How To Travel For Free: Game Changer

travelingEarlier this year when a family emergency came up I only had enough miles for a free plane ticket from Hawaii to the mainland.  I used it on my mom and paid around $1000 for my wife’s ticket.  Those miles were accumalated during my travels from work.  We’ve gone on some nice vacations that I’ve saved thousands on due to points I’ve earned.  (Nice perks for being away from home). We put everything on our rewards cards and get miles for purchases like everyone does.  I was happy to accumalate 15-20,000 miles/points a year this way, combined with my work points it would come out to around 60-100,000 hotel points or frquent flier miles a year.  70% of our “free” or discounted vacation was points earn from my travels. I joke with my wife that it took me 10 years to accumalate my Marriott points and three years of dating her to drain it.

I first heard of travel hacking from several blogs sometime last year.  Travel hacking is where you open credit cards or “churn” them for the rewards so that you can get free travel from the sign up bonus.  Some had high spending requirements but once met you would get some nice bonuses.  After reading up and visiting several chains in Hawaii i started thinking about travel hacking.  I realize now that this is a game changer. Credit cards aren’t evil, used responsibly they enhance your cash flow and can improve your life.  Collecting the rewards to go on nice vacations at a minimal cost to relieve stress is improving your life.

Why this is a game changer for me, and it should be for you also.
To build your finances you need to invest in gamre changers. Real estate is one of them. Never having to pay for travel again is another.  We love to travel and I’m always glad to spend points to reduce the cost. I will pay for trips or nights when the value for my points don’t match up. I value all miles or points at a minimum of 2 cents per point. Anything less than that I will pay for out of pocket. Don’t waste your points on anything less. An example is a United ticket to Boston from Hawaii is around $950 or 45,000 miles, at a value of 2.1 cents per mile. 950/45,000= 2.1 That’s worth it, a ticket to LA costs around $475 on sale which comes out to a penny a mile. 475/45,000= 1 cent. In this case I would pay for it out of pocket.

When I traveled to Hong Kong for a five day stay at the JW Marriott we got 3.4 cents to the point which was a great deal.  Now that I started laying out my “travel hacking” strategy with my work points I plan to never pay for travel again.  My goal is to generate at least $4000-$5000 in rewards a year. 

Since I fly United I had a United Explorer Card.  Since then I got the much better Chase Sapphire with the 45,000 point bonus, Chase Ink Business with 50,000 points, my wife and I both got the Barclay Arrival Mastercard, and she got a United Card.  With all those cards we needed to generate a minimum of $15,000 in spending otherwise you don’t get the sign up bonus.  Enter the American Express BlueBird card and the vanilla reloads that allowed me to charge $21,000 in six weeks.  I have $10,000 a month in mortgages that I now technically pay with credit cards.   Now that CVS no longer allows credit card purchases for Vanilla Reloads that door has closed.  There are other opportunities like loading a gift card with a pin onto Bluebird, since I’m not a travel blog I won’t go too much in depth. I’m going to use various strategies that will allow me to “pay” all my mortgages via credit card, which means at least 120,000 points a year!  That doesn’t include my regular spending which is additional points.

I know most people don’t have that much expenses.  You can generate $24,000 in spending from Amazon Payment.  Jacob from Cash Cow Couple has a great post on this.  You can also use money orders using gift pins, go to this travel blog to learn more.   So far in three months with the value of points and extra spending I’ve earned a little over $4,000 in travel, I know this will drop because my sign up bonuses are counted in this. There are still a few cards I’m going to sign up for as my goal is to get around 400,000 total points this year.

Time is a valuable commodity.  How much is this taking of my time.    I probably spent 40 hours reading and 20 looking for and loading all the vanilla reloads and gift cards.  (Trial and error as Hawaii doesn’t have major chains like the mainland with a wide assortment of vanilla reloads.)  Gift cards ang loading have fees associated, net after expenses I made around $45 an hour.  I’ve looked into a few other things and determined to spend at most 10 hours a month working on this, if successful I will never have to pay for travel again.  Beats any other side hustle I can do in my limited time.   (Although every blogger knows how much money we all make from this)  Which of course in my case its negative since I make no money from this, I’m better off working in an Indonesia sweat shop.

Are you travel hacking?  What major trip do you want to do this year?

Build On Your Missed Financial Opportunities

regretOne of the most expensive things in life is regret.  We all have missed financial opportunities that would’ve helped immensely in improving our financial situation.  I had a costly car mistake and sold too soon some of my stocks that has cost me hundreds of thousands.  Done By Forty had a post that reviewed his missed opportunity by paying off his house too soon and missing out on investment gains.  I’m a big proponent of leverage as paying my mortgage down is last on my financial priorities.  With finite funds I prioritize the following:

1. Maximizing 401K tax deferred.
2. Maximizing Roth IRA.
3. Saving additional 15-30% in taxable account.
4. Money for vacations, beer and Poke (Popular food item in Hawaii, you clicked didn’t you)
5. Additional mortgage payments.

Paying down his mortgage was the right move financially for Done By Forty as it made him feel more comfortable.  Instead of dwelling on that DBF is now looking to leverage and invest in a turnkey rental property on borrowed money instead of paying cash.  When you miss out on a financial opportunity you should take that as the price to pay for a financial education.

Ryan at Impersonal Finance had a great write up about recognizing opportunities and seizing upon them. There will always be financial opportunities, the problem is it’s often very difficult to recognize them when it’s happening.  Why is that investors and rich people always seem to be make money while the middle class are often missing out or late to the party? We hear it all the time how wages are stagnating and the middle class is in decline.  In order to get ahead wages alone won’t do it, only having investments that grow faster than inflation will allow you to get ahead.  Having a 1% savings account is not getting ahead.

“Obvious 2009 was the time to invest in the stock market, market’s too high I’m waiting for a correction”
I hear that all the time that 2009 was a great year to buy and the market’s just too high now. They’ll time the market and put money in when there is a correction, I know some that are still waiting from 2012 for that correction. It wasn’t an obvious time to buy in 2009, I invested nearly $30,000 that year and lost 35% by the summer. This was on top of the $100,000+ I lost the year before. With all my losses I regretted having so much invested, I was envious of those who had made extra mortgage payments or paid off their homes. Even the YOLO crowd was vindicated, why bother investing when you’re going to lose it all anyways. Better to spend it now and enjoy your life.

Price to earnings (P/E) is what an investor is willing to pay for a company’s earnings to own that stock. The current P/E in the stock market is 18, the average investor is willing to pay 18 times earnings. In 2009 with earnings collapsing the P/E was around 30 and rising as sales were collapsing. The market is cheaper today than the “obvious” 2009 prices.

I thought it would take 10 years to recover what I had lost.  I regretted having so much in stocks, instead  I wish I contributed the minimum and used the rest of my surplus funds to pay off my rentals.  Every month I invested was another month of losing money.

In 2010 and 2011 it was “obvious” to buy a home.  The federal government was giving out $8000 in tax credits to stimulate the housing market.  Ask anyone who bought in those years, they lost more than the tax credits due to falling prices.  In some markets they lost the tax credit and their down payments when their house dropped in value more than 20%.

There is always opportunities in a well diversified portfolio.
When I experienced my first bear market after the tech bust in 2000 I got scared and shifted into bonds, locking in my losses and waiting for a rebound. I got back in right after the market had rebounded 40%. That lesson taught me not to stop or lower my retirement contributions despite my losses. Instinctively I wanted to send extra payments to my “safe” investments of paying down my rentals. What I learned from my missed opportunities from my first bear market allowed me to seize on the opportunities from the second one.

Block out all the noise and not worry about where the markets are headed. (I have no idea) There are a lot more naysayers in this world (read the comments section in any Yahoo finance article) that will do absolutely nothing to improve their finances. A third of people despite the worst recession of our lifetime have less than a $1000 saved.  How big will that regret be when they can never retire?  How do we know in 10 years stocks today won’t look cheap? Homes bought today will be a third paid off that will cash flow for you,  you’ll wish you bought five more.

Budget, earn more money and get off the sidelines. Aggressively save into all your retirement accounts. Save another 20% in taxable accounts, look for real estate properties. The most important thing is when the crash comes (and it will) you continue to contribute the same amount to each asset class. Don’t change your investing plan (shift more into bonds or cash, sell properties etc.) You will benefit from the rebound and be much farther ahead than the naysayers.

What is your biggest financial missed opportunity? What financial lesson did you learn?

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