Death By 1000 Cuts

What’s Shakin’!

This is the Budgeteer Newsletter. The newsletter that makes financial knowledge more accessible than your grandmas candy drawer. Even though it was filled with candy orange slices and Werthers. But when she had the good stuff, it slapped.

Today we are bringing you:

• Managing subscription costs

• When to use points or cash

Today's edition is brought to you by Refside. Fun referee apparel for refs by refs.

Yes, you will get tired of us saying it, but we will continue to say it repeatedly! Your first step to building wealth is to understand your income and expenses and establish a spending plan! One thing we often overlook(or forget) when writing down our expenses is a serious wealth killer that initially seems small but suddenly turns into a considerable expense - subscription fees! Sure, it's just a few bucks here and there, but when you add them all up – especially for stuff we don't use anymore – it can be a real budget buster. They're tiny money vampires, just sucking away at our bank accounts without us even realizing it. And the worst part? We're the ones who invited them in! Let's get into how we can manage these costs.

1. Take inventory: First things first, make a list of all your subscriptions – I'm talking Netflix, Spotify, gym memberships, Hulu, you name it. You might be surprised at how many you've got! And do this with your significant other, you both might be surprised that you have three Peacock accounts.

2. Prioritize them: Now that you've got your list, it's time to figure out what's important. Ask yourself, "Do I use this?" If the answer is no, or not really, it's time to let it go. Pro tip: Can't decide which ones to get rid of, cancel them all. Then, over time, add back the ones that you genuinely need.

3. Set reminders: Don't get caught off guard by auto-renewals. Set up calendar reminders a week or two before your subscriptions are set to renew, so you can decide if you want to keep them or cancel them.

4. Go for annual plans (when it makes sense): Some subscriptions offer discounts if you pay for a year upfront; the discounts can be as much as 40%. If it's something you use a lot and plan to keep, why not save some cash?

5. Share with friends: You know what they say; sharing is caring! So talk to your friends and see if you can share the cost of certain subscriptions. Just make sure you're not breaking any rules or terms of service.

6. Hunt for deals: Watch for promotions and discounts on the subscriptions you love. Sometimes, companies offer sweet deals for new or existing customers, if you're lucky!

7. Bundle up: Some services let you bundle multiple subscriptions together for a lower price. Check if your faves have any bundle deals to help you save some moolah.

8. Don't be afraid to negotiate: If you're attached to a subscription but think the price is too steep, call the company. You never know; they might offer a discount to keep you around! And yes, this really does work. We recently saved $40.00 a month for internet by simply asking if they had a better rate. Another option, if you have had the subscription for some time call the company and tell them you would like to cancel. They typically have a retention department that will give you significant savings to keep you as a customer.

9. Keep track of your spending: Add up the cost of all your subscriptions and see how it affects your budget. This can help you decide if you need to cut back or make changes to your subscription habits. RocketMoney is a great tool to help manage your subscriptions.

10. One card to rule them all: Here's a nifty trick – try using just one credit card for all your subscriptions. Not only does this make it way easier to track 'em all, but it also helps you see the total impact of those fees on your budget. Plus, if you ever need to cancel or update your payment info, you only have to worry about one card. Pretty cool, huh? Just make sure you're using a card with great rewards, so you can score extra perks while at it!(Hint for credit cards to use: Chase Sapphire gives 3x points on select streaming services)

So there you have it, subscriptions albeit great, are sneaky little wealth killers that we often overlook because they seem harmless. I mean, that $6.99 Hulu cost will not break the bank. However, when you start looking at all of your subscriptions, they can quickly add up in the hundreds. Happy subscribing!

How do you know when to redeem your points, or when you should pay cash instead?

Ideally, the answer is, “All points all the time, because I have millions of them!” But for those of us who haven’t crossed the 7-figure points mark (yes, people out there with millions of points exist), a little strategy and #math is involved.

When to pay with cash

The magic number you want to isolate to make this decision is called the redemption value. Luckily, all you need is:

• A 4th grade understanding of long division

• The price in points

• The price in dollars

Once you’ve got that, you want to run the following equation:

[the cost of the flight or hotel in dollars] ÷ [the cost of the flight or hotel in points] = the value of each point for this transaction. This tells you whether or not it’s a good time to use your points.

Let’s pretend you’re debating between spending $200 on a flight or spending 18,000 points on Southwest, where Rapid Rewards points are valued—on average—at about 1.5 cents apiece.

$200 ÷ 18,000 = your 18,000 points are worth 1.1 cents/each.

So what do you do? 1.1 cents per point isn’t a great redemption value—remember, the average value is about 1.5 cents.

If you have tons of points (and a Southwest Companion Pass), it’s probably not a big deal to use them. But if you only have, say, 20,000 points total, this might not be the most worthwhile flight to spend them on.

Here are the average values per point for the major loyalty programs.

But there’s another factor to consider: While it’s not a hard and fast rule, generally speaking, you’ll achieve much higher redemption values by transferring points from your credit card company to a partner hotel or airline than you will booking travel directly in the credit card rewards portal.

You’d think the numbers would be similar, but they can actually vary substantially: A Delta flight might cost 30,000 points in the travel portal, but only 18,000 Delta points will be deducted from your account. Transferring your points to Delta (rather than booking directly in the portal) can change the calculus of whether or not the redemption is “good.”

When to pay with points

Let’s say you’re perusing a credit card travel portal for a hotel room in Big Sky, Montana, and you stumble across a room that costs either $266 or 21,820 points.

Using our earlier formula: $266 ÷ 21,820 points = about 1.22 cents per point

Hmph. This isn’t great, especially for Ultimate Rewards points.

Let’s try another hotel at the same destination: $354 ÷ 25,512 points = about 1.4 cents per point

That’s a little better! Anything encroaching on 1.5 cents per point is usually fine by us. As we’ve already hinted, a lot of the value assigned to the “average” Ultimate Rewards points value comes from the fact that they can become ludicrously valuable when you transfer them (like to a partner airline for a flight worth $1,400 for 35,000 points, making the flight redemption value worth a whopping 3.7 cents per point).

Most travel portals will usually have (relatively) consistent ratios. In other words, you probably won’t often find situations in which the points are worth a lot more than the standard two cents each. Where you’re more likely to see point values fluctuating is when you directly book with the hotelier or airline. This is because the airlines and hotels offer peak and off-peak pricing models, in a lot of cases.

In other words, if you’re looking at Hyatt, you know you’ll always be able to find a “Category 1” hotel for, say, 5,000 points per night, and that the most you’d ever spend for a “Category 4” hotel is 90,000 points/night.

Without standard award charts like the example above, a flight or stay could cost as little (or as much) as the vendor wants for reasons we’ll never know, which makes it less predictable (and usually, more expensive).

Your best bet is to use the “dollars divided by points” equation every time and determine if the redemption value is strong compared to what the geniuses of the internet say is the average.

Credit Card Deal Alerts!!

There are two awesome deals this month:

The Chase Sapphire Preferred bonus has soared to an impressive 80,000 points when you apply online, making it a fantastic offer if you qualify. The bonus is usually only 50,000 points. This was our top recommended card for those new to the travel hacking game

The Citi / AAdvantage Platinum Card currently features one of the most remarkable bonuses out there, with 75,000 miles up for grabs. As AA isn't a transfer partner for Amex, Chase, Citi, or CapitalOne, their miles can be challenging to accumulate. So, if you've been eager to stock up on AA miles, now's your chance. ​

Read. A new report highlighted by CNBC reveals that a whopping 73% of millennials are living paycheck to paycheck. The study, conducted by PYMNTS and LendingClub, found that overall, 60.1% of consumers face the same struggle. The paycheck-to-paycheck lifestyle is widespread across generations, affecting 65.5% of Gen Z, 64.2% of Gen X, and 49.5% of baby boomers.

​Read. Money.com investigates the reasons behind the current housing shortage in the US. Factors contributing to the crisis include a scarcity of new construction, increased demand from millennials entering the market, and homeowners staying put due to low mortgage rates.

Read. Darius Foroux's article on stock market cycles provides valuable insights into the different phases of market cycles and their significance for investors. Understanding market cycles can help you make informed decisions and improve your long-term investment strategy.

Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email don’t hesitate to send us a reply.