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The Perplexing Case of an extra $137

Discussion in 'New Blog Posts' started by Matt, May 11, 2017.

  1. Matt

    Matt Administrator Staff Member

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    I recently posted about my upcoming travel booking needs, I’ve had a bit of luck since then, as I’ll have 4 Marriott Nights rather than two (they reset in June) and I snagged roundtrip airfare for the three of us from NY to Miami for 14.5K Delta miles a pop, non stop. I was already preparing myself for $1,000 in airfare expense there, so it really lightens the load.

    Next, bored one evening I decided to run a search through Raise.com to check out what gift cards were vastly discounted. The concept here was that if I found one that was really cheap, I may try out a little reselling using that vendor. Low and behold, they have Celebrity Gift Certs for 13.7% off.

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    Celebrity Cruises at 13.7% off

    As you might know, I’ve just paid Celebrity $986 for our upcoming cruise for three people, and I’d already paid for it on the credit card. Some fast talking allowed me to get them to allow the swap to gift cards after the fact.

    The rules for these Gift Certs are that Celebrity allows you to use only $1,000 per cruise, and they must be used in $100 blocks. I prepaid gratuities to bump me over the $1,000 level and applied the gift certificates. Essentially, that one transaction gave me $137 of ‘free money’ (the best kind) but now what? I’m facing the problem that was raised in this post, Where does your marginal dollar go?

    Spending and Anchoring


    This latest round of booking has really got me questioning valuations and ability to spend. Another example of this is the strong inclination to cash in 25K plus $350 per person for American Airlines upgrade to Business. When anchored to the notion that I can travel for ‘free’ using AA Saver awards, this has been a challenge, but if we start to challenge our thinking, the deal isn’t such a bad one.

    With regard to Anchoring, it is interesting to note that I still consider 50K AA miles to be a one way in Business to Asia or Europe, because I’ve not really taken that second look and internalized any devaluations. Also interesting (to me at least) is that I always forget that the 50K AA miles come with no taxes and fees when valuing them in my head.

    So what to do with the $137?


    We’re in an interesting spot financially. We’re not ‘all set’ but our cost of living is very low, much more so than average. No debt, few restaurants nearby and most of our consumption spend coming from groceries. We could ‘afford’ to splurge. There’s always talk of lifestyle inflation and the such, but I think a lot of that misses the point of living a life you can enjoy.

    What’s more, the focus is on the clear win of $137, but I also ‘saved’ at least $500 by snagging those Delta flights. Saved is a complicated choice of words here, because it is easy to start tricking yourself with such thinking, but the end result is that this component of my travel ‘budget’ (if I had one) is significantly lower than expectation.

    Booking Miami


    Our flights to Miami get us in at 7pm the day before the cruise, so we need a hotel. This is one area where we can spend some of the $137 (or $637) but again, I had somewhat planned for the need here, so the money may go to an upgrade (lifestyle inflation) or perhaps somewhere else.

    In terms of Miami, it is also strongly challenging Hotel point usage. I’ve always struggled with hotels because their points tend to cannibalize. For example, it was hard to spend 20K SPG per night when that was 25K AA miles. Hyatt draws from my United stash (via Ultimate Rewards) and so forth. This does lend itself to ‘cash’ taking over.

    Cash itself though (ideally statement credits) creates a conflict between using it for hotels or using it for flight fees and taxes. Going forward, I may find myself using the Altitude card for this type of booking, assuming their rates are good, and protect my transferrable points for future flights. An added perk of this card is access to the Visa Infinite Hotel program (similar to the Amex Fine Hotels).

    Conrad Miami


    Paid with ‘cash’. The rate isn’t that bad if we consider the alternatives, and comes with $25 dining credit. Incidentally, the Kimpton is about $70 over the market rate, so make sure to shop around!

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    Visa Infinite Hotels

    If I do decide on the Conrad, the last two things I would try to ‘hack’ with it would be to swap out the card on file to a Capital One card that has about $300 of statement credits on it, and to see if I can haggle something in exchange for the free breakfast, since I think I get that as a Gold anyways….

    Travel is very personal, and while we often follow the thought leaders when it comes to things like valuing Delta miles, or booking a certain type of hotel, eventually we all develop our own taste and standards. For me, I remain ‘cheap’ in that I wouldn’t pay $249 for a Kimpton room over $169 for a Conrad room, I may pay that $169 instead of staying at MIA airport for $80.


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  2. AlaskanTraveler

    AlaskanTraveler Level 2 Member

    Hi Matt, I always appreciate your post. Felt like this one wandered a little. Your 'travel hacking' skills saved you an additional $137 from what you were willing to spend on a vacation. Put the $137 in your IRA and you are $137 richer and closer to financial independence. Enjoy the vacation you planned. As for the 25k AA miles and $350/ person. Burn the AA miles, you can always get more. As for the $350/person to upgrade. I guess it depends on how much you value the Biz class experience over econ. I generally break it down by hours flown. Value your time by the hour. If you value your time at $30/hr. If it is 12 hours of flying time per person. Then paying $350 might be worth it to me. At the same time for 2 people that is $700 in cash. So you are trading say 12 hrs of general misery in econ or 12 hours of pleasant luxury in biz for $700. Personally if my wife and I were in biz and someone walked up and said I'll give you $700 in cash right now to trade seats, I'd probably take the cash.

    When you say travel is personal, I think you mean it depends on how much someone makes and how much they value the experience. For me I'm really not willing to every pay more than $100/night to sleep in a hotel any hotel. I don't remember who said it, but always spend cash last.
     
  3. Matt

    Matt Administrator Staff Member

    Appreciate the feedback. I think part of the problem here (other than my writing skills) is that my thoughts are rambling a bit still. I'm writing the thinking process, rather than the conclusion phase.

    It's 3x for the biz for us, so $1050 each way.

    I'm pretty sure I invented the phrase spend cash last, and Prime the Pump™ :)
     
  4. AlaskanTraveler

    AlaskanTraveler Level 2 Member

    I thought that was you, but I've really been trying to put that into practice of spending cash last. I seen my tendency to hoard miles and points. 40k Hilton points or $80 for a somewhat comparable room somewhere else. That's only .002 cents per points value when Hilton points are worth closer to .004 cents. Spend the points you can always get ,more save the cash. I'm also having a hard time spending my 300k stash of UR as I can and the very least redeem for statement credit at 1 cent each. This was apparent when I was looking at using United miles to Europe. 60k rt in Econ or 140k rt in Biz. So and additional 80k UR each. That is worth a minimum of $1600 cash. For me I'd be willing to put up with the 8+ hrs of misery in Econ and put the $1600 into my yet to be maxed out tax deferred accounts. This differs by the person obviously.

    I am also change my churning strategy to try to limit credit card fees try to avoid those cards that charge annual fees for the first year. This year alone the DW and I have signed up for 13 new cc. We've already taken on $415 in fees from two AS BofA cards at $75 ea. 1 hyatt $75, and two BA cards $95 ea. Sure I collected a bunch of miles, but I paid $415 for them. And I already have a stash of 2.5 million points that I'm not sure when I am going to use anyway.
     
  5. Matt

    Matt Administrator Staff Member

    Totally agree that we should spend cash last. But it gets complicated....

    After all, what happens when points are cash? Statement credits etc? What about when you can use a point to transfer to an airline OR cash it out at a penny a point?

    This is where I hear the phrase, spend cash last, but often people associate that only with Travel budget. I wonder:

    1. How many people have 2.5M points who value them at 2cents each, so wouldn't cash them out at 1cent each?
    2. How many of these people have some form of debt (mortgage, student loan etc) or obligation (not maxing out the IRA/401(k) or 529)?

    These people in group 2 of the above are spending cash first, not last. They are paying bills/expenses etc from their payroll/assets and hoarding points.

    The argument that you could later use them for 2 cents doesn't work for me. Because I think that if today, you don't need the points, you can cash them out at almost any rate, use the money to boost net worth, and then get more points in time for the next need. The exception being any travel you know you need to book but haven't got around to yet (IE in the next 12- 14 months or so). Beyond that, cash 'em out, and get new ones before your next trip if it is expected to be Xmonths from today, perhaps 18-20 months being a good level.
     
  6. smittytabb

    smittytabb Moderator Staff Member

    And don't forget there are some credit cards you can use to pay for the upgrade that will reimburse you for part of the expense, such as the Ritz card. If you each had one, you could get $600 of the $1050 back. Always use my credit for that specific expense.
     
  7. AlaskanTraveler

    AlaskanTraveler Level 2 Member

    Wouldn't that involve taking on a 2 x $450 fees? Unless....
     
  8. smittytabb

    smittytabb Moderator Staff Member

    Sure, but even if they have one card, it is a good use.
     

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