We are serious about our goal of living on $20,000 a year, but have to overcome a couple obstacles.
We’ve been posting all of our expenses for almost two years now and we aim to spend $20,000 a year. Last year, we were slightly over budget and this year I’m determined to make our goal… despite big set backs.
Our aim is to live a simple life in terms of not owning much. One of travel and experience over possessions. We do mostly live out of 4 and 5 star hotels, but our biggest expense is food. We just don’t really think much about eating out. But so far this year, the travel expenses have been abnormally high.
In my mind, there are investment months and burning months. Unfortunately or fortunately, I’m not too sure, we had a number of opportunities for investment months.
Meaning, there have been quarters where we’ve gone really big on IHG’s promotions, and we’ve spent over $2,000 on IHG hotels alone! Crazy, right? Except, the hotel promotions got us so many points that the number of nights we got out of the points brought the average cost of a night down to $20. $20 a night long-term, but $2,000 up front.
I’ll explain how we’ve started off 2015, but the end conclusion is that we are over budget and we’ll be burning a lot of points we’ve earned in the first 4 months, for the rest of the year.
The following is about where our money went and how we plan on saving for the rest of the year.
$440 is the most money we’ve ever spent on an airline ticket
In the last little while we’ve done a lot of mistake fares. One got us to Europe right before 2015, and so I won’t count that one or the few right before it. But here are the ones we did this year:
- $420 for two tickets to Muscat, Oman
- $422 for two tickets to Nairobi, Kenya
- $880 for two tickets to Beijing, China in Business Class
These are all per person.
Yes, $440 is the most we’ve ever spent on an airline ticket, and it was a long haul on AA in Business Class. And it earned us each 36,266 Alaska Miles (and Alaska Miles are some of my favorite).
Are mistake fares actually worth it?
Here’s my though on mistake fares.
On 5 of our last number of mistake fares, the only thing we paid for was the airport/country taxes. In other words, this is part of a ticket that we would pay even if we were using miles. This is the case for the ticket to Muscat and Nairobi.
Think about it.
- The mistake fares cost no more money than an award ticket.
- The mistake fares saved us from using miles.
- And they actually earned us miles.
Mistake fares are great (and I’m not worried about most of them being honored in the future (just as they were before the DOT cared)) saving money in theory. However, there are a few problems.
I hate flying and we have been doing a ton of flying. Normally I travel slowly, but because of scheduling all these, the trips were shorter. Like normally, I would have just booked a ticket to Oman and booked a oneway to Kenya maybe. Then maybe added on a few other places and stayed for much longer periods of time.
In other words, we paid more money just because we took more flights. And because all our trips this year have been fast paced, our expenses have been higher.
Mistake fares are still a good deal for us, it’s just an investment.
Also, we ended up paying for tickets to Ukraine because we wanted to be on the same flight as Rachel, Zack and the kids. (Read more about their adoption story here, and our trip so far). This was an extra $330 each and it was only a oneway. While the business class roundtrip to Beijing was more expensive at $440, obviously it was a better deal. This won’t earn us miles and the flight was… super basic (again, my armrest fell off).
Another thing that caused us to go over budget was traveling in Kenya with friends. Often when we travel with friends who only have a week vacation, expenses go up a lot. Times where we’d do public transit we end up splitting private transit.
$13,661 in 5 months is way over budget
All that to say, the first part of the year has a bit of airfare expenses we normally wouldn’t have, and the fast pace we’ve been keeping isn’t normal or in our budget.
With a little over 7 months to go we are more than half way through our year’s budget.
This means that we’ll have to spend $6,339 a month for the rest of the year. Which… is not a lot of money, but I’m totally not worried about it.
That’s $905 a month.
The plan to stay under $905 a month
Here are a few reasons, I’m not too worried about keeping under $905 a month.
1) Burning the stockpile
Believe it or not, I don’t normally have a large stockpiles of points. All the time I see friends’ mileage balances, friends who have millions of miles with one airline or another because of some stupid good deal they got in on, or because they just earn more than they spend.
Not us. Burning millions of points is a lifestyle. Burn em. Don’t hold back, use the miles!
Yet, in the last many months we’ve saved tons of miles doing the mistake fare flights.
Because we’ve spent so much money in the last 5 months on “good deals”, we have a little bit of stockpile of miles.
I’m committed to the $20,000/year concept… and I’m also committed to living within our means. So I will burn every single mile and point just to stay within the budget. In fact, I have a lot of points to burn.
2) Burning my Hilton HHonors stockpile
I’ve been dying to do a trip to Egypt and a few other places with category 1 and 2 places. I’ve been saving these destinations for a while, and trying to rake in the miles.
I talked about the Egypt example a little earlier, but I’ll explain more.
I did a post on how there are 15 credit cards that earn Hilton Honors points. Particularly, the Virgin Atlantic card transfers 1:1.5 to Hilton. That means I’ll get ~140,000 Hilton points from this one bonus/spend.
140,000 from one card, and there are a 7 hotels in Egpyt that are only 5,000 points. Plus, there is a 5th night free. That means 5 nights would cost 20,000 points.
5th night free on category 1 hotels would mean that I could get 35 nights from the 140,000 just from the Virgin card. Plus, I’ll try to get a few more Hilton cards.
(I’ve been interested in a Turkey trip as well, but I’m not sure the category 1’s are where I want to go.)
Really, I could spend 35 days in Egypt. I love ancient history and new places. Egypt is unique and it doesn’t get too much more “ancient” than Luxor and the Pyramids.
I’m going to give a try soon at the TrustedHouseSitter thing.
I’m definitely picky about where I want to stay, mainly because of location and internet. But if someplace is downtown in a super cool place, a month of free lodging would be awesome.
One month of free lodging and staying put could mean that food would be our only expense. Which we averaged about $600 a month last year on food… which is a lot. But we could do that thing that normal people do…. it’s called.. um…
Yeah, we could try cooking. I just hate the dishes part. Perhaps we could do the cooking thing everyday. At least one meal a day.
I can manage the time to make cereal or oatmeal.
But in all seriousness, if we actually try… we could have a seriously cheap month. This is all wishful-thinking math, but let’s just say we only spent $500 that month and the Egypt month, and another month we do really well. Then the other 4 months would be allowed a little more slack, like $1,200 a month.
And that’s how I see things going a little more. A few really cheap months and a couple months still over budget.
A) How do I handle cashback?
If you saw my $0 trip to Muscat, Oman then you know that I covered the flights on the mistake fare with Barclay World Arrival points.
Then I wrote about how I would MS $20k on a cashback card this year.
The goal is to publish my expenses to learn something about travel. To learn what strategies are and aren’t working, to learn more about the costs of places, and to be more transparent.
It doesn’t make sense to say we spent $0 just because our cashback matched our expenses.
However, I’ve now put serious effort into cash back. Specifically here’s my strategy:
- Airline miles from credit card bonuses
- Hotel points from promotions and a few card benefits
- Cashback from 5x MS
The fact that I’ve diverted more credit card energy/apps/bonuses to cashback doesn’t change the fact that I spent $440 on a business class flight to Beijing. They are unrelated and show different things. However, it could mean that I have less miles/hotel points to cover travel expenses.
I plan on keeping the info separate and continue to show expenses the way they are, but I suppose it does have some relationship, but haven’t thought much about how to display it yet.
Any thoughts? I could do cashback vs reimbursement? Or just keep the info separate…
What most people have a hard time imagining is that Europe ends up being cheaper for us. Probably because we burn points, and also because there are points hotels everywhere we go.
What doesn’t seem obvious is that places like India and Kenya cost us way more money. India because things went wrong and I paid for flights where I would normally take trains. Kenya because the national parks are expensive and the hotels are expensive.
Sure there are crappy hotels for $10 a night, and I’m not above staying in such a place. But as I say, my priority is also to work while traveling, which requires good internet. Places with good internet are expensive.
Take Ukraine for example. We spent 17 nights in Kiev a couple of years ago, while the InterCon was on PointBreaks. Sure it was super cheap for us, 85,000 IHG points before the 10% rebate from the credit card. But the hotel was going for $400+ a night. Why? Besides the fact it was a nice hotel, the real reason is that there aren’t many options for nice hotels in Kiev.
Which is to say that the cheapest option isn’t just to go to “the cheap places” without points hotels. The cheapest option for our needs tends to be places with points hotels.
That being said, I’m still going to go where I want. If I feel like going to Vienna for the billionth time, I will. If I feel like going to Turkey, I will.
It might mean that I need to get creative. So I will be trying out a few hotel experiments involving hotel booking sites’ rewards and other ideas.
In the meantime, I’ll be trying things out and will be figuring out how to spend $900 a month and still knocking off the places on my bucket list.