Travel Budgeting – I

PART-I The Art of Spending

What goes on your mind when your spouse asks you”lets go on a vacation to Hawaii ?”, let me guess- “That would be amazing, but isn’t it expensive ?” Unfortunately that is the truth about vacations, they are expensive, they always have been. Yet in spite of this, me and Akshata, we love to travel and try to find our way through this. We have traveled almost every other month for the past 2 years including many exotic places. That is a total of 5 countries, 20 US states and 21 trips in 3 years (not counting the ones by road). Our friends often ask us “how do you guys manage to travel so much ?”. Our followers probably think we spend all of our earnings in travel or we are rich enough to afford it. The truth is we started at ground 0, to be precise we started with massive education debt (Tuition alone was 100 grand USD combined for 2 years not to forget the cost of living at LA for Akshata). So we had to prioritize our expenditure if we wanted to travel and save at the same time. We disciplined ourselves in what I call the art of spending .

You will be surprised to know the amount one can save after so much travel. Its been 3.5 years since we started working, we bought a house 6 months ago in Austin Suburb(15% debt), paid off our massive education loans, bought 2 cars and savings decent enough to buy my parents a retirement condo in Mysore, India. So how is this all possible in such short time along with travel ? I have been waiting eagerly to share this information for a while now yet pushed it away as writing blogs can be tedious.

This short blog series (3 blogs) is going to be all about money, how and where can you save money, how to manage your money, make your spending earn you more money to spend it all again, did i just say that!

In this particular blog, I will focus on how we use the credit card system to our benefit. Without any further ado, lets get started on how we spend money.

Credit cards points system

Spending money is inevitable, be it for gas, grocery or restaurant. So let us learn to spend it wisely.

This one is mostly applicable to people living in United States. If you are from another country, this may not help you . Almost everyone in here has few credit cards, after all that is how we build credit history, we all earn points and we get statement credit, so whats new about it that I didn’t know earlier ?

While all of us use credit cards, its important to use the right credit card at right place and spend the points carefully. Most of us have multiple credit cards but mostly use one for all of our purchases. What this means is, you are probably earning 1-1.5% as points which you probably get en cashed for statement credit. On the contrary, we have a set of 5-6 credit cards that we use, depending on the category and time of the year. When we spend, we receive 1.5-5% as points (Sometimes up to 15%). Then we further exploit the points system to combine them and get 1.5x more out of it, making it 2.25-7.5%. That is a maximum cash back of 7.5$ for every 100$.

Does this sound like a lot of hassle to manage multiple credit cards ? Well its not, once you get used to it. Every time I go to the grocery store now, my mind automatically picks up this one card dedicated to grocery shopping.

How much do you actually make out of it ? Well you will be surprised to know that a good majority of our flights are booked using just the points. The following are flights we booked this year (2019) through points:

• 1 Round trip flight ticket to India from Houston
• 1 Round trip flight ticket to Miami from Austin
• 2 Round trip flight tickets to Seattle from Austin(Vancouver Canada trip)
• 2 Round trip flight tickets to Maine from Austin
• 2 Round trip flight tickets to San Jose from Austin
• 2 Round trip flight tickets to Cancun, Mexico from Austin
• 6 Round trip flight tickets to Vegas from Austin (us + parents + in-laws)

Following are the flights we actually paid for through credit card (not in points)

• 6 Round trip flights tickets to New york /Buffalo (us + parents + in-laws )
• 4 Round trip flight tickets to Austin from India (Parents + in-laws)
• 2 Round trip flight tickets to Hawaii from Austin
• 1 Round trip flight ticket to India from Houston

As you can see majority of our flight tickets were booked through points rather than actual money. 2018 was no different and 2020 will be no different.

List of categories and the credit cards we use:

• Grocery: Amex blue cash every day card with 3% returns and 0$ annual fee.
• Gas: Chase AARP credit card with 3% returns on Gas and 0$ annual fee.
• Restaurants & Travel: Chase sapphire reserve card with 3% returns and 450$ annual fee.
• Chase Freedom with 5% cash back and 0$ annual fee on rotating categories every quarter typically Gas, restaurants, grocery, stores (Amazon, Target, Walmart etc.) and payment gateways(Paypal, Chase Pay).
• Discover it credit card with 5% cash back and 0$ annual fee on rotating categories every quarter in categories similar to freedom but at different times.
• Chase unlimited credit card for everything else which doesn’t fall in any of the categories with 1.5% cash back and 0$ annual fee. If you are not planning to use the chase sapphire reserve card to get 1.5x out of it (making it 2.25x), I would recommend cards which pay back 2% such as Paypal credit card.

Chase cards additionally offer up to 15% on specific stores that you normally shop from. But its a hassle to add the offer to card every time. We generally use this on Airbnb reservations.

Most of the credit cards above belong to Chase. I should mention that Chase didn’t pay us for this blog (though I wish they did). The points we earn in each credit card is combined and moved to Chase Sapphire reserve card to redeem the points for 1.5x. In our case as my wifey holds this credit card, I transfer my points to her account before we book flights from it. It doesn’t have to be Chase, perhaps there are credit cards in other banks that work better for you but I haven’t found one that works better than Chase for us.

But isn’t the annual fee for Chase Sapphire Reserve like 450$ ? Yes but out of that 450, 300 is instant travel credit when you use it for travel category (Flights, Uber, parking). So I see 150$ as its actual annual fee. But considering its benefits I feel its worth the 150$.

So what exactly are the benefits of Chase Sapphire Reserve ?

• The ability to get 1.5x of the existing points is amazing and saves us tons of money.
• 3x points at restaurants and travel which is hard to find for a free card.
• 50k introductory bonus points on spending 4000 USD which is worth 750 USD.
• Primary rental car insurance for all the drivers up to 75000$. I see a good number of people buying the expensive rental car insurance at the airport every time because they don’t want to bump their auto insurance in case of accidents.
• Trip interruption insurance- Its not very uncommon for a flight to cancel or reschedule due to weather and other issues. The airlines declines from providing any stay during such occasions. Guess what Chase will cover you and your spouse for up to 1000$ per night for stay, rental car and food. We have used this once and I must say, we had no trouble claiming the money.
• Priority Pass- Rather than spending on restaurants( typically 10-25$ per person per meal), we travel early to airport and have our lunch/dinner over there. Priority pass covers for the credit card holder + 2 guests. This otherwise costs 27$ per person per visit. We try to use this almost every time possible.
• No foreign transaction fees- Before I started using this card I assumed that banks in US charge exorbitant fees if used in other countries. I was wrong. Not only is the foreign transaction fee completely waived in this, even the exchange rate is very reasonable. Pro Tip: Always remember to pay in the home currency of the country you are in. If the transaction is carried out in USD then the bank managing the transaction machine decides the currency exchange value which is very high. Exception to this is when the business is carried out in USD rather than home currency, then paying in USD makes sense.
• TSA pre and global entry Fee is reimbursed which is typically 100$. You can literally save so much time with this.
• Trip cancellation insurance- If you had to cancel or cut short your vacation because of sickness or because of the airlines, no problem, chase covers you up to 20,000$ per trip.
• Medical emergencies during travel are covered.
• Damaged or lost luggage reimbursement up to 3000$
• Points transfer to other airlines – We have mostly used this to move the points to Southwest when we want to book southwest flights. Its a 1:1 transfer and each point in southwest is actually 1.5x the point value.
• There are more benefits but these are the ones related to travel.

With so much free advertisement on Chase, we deserve to get paid for this!

Does the chase travel portal over charge for flights ? 90% of the times we find the flight we want to go on (which is typically the cheapest flight) at the same price as other websites. There are times at which other websites offer better price during which we ditch the chase travel points.

Most important of all!! Never have a credit card debt. Credit cards are a great way to build credit score, credit history and points but its a two sided knife, debts not paid on time incur very high interest rates and penalty. If you cannot handle your finances and credit cards, please do not use one.

This was only one aspect of managing finances for travelling. More will follow. Hope you enjoyed reading this blog. Thank you for your time.