitat.

A corollary to evaluating your travel goals is evaluating your earning streams – if you’re a big MSer or reseller deals are going to look better/worse to you than they would to me, but that’s a whole other post in and of itself. Hopefully you get the concept.

Equip yourself with as much knowledge of the miles and points game as possible

This one’s important. It’s impossible to know what a great deal is if you don’t know what the good ones are. Take a look at Matt’s list of the Top 10 best credit card offers historically. It’s important to know what has been offered in the past and more importantly, have a feeling for whether it will be offered in the future or not. For example, I have absolutely no proof but my guess is we’ll see another 75K Amex PRG offer again. That means a 50K offer might not be the best deal, no matter how many exclamation marks you see (no guarantees of course). Worse situations are when you see a lot of exclamation marks around cards like the US Airways Mastercard – 40K after first purchase is great – if you have miles in US Air. Otherwise, they could quite possibly be totally useless to you.

Another thing to make sure you have a good handle of is how much awards cost regularly, what airlines charge fuel surcharges, how much award space various airlines release, etc. etc. That’s how you find “sweet spots”, recognize when something is a big deal (like avoiding fuel surcharges on BA), or realize that an award space glitch is a major deal (like Lufthansa releasing first class space more than two weeks out). The only way to learn these things is through practice, reading, and more practice. No one knows the ins and outs of everything, but there are a lot of guides out there like at Travel is Free or my own DIY Guide (which releases at the rate of one article per year at this point :P).

Ultimately, it’s about opportunity costs

Hot deals are great, but while they seem cheap, you’re always giving up something to get them. Understanding your assets, clarifying your travel goals, and equipping yourself with knowledge of the game should help you answer the single most important question when a deal comes up: What am I giving up if I pull the trigger? Or, to put it another way, is getting in on this deal going to prevent me from getting in on another one that fits myself and/or my family better? You can’t really answer that question without an understanding of the three things above.

Everyone is going to highlight a deal with some level of bias. I sometimes point out good value fares to Europe because I love Europe. Just because I think something is a great deal doesn’t mean it’s a great deal for you. I really would consider shelling out $1500 for a business class flight to Europe (assuming I haven’t blown too much money on my travels elsewhere) – but if you aren’t even sure if you LIKE Europe, why should you? That sounds silly but it’s really not – if you read blogs enough you kind of start hearing very similar views and opinions about things. You’ll hear counterpoints, but they can be rare.

I'm sure tons of you could care less about Sound of Music tours — I’m sure tons of you could care less about Sound of Music tours

You might be less susceptible to peer pressure than me, but generally, if you hear that “Bali is amazing” a million times you might just put it on your list of places to go. Then if an amazing fare to Bali drops, you might pull the trigger. That’s not a bad thing by the way, add me to the chorus of people who think Bali is amazing – just make sure you know what you’re giving up to get there.

Final Thoughts

Apologies for the super long post – I haven’t posted for awhile and have just had all these thoughts in my head for awhile. The reality is, I’m sure many of you think about these things already. But writing helps me clarify my thoughts, and this is a good reminder to me that if I miss a big deal that doesn’t necessarily mean I’m missing out. One of the best things about the miles and points game is great deals are always there to be had. It’s like whack-a-mole: they always pop up! Unlike whack-a-mole, you only need to nail one to win. Sure, you’ll sometimes miss a deal that you might regret, but that’s better than regretting wasting assets on a deal! I’d love to hear people’s thought processes about this topic, so feel free to leave equally loquacious comments!