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.
Loved the TM mark where you placed it lol.
We are all different. We may have different Frameworks. My framework starts and ends with the Chase Sapphire Preferred Card. Woohoo.
I generally agree with your approach.
Voyaging Doc says
without a doubt gaming the loyalty system has cost me more money, but I am fully aware of that and still do it to enrich my experience without letting it defray too much of my Framework (TM). If funds were tight I wouldn’t bother with travel hacking, mostly because I think travel hacking is not a poor man’s game. A poor man’s priority should be to advance his own Framework (TM) and not to focus on travel or gaming the system for travelling.
I consider myself too poor to fly F. Hopefully in a few decades I will reach “net worth” to attain J more regularly but for now it will be all Y and any upgrades with travel hacking. Aside from experiencing the joys of travel I don’t think there ever is a true net gain from travel hacking. You will always lose money, but maybe just a lot less money than if you paid by cash.
I agree broadly, but it isn’t black and white. Even when the poor man is focusing on the Framework or earning, he should still carve out time to enjoy the moment. It’s a case of how much focus/emphasis to slide onto one area or another, but not all of one at the expense of all of the other IMO.
This part of life is hard! I decided to work 2-3 days a week in a standard job so that I can spend more time on reselling. One of the main reasons I did that was I can now bring my kids to day care almost every day and the days I work for myself (read: Amazon), I am home when my kids come home and I can actually spend time with them. I also can vacation pretty much as I please.
That being said, I am highly concerned about making sure I have enough money to help my children and retire comfortably so I forgo many (some would say too many) pleasures to reach those goals. Living well below my means is the only reliable way I know to save comfortably for the future.
Life is one big compromise for almost everyone and you have to choose the compromises you can most be happy with.
Yep, life is full of tough decisions when you care about such things. Sounds like you are heading in a good direction despite the challenges though!
Noah @ Money Metagame says
The Framework™ is an interesting concept. It seems to boil down to figuring out what you want out of life (the hard part) and then organizing your life to achieve it in the best possible way which I can definitely get behind.
I’ve been really impressed by some people in the “Game” who seem to have it together financially (and otherwise) while traveling the world on a regular basis. These people already have it figured out and are doing just fine in life (at least in the part they share with the world).
It’s the other group of people who seem to be spending beyond their means in the pursuit of Free Travel™. This may be a straw man I created to explain the absurd questions I find on reddit about whether or not someone should buy points, but I have a feeling there are people out there in debt spending all of their extra money manufacturing points to take trips they can hardly afford. To each their own I suppose, but hopefully they’ve at least thought about the bigger picture.
Agreed. There’s a real mix out there, and many will see the ‘Free Travel’ stuff and jump on it, especially when nicely packaged for them on a blog.
Big picture, travel hacking is filled with gigs, and is one big gig in itself, and gigs just slot into the Framework. It’s no different from giving a financially incompetent person a lottery win, they’ll end up broke again sooner or later.
I definitely would not spend my time traveling 2-3 times per month on vacation in business/ first without being part of “this thing of ours.” No, not La Cosa Nostra. You understand.
Although I could afford it, I would not feel good about it.
Some of you are young . Enjoy your life as much as possible when you are young. I always lived paycheck to paycheck until I was 40. I didn’t go on vacations, party, etc. This blog would have been irrelevant–and still is to many people who can’t afford vacations.
Consider yourself lucky if you are reading this blog as you must have some capacity to achieve what u want.
Nice (TM) but not sure what you are trademarking.
I heard somewhere that you can only really teach people that are very close to the end point of a concept.. so yes, a lot of this stuff works if you’ve already got a certain level of success… but hopefully it is still good food for thought!
The Framework… that’ll come out sooner or later, perhaps as my attempt to take on Scientology.
Matt, you really should lecture on TEDtalks! I always gain some great insight when I read your blog. One thing I must say about Framework (liked the concept for sure), the most important choice a person makes in their life if who they will spend their life with. Coming up on 50 years of marriage, some horrible years (mutual forgiveness an absolute component) but mostly good ones, I can say that living without this life partner would’ve made a great difference in my happiness quotient. However you travel hack, if you’re miserable in your relationship, your travel will not have the joy factor compared to being with someone who puts up with you and someone you put up with for the long haul.
Thanks! Yeah I think that’s a very important piece, both finding someone who fits the mold and perhaps having the courage to agree when someone does not.