Noah wrote a thoughtful post about how much we are actually saving through travel hacking, as it might often be the case that we become the game, instead of the player. The topic is complicated, and very individualized, but here’s some thoughts on it from my perspective.
Can ‘gaming’ a loyalty system cost you more money?
Certainly. I’ve met many people who have fallen into the trap of status chasing, and who pay real money in order to buy perks on an airline or hotel. Some were doing this before, and use travel hacking to reduce the cost of status, and others just discovered that they like the status via a free trial and become a customer. My own experience of this is straightforward enough: I don’t chase status, over the past 7 years or so that I’ve been into the ‘Game’ I’ve only held status when it comes for free, and I’ve paid for two revenue tickets (using Amex credit) in that time, for domestic flights that I couldn’t find award pricing for.
However, when I recently became a Hyatt Diamond, I did pay real money to get into a Cash and Points award for a Diamond Suite Upgrade in Santiago and Buenos Aires.
Reducing costs vs improving experience
One of the first things people do when they travel hack is ‘lift away the cost’ of travel. EG, if you have a $2000 flight coming up that you can remove the cost of via points/miles/etc then you net to zero and achieve your goal. However, it quickly goes beyond that and into the realm of earning more points to not just net out the cost of a flight you might afford, but beyond where you should be affording. I’ve raised the concept several times, including in the thread ‘Are you too poor for First Class’.
Life isn’t about improving your net worth
This is important, but to use it well you must first improve your net worth…. It is a cycle of improvement that I refer to as Shu, Ha, Ri. This cycle starts with one concept, then once mastered you discard and take on another. If all you do is think that life is not about improving your net worth, you’ll likely end up broke, with finances out of control. However, if you realize the importance of net worth and then make calculated decisions to break from the pattern of improving it you can achieve a much fuller existence.
Net worth is simply Assets minus Liabilities. Some think that you grow it during your working years and deplete it during your retired years. However, life is not binary, and forcing your net worth to be so is a bad idea. For example, if you are a parent, is it better to work two jobs and earn enough to propel your net worth forward at the expense of never being home? What about instead if you took time off to connect with your child?
For the non parents out there, this is the ‘travel now or later’ question. Many travel now because there is value to being young, but others travel later because they worry about building net worth. What people miss in the ‘travel now’ equation is that, if done correctly, it can influence you and create a better ‘you’. That could reflect into net worth, or simply a more fulfilling life. The flip side of this is the person who avoids ever taking responsibility for their finances and actions… but life is never so binary.
Personally, I think more important than net worth is Framework. The Framework is a concept where you build the things into your life that allow things to work. The proper Framework allows you to travel, or to quit your job, or achieve Financial Independence, and all sorts of other things that might not make sense or add up to someone on the outside.
Recently, when speaking with some people in Vegas I explained that at Saverocity (or anywhere I work) I don’t make commission, here it means I don’t sell credit cards. Someone asked how I make money in that case, and I explained that we have some display ads and whatnot.
However, the real truth of the matter is that I don’t need to make money from Saverocity, not because I’m wealthy, but because of the Framework in which we approach life. Framework items for me include:
- Not carrying debt
- Investing in future earning potential to avoid obsolescence
- Focusing on living life today
- Understanding future obligations
Such a Framework is tremendously empowering. It affords me the ability to ‘stand tall’ as Noah shows in his blog post. To make my own decisions, and follow my own moral code rather than brushing the questionable stuff under the carpet.
Debt makes you a servant
If you read many finance blogs they will talk of the power of carrying debt for arbitrage, eg a mortgage at 4% is a good idea because it is tax deductible and you can earn 8% in the market™ however, most of the smart money out there is targeting a 3-5% return for the market, so why be a slave to debt?
In our case, if we had leveraged debt for a property we probably would have a higher net worth today, but also we would have been wedded to debt service payments. This means that choices we have made, such as how to travel, or when to quit work to raise a child wouldn’t be there, we’d be stuck in the rat race.
When people think of Financial Independence they think it must come in a binary manner: raise net worth up to the point where you don’t need to ever work again, but that can mean 10-20 years or more of suffering in order to be ‘free’. Just look at the poster child for financial independence, Mr Money Moustache… he worked hard enough to retire early, but now makes many times more money in ‘retirement’ than he ever earned working. With that in mind, could we say he lost many opportunities in the last 3 years of saving?
You can say that 3 years is worth it for a secure future, but that’s still a binary ‘tit for tat’ discussion. What if those 3 years are the ones where you child is born and you get to bond with them? What if those 3 years are the ones of your prime where you can meet your future partner? Ask any wealthy old person, and they will tell you that those years are important, much more so than money.
So, don’t worry if your net worth hasn’t grown since you’ve been travel hacking, as it is only one metric that we should use to track things in life, and hardly the most important one. But maybe it’s time to look at the Framework, and make sure you are building the YOU that you want so that you can enjoy the life that you choose.