Miles & Points Exposure & Risk
I have been debating writing this for a bit and ultimately thought it needed to be written, especially with yet another major issue in our award travel niche over the last few months. Hopefully this is a needed wake up call to the people in this space, myself included. It involves a story we have seen play out several times now, over the past five or six years, and it seems like we as a group just haven’t learned. If this article can help one or two people avoid self destruction, then mission accomplished. Hopefully it is bucket of cold water thrown on a whole lot more than just that though.
I want to make it clear that this isn’t to pile on or anything like that. There are people out there going through immense struggles and by the time they woke up to the truth it was simply too late. It is a lesson others have learned time and again over the years but it hasn’t resonated with the mass miles and points public yet, or at least it doesn’t seem to have.
Miles & Points Cardinal Rules
There have always been two cardinal rules in the miles and points game. First is to never carry a balance on your credit cards (at least that have interest on them). That is because the fees and interest gobble up whatever miles and points you are earning. Until you are on sound financial footing, this is just a game that shouldn’t be played. Dave Ramsay has that one thing right, he just doesn’t want to admit that there is a time to make your hay too.
The other cardinal rule is to never bite off more than you can chew, or afford to lose. This is pertaining to float and increased spending. It doesn’t matter what it is either. It could be buyers groups, gift card reselling, fin tech loads, credit limit lending, Simon Mall or anything inbetween.
I Would Like To Add Two To The List
When you get deeper into miles and points, I think there are two other cardinal rules you should have as well. First one would be to have multiple outs. If your particular avenue doesn't have a few exit plans, then that means the risk is higher, and that is in the multiples. Be aware of that and adjust your exposure as such. One thing may be fairly safe with 3 or 4 off ramps and you have a comfort level there. Don't automatically take that same approach with something that has only one out; they are not created equal.
The other cardinal rule I would add is an old stock one: diversify. Don't have all your eggs in one basket. If you do buyers groups, then spread whatever amount you want to do across multiple groups. That means if one goes down you don't lose everything. This allows you to do the volume you want while limiting your overall exposure.
Don't Lose Sight Of The Risks
Everyone knows that any of those things can go bust at any moment, but they seem to forget it when they are watching the miles and points stack up. Over the past few years we have seen gift card resellers go belly up a few times now, buyers groups “lose product”, have delayed payments and now run out of money completely. Whether it is because of them trying to turn a buck into a buck fifty with risky investments, or just poor management, it has happened time and again. This latest instance is the worst yet and has entire families under the weight of financial ruin.
Even if you have a proven method dry up overnight you can be left in a tough spot with more float than you can afford. That is why it is best to always have multiple outs for whatever you do on top of being aware of your overall exposure. What isn't normal seems to feel pretty normal pretty quickly and that is a scary thought when you step back and look at it.
History Continues To Repeat Itself
Over the past 5 years or so we have seen people lose life savings and more chasing miles and points. It is time we take a step back, myself included, and ask when is enough actually enough? Are we just riverboat gamblers that are continuously in need of that next points high? A high that continues to shoot to the stratosphere because the last high needs to be beat? Gone is the excitement from 50K-100K welcome offers. Those are child’s play these days and barely move the needle.
We Need To Ask What Is Driving Us
It has gotten to the point that we are doing it because we can, not because we need to. People that are into this on the heavier side of things have enough points to travel for years and are now onto a much more dangerous game. A game that has them chasing a mythical unicorn they will never catch. Have we entered an area of addiction? Likely.
I find myself fighting the same urges. The urge to always get more. If I am sitting on the couch that means I am not out there earning–well, except for those glorious couch points, that is. It's something I have been trying to be aware of and combat. Because the old cardinal sin used to be that you were not going hard enough before something ends for good. That is a sin we should etch in our forehead and look in the mirror every time before we head out. Maybe it is time to realize that sometimes enough really is enough.
Balance Is Needed In All Things
Don’t get me wrong, miles and points have afforded me things that would have never been possible without them. Whether that is from travel, or from the income you can secure from miles, points, bank bonus and the like. Having said that, I find myself wondering some nights why I am exhausting myself chasing them so hard, only to whip myself into shape and back on the points treadmill the next morning. We, just like in the work world, need to find that balance.
Because without that balance, and perspective, we find ourselves ignoring risks and pushing our exposure to places that two lifetimes couldn’t cover. That needs to stop and it needs to stop soon.
Only You Can Draw Your Line
That number will be different for each and every one of us, but it is a number we need to deliberate on and live by.
For myself, going forward I plan on never extending more than I have points balances available to pay for via cashing out or other methods. That may mean lower earnings but it can still be significant if I work through it quicker. It may not be as easy as other, riskier options, but that is a trade-off I am willing to accept. Because it is a result I know I can live with at the end of the day. I encourage everyone else to identify their exposure limits and find a way to live within them. Hopefully having that perspective will protect us from ourselves.
As always in this space, whether it's travel, miles, or points, it shouldn't be a keeping up with the joneses scenario. Always focus on financial stability first and foremost.