When I was in my 20’s I didn’t save money towards retirement. Zero, zilch, nada, zip. That period wasn’t savings free though, as I did save $30,000 or so for travels to around 35-40 countries during that time. In terms of retirement though, I was basically brain dead. I remember willfully ignoring the retirement savings match offered by my first employer that was somewhere between 3% and 5% at the time. I just couldn’t conceptualize the return that saving early would have on a my overall wealth. Those savings percentages seemed like such a small amount back then. Compare that to now, where if I net 2% on manufactured spend proceeds, I get pretty giddy.
In 2019 though, things have started to change for me in a variety of ways. More knowledge about points, miles and financial rewards, and increased options to earn both. Some methods to earn have died, while others continue to live on. Those specific ways to earn rewards aren’t really the point of my change or outlook, it’s the ability to see light at the end of the retirement tunnel. Basically this past year I’ve finally been able to envision retirement. By envision I mean that retirement has only seemed like an idea until recently, but now I can see the finish line.
That change started when I downloaded a Mad Fientist episode with Mr. Money Mustache, a popular personal finance blogger. At the time, I hadn’t heard of either of the two people on the show, and also hadn’t heard of FIRE (Financial Independence Retire Early) or the path that extreme savers were pursuing. For those interested in FIRE, here’s a simple blog post that gives more detail.
I have some some specific financial goals and can see the fruits of my labor. In short, those fruits involve saving more money, and (spending less). For some, spending less money doesn’t coincide very well with earning rewards in the form of points and miles (or cash for that matter), but fortunately it’s possible.
Back and Forth
I’ve had varying opinions about earning and spending points, and about whether hoarding miles (or saving miles for future use, usually en masse), is a good or wise thing. I’ve earned a lot miles in the past 6 years or so, spent a bunch of them, but in general, can’t spend the miles at the pace that I earn them. That difference has created a surplus of rewards, some in the form of cash, and others in the form of travel rewards in the form of points or miles. Some of that points surplus I’ve cashed out, and others (like a healthy stack of Alaska miles), I’ve kept for future use. My current stream of thought, or future goals, is to save a healthy balance of miles and points for the future (around 5 years from now), and to also 1save as much money as possible.
Although it depends on definitions, the 3 main components that affect how much money is available for travel: Income, Expenses, and Rewards. I earn a salary from my regular job, but there are pretty hard caps on what I can earn in a year. However, xtra credit card rewards helps with increasing money coming in, both in terms of extra cash or travel savings. Although there isn’t much control over my income, I do have a lot of control over expenses, which I’ve made an effort to reduce. Fortunately, my expenses weren’t that high to begin with.
For example, I’m friends with the janitor at my workplace and we talk sports a lot. He watches all of the big games, and last week he told me his monthly cable bill was nearly $230. That was a revelation, as I couldn’t imagine paying that much money for a cable service. I’m also assuming that expense is consuming a good portion of his take home pay. Maybe there are things I don’t know about his finances, but it seems like an awfully big (and probably unnecessarily too big), expense. I don’t have cable tv any longer (haven’t had it for years), and have zero interest in getting it anytime soon too. Don’t get me wrong, I like to watch sports and some movies, but many games and events can still be watched without cable. Better yet, using a small, over the air antennae can bring in a signal in crystal clear high definition that’s actually better than the signal from a traditional cable provider.
Travel rewards are icing on the financial cake. Not only do they reduce the cost of my travel, but they can positively add to my bottom line each month too. However, any form of credit card rewards always has an opportunity cost, and by choosing certain points/miles currency over another, you’re forgoing earning more of the other option(s) that you’re not pursuing. Along wit financial aspirations, I have loose 5 year points and miles goals that together, should be pretty compelling.
I now save 61.5% of my gross paycheck. I haven’t calculated my net savings yet, but saving over 50% of my gross paycheck was a short term goal, which I accomplished not too long ago. For comparison sake, I know that some people involved in FIRE have saved 70% to 90%+ of their paychecks (not sure if that’s gross or net though). They often bike to work, buy used things, don’t eat out much, and are careful on how money leaves their wallet. For some, hearing those spend restrictions may sound like something closer to prison life. For me, it makes a lot of sense, as constant consumption actually gets a little boring to me. Because our circumstances are different, I can’t replicate everything that some of those extreme savers have done, but I take my own, similar path to achieve my goals. Those examples do provide a nice base to work from though, of what’s possible and what might work to save more money.
Saving points and miles is an ongoing battle. It’s a battle to earn the points, to redeem them efficiently, and to cash out for money when it seems logical to do so. Sometimes it feels like I’m hoarding points, however, I don’t have enough vacation to make use of my current stack. With 3 major credit card bank shutdowns in the past year or so, it’s been a wild ride of late, and one that I self-admittedly could have handled better. I’ve learned from those mistakes though, which will hopefully help me out in the future.