Saving for Vacation: Financial GPS
A failure to plan is a plan to fail. ~Winston Churchill
Three additional months into the 2013 Saving for Vacation challenge, much has happened. First, everyone (kids included) survived a summer vacation full of regional travel and day trips. Second, I left the comforts of my steady paycheck with the intentions of making a go at a career in freelance writing. Third, I thoroughly enjoyed the recent Chicago Seminars conference put on by key members of the FlyerTalk community and attended by those of us looking to get into “travel hacking” (more on this in a few paragraphs).
Drawing some analogies between following a GPS device and taking a long road trip, it turns out that having financial plan is not unlike a long journey full of detours and traffic jams. By tracking your progress and having an ultimate goal in mind, the GPS device (i.e., financial planning tool) can help you re-calculate the best course of action taking into account the known variables along the route.
With a bit of financial uncertainty in the next few months, having a funded emergency savings plan and a clear understanding of our current savings and expenses gives us better control over the choices we make on a daily basis.
Now, let’s segue into the topic of “travel hacking.” As best I can describe the term, travel hacking is the practice of earning and redeeming rewards points for free or reduced flights, hotel stays, and perks related to taking a low-cost or free vacation. For example, today I purchased a dog bed from LL Bean. Instead of going to the LL Bean website and clicking ‘buy now,’ I logged into the online shopping portal associated with a popular airline and earned 250 points for the purchase. This is in addition to the point-per-dollar earnings accumulated by charging the transaction to a credit card associated with a different airline. By making everyday purchases in this way, eventually a person can take a vacation on the merits of their everyday purchases.
And if you’re following the Mvelopes* envelope funding methodology, buying the dog bed assumes you had set aside enough money to make this purchase in the first place.
That said, the idea of travel hacking is somewhat new to me and is akin to using the Apple TV remote without the assistance of a seven-year-old. While I’m still working to assemble my conference notes—and will publish a list of resources in a future “Saving for Vacation” post—my main takeaway from the conference was the importance of knowing your credit score as well as your debt-to-credit ratio.
Key to playing the game is being organized and having the financial discipline to pay the balance of your credit cards each and every month (many points bonuses require a minimum spend within the first three months and this is where a person can quickly get in over their head). I think Winston Churchill would agree.
*P.S. Check out the new Mvlopes blog, where you’ll find a variety of down-to-earth articles on financial planning and ideas for creating your own financial road map.