I’ve said on many occasions that I’m not a fan of Manufactured Spend (MS). It is a means to an end. Certainly, there is some fun in cracking a system or finding a new pathway, but that is not an exclusively MS related activity. I see MS as a job, sure it can pay relatively well, but it is still a job. You are beholden to give up valuable time in order to ‘earn more money/points/miles’.
I think its time to acknowledge the problem, and find solutions.
First – can we all agree that manufactured spending is a job? I define this simply as “You exchange your time for reward”. Sound fair?
Next, can we all agree that working sucks? In a real job we are looking for an exit strategy. Sure, you can love your job, but even in the best job in the world, you are likely saving for retirement, right? There’s a path, a journey. You can enjoy the moment, but the moment is a stage on the path to retirement, or early retirement if you so wish.
Transliterating the work cycle to the MS cycle
Many people can grasp the notion of the work cycle. You save enough money to be able to cover your expenses without the need to work anymore. Not an easy task, but generally speaking most people can figure out that they need some money in a 401(k) or an IRA or a really good pension. There are a ton of formulas (that may or may not work) about the number you need, but ultimately you see the concept:
Work is a necessity >Save enough>Work is elective.
In MS there doesn’t seem to be this evolution for many people. Instead it is a case of ‘earn as much as you can, burn through it, earn more’. Its a hamster wheel. You are never really breaking free from the need to ‘earn’ in this way.
However, I do see an evolution:
- Pay for travel with cash
- Earn signup bonuses
- Earn points through MS
- Earn cash back through MS + Points from signup bonuses
- Earn signup bonuses
- Buy points for cash with cash back
- Pay for travel with cash
It seems crazy to suggest, but I think you’d agree that someone like Bill Gates doesn’t need to MS his way to 150K Skypesos through buying money orders at Wallys right? So at some point… unless you are stuck at some point, evolution needs to occur.
I’m personally at stage 4.5 on this chart (I may still opportunistically pick up a few things for cash back). I’d say that is the tipping point, you start regressing here, and stage 5 is the same as stage 2 on the way up. The big question is.. what changes at stage 5?
In one phase of evolution (stage 2) you would go from signup bonuses to spending (a lot of) time and a little money to ‘buy’ MSing points. In a later stage (stage 6) you’d spend little time, and a (lot of money). The ‘lot of’s here are used in comparison with one another of course.
Can you take a leap of faith?
If you are running around between grocery stores and your local Wallys like a demented hamster chuckling about earning $200 per hour, you’ll never be able to break free. At some point something has to give from your schedule, and you have to stop MSing to evolve. The key of course is to replace it with something more valuable, just quitting and returning to old habits of playing WoW and buying scratch offs isn’t going to get you there, so what can?
I think the answer is to look at the interplay between income and expenses: Can you reduce your debts and expenses via MS to the point where you don’t need to any more, then let it go? Can you then take that time and invest it into personal development, such as a higher degree, professional certification or perhaps a start up business?
At some point, what ever path you elect, you need to get off the wheel in order to evolve.
Is there a Mr. Money Mustache phase?
Can you elaborate on that?
Mr. Money Mustache is a famous blogger who advocates early retirement and frugality. He watches the bottom line, but he values time and experiences over material wealth.
Haha, I also saw this post and thought “Mustachian!” He’s all about reducing expenses so that you really don’t need a huge income and can live off investments.
We differ in that I like the fancy things that he does not. I like the idea of saving and financial independence but I don’t like the idea of ‘settling’.
Yeah I know of him, just wasn’t sure where Kim was going with the thought.
MS really is a hamster wheel. Its interesting, looking at the phases you proposed, through my own personal view. I definitely jump among them the different phases, in some cases, in the same month. But more interesting to me, is watching how some of the “deals” that really get promulgated of late, show how the community, or at least some of the larger bloggers have progressed. Years ago, the biggest focus was cheap travel. Now you see 5+ (that’s all I can think of at the moment, but I’m sure there’s more) bloggers posting about $1500 fares to Brazil in Business Class. the rough math is just under 9 cents per elite qualifying point (EQP) on American, I’d imagine its probably approaching ~6 cents per redeemable mile, depending on status and legs (with AA’s premium cabin promo). Years ago, I don’t think you’d see that kind’ve focus. But, I would ask, does that mean our “pain” threshold is getting higher, or more folks more affluent?
It just means that some readers have been conditioned to think like the titans.
Well, for some people that isn’t a bad deal…. I guess.. I remember seeing things like this from Gary Leff and not getting the appeal, but clearly a certain demographic has enough money, and not enough time for it to be valuable.
It’s really hard to judge based on ‘5 bloggers’ though as they are most likely writing for profit rather than what excites them… not that the two cannot co-exist, but it would influence the decision for such content.
Interesting take. I don’t get MS. I understand it but I don’t need it to earn points for some pretty great travel. You see I love my job. Perhaps I am one of the few who took the advice to find something we love to do and do it so you are happy. You say we are “looking for an exit stagey”. I can’t disagree more because in my opinion I truly love my job and although I have an exit strategy when I do retire it’s going to be a huge void to fill. To clarify my job is my business. It’s small in the scheme of things but I have employees and customers. I create a custom product, not the same product all the time. It’s a challenge but it’s both mentally and financially rewarding. It enables me to pay for almost everything I need for my business on credit cards (yes PIF always). Imaging the spend machine I have for materials, labor, travel expenses etc. it’s mind boggling the amount of points I seem to rack up in the normal operation of my business.
No time for MS. No need either as I earn more points than I can use each year. I stockpile quite a bit for 8 weeks vacation per year and then give my employees bonuses in the form of flights and hotel rooms. I always pay for business travel as it’s an expense. The points are my company bonus pool. Yes, I do give cash bonuses also.
Also no MS as my accountant would flip as the MS paper trail is unbelievable.
Makes sense… you don’t ‘get MS’ because you don’t need it.
I do like to focus on the point that the exit strategy is to make your work elective. If you really love your job, that doesn’t change if you have enough socked away to no longer need to do it. Conceptually, there is a difference between someone like yourself who loves their job and someone who has total ‘screw you’ money. For example, you might really enjoy making these products and working with your staff, but that one day that you really don’t ‘want to’ go in and do that job.. that’s the tipping point.
The moment you have to bend to sacrifice it becomes a burden, and you are beholden to someone else.. that’s the point I would seek to (ideologically) remove during our ‘hearty’ years. Of course there will come a time when we do need to stop even elective work due to the natural progression of health and aging.
One thing I’ll put out there, based on your fear of the void. Perhaps holistically your life isn’t balanced, and there is too much satisfaction from your work vs other options? I say that in the knowledge that you are already in the highest percentile of what one should aspire towards.
this is an excellent post!….my coworkers often tell me of ‘my second job’ as I return from lunch with MO in hand and stack of VGC with X’s on it (redeemed).
I work a contractor job so I have plenty of time for MS but I lostly focus on cash because I travel 2-3 months a year and like to do long trips to the middle of nowhere…like driving around new Zealand or australia. So for me cash is king as I have little use for hotel points and I won’t turn away $150-200 per hour tax free. Not sure how it’s a hamster wheel. It’s real money out of thin air.
The hamster wheel aspect relates to you working as a contractor and being satisfied with $150-200 tax free.
While both are awesome on one level, how do you reach the next?
Well that’s a general finance and career question. I meant that nothing about MS is inherently negative or worse than any other means of making money….as long as you know what you’re making per hour.
Next step is investments of some sort. Rarely do you get rich by working.
If you aren’t working for it then it’s not income therefore it makes no sense to refer to it as “tax free.” Or stated another way, what are the scenarios in which “real money out of thin air” gets taxed that you are avoiding?
Credit card cash-back is not considered income, so in effect when you make ~4x net profit on MS volume from a 5x card, that income is really 25-35% more if it were compared equally to regular taxed income, so $200/hr becomes $260/hr equivalent.
Excellent insight. I have generally characterized myself as a lazy MSer, only going for the easy low-hanging fruit. I never thought about the analogy that MS is a job. Since I love being retired, it makes sense that I don’t work at the MS because I don’t really want to work anymore.
For me, MS, outside of meeting signon bonuses, is a time waster. I know there are some people that have it working like a charm but, for my personality type, it’s too much hassle.
Besides, as you allude to in the article, plain old money is the ultimate, flexible travel currency. 🙂
Matt, great post. It is thought provoking. We do call it a hobby, but it is work, you are right. In my case work that I enjoy doing, same as my other work that I enjoy — that pays my bills. I am finding this hobby morphing a bit more, at least for me, as I am trying to stay hungry (your other post a month or two ago), and just using flexible points and converting them to cash. I would not consider doing that years ago when my mileage/hotel accounts were in 6-figures. Using these UR/MR/Citi/Arrival points not for travel but for other things. Like buying building supplies at my local HD by using MR points after converting them to HD Gift Certificates. Or using UR points for pure cash $.01 redemption. So if these sign up bonuses yield $500-$1,500 cash. As pointed above, without paying Fed/State/Medicare taxes on that extra marginal income, it really translates to $750-$2,250+ sign up bonuses with each Ink, Arrival+ or lovely targeted Amex Platinum card. So be that cash going to 529 account, IRA account, or getting a new washer/dryer, it just seems like a lovely hobby to have and call it work. I feel like I am just sitting in Stage 5, ever since I started this hobby, or be it Stage 2. MS is just necessary to be able to spend $5,000-$20,000 per card to get these signup bonuses.
Marginal points made in pure $1/x5 or $1/2pt just does not appeal to me (and there are many folks like me out there!), it seems like a lot of work for not the same level of return. However, I am certain there are people who believe earning these points at that rate is worth while. They can really maximize it and expand it and get amazing results. I think Drew just recently had a post how he is all about MS and plans to make $20,000+ in pure cashback this year — power to him, if that makes sense for him and his wife. So what stage is he sitting in?
Cheers,
PedroNY
Drew’s doing things differently and I can’t fault that. He’s very much in the live life to the max stage. I went through something similar when I was working on cruise ships.
What a great post. I accidentally came across this post and I’ve been thinking about getting off the hamster wheel for some time. The change has been triggered. I just had a baby girl and my life is going to change.. my wife also found a nice full time job. So we won’t have that much time to travel and there aren’t that many good cash back tricks left. I can’t justifying doing MS for cashback and the motivation of travel is missing. The fact is MS is time consuming and takes up a lot of mental energy in figurign out the schemes and keeping track of payments, deposits, gift cards receipts. So I’m going to scale it down to a point where I hit some sign up bonuses and use all the tricks I’ve learned.
I’m happy with the results I got so far and I think it’s time for me to stop being greedy. I’ve had some amazing redemptions for the time I’ve spent in this hobby since early 2012.
6x F RT flights on Etihad
3x J RT flights on ANA
Lots of trips like maldives, london, india, japan, mexico, nyc, vancouver, banff, alaska, hawaii, florida, vegas.
Yeah – I went through the same things, baby, life changes, etc.. when I wrote this. Head on over to the forum if you have time, maybe there will be some things there that work for you.