Getting to Easy Street

Working for a living is so boring!  Good thing there are so many viable alternatives.  Let's forget the illegal stuff for now because a jail term could really derail your financial plan.  But surely those stories of your uncle who struck it rich when he invented the pencil couldn't have been made up.  And you're a smart cookie, so surely you can come up with something better than sitting at a desk all day, wasting your talents.

1) Invent something:  Don't let the odds discourage you!  Just because there's only about a 2% chance that your patent will earn more than it's cost, doesn't mean the next big idea won't be yours.  I mean, someone had to invent Post-It's, right? (no, it actually wasn't Mira Sorvino).  And look at the woman who invented Spanx --- She's the youngest female self made billionaire.  And you also spend a lot of time trying to think of ways to make your butt appear slimmer, so really, that could be you!  

2) Play the Lottery:  Sure, you are 100 times more likely to die of flesh eating bacteria than winning, but apparently 1 in 3 people in the U.S. think the lottery is the only real path to financial security (and really those people should call me, we need to talk).   Like the ad says, You can't win if you don't play, right?  The odds are long (one in 175 million), but someone has to win, and I'm pretty sure the winner is usually the person determined to be most deserving.

3) Game Shows:  You're outgoing, spirited, and you have quick reflexes.  What could be better than playing games on TV for a living?  You probably won't make millions, and some of your winnings may come in the form of a set of patio furniture, but ya gotta love free stuff.  Oh, and don't forget you have to pay taxes on the value of the patio furniture set (and that the value gets added to your taxable income, possibly bumping you up into a higher tax bracket) otherwise you'll get sent to jail like Richard Hatch who won Surviver, but it's still great just to know you're smarter than a fifth grader.

4) Attend focus groups:  Ok, so slightly less thrilling than playing the lottery, obviously, and the pay off is also less glamorous, but what's wrong with getting paid $100-$300 to give your opinion about something? Sometimes they even give you snacks!  Better than sitting at home and yelling at your TV, right?

5) Selling bodily fluids:  I've read you can make between $200 and $250 a month donating plasma twice a week, and you don't have to really have any skills at all for that, just a body that weighs over 110 lbs (preferably your own).  If you happen to have a male body, you can also sell sperm for somewhere between 50 and 300 bucks at a time, but you can usually only do it once a week.  Still put that and the plasma together, and you might be able to take care of your car payments, for example, while you help populate a small city.

6) Blogging!  Apparently, you can make a lot of money blogging, and I should know because I've now made well over $36, and I'm getting very close to being able to fund college for my kid from this.  Of course, it will be just a single course at community college, and I have 8 more years of blogging to make up the shortfall, but I'm an optimist by nature.

Narcissistic Peacocks and the Sand in Your Ears

I find it shocking how quickly many women will tell me how little they understand about financial matters.  And why is that?  A man with about the same level of knowledge will usually have a completely exaggerated sense of his knowledge and abilities!   It's not that we can't understand financial issues, it's just that most women don't seem to really want to.  And why is that?  Women don't dislike money, and they don't dislike doing smart things, so what is it?  

Well for one thing, financial choices involve risk, and we don't really like risk.  Biologically, we're not really programmed to like risk (appetite for risk apparently increases with testosterone levels.  Yeah, Really!).  Making financial decisions involves the risk of making bad ones, that might result in losing a lot of money.  We don't like making mistakes (or at least that's what I've been told by those who have made them).   There's also risk involved in asking questions about things we don't understand.  Maybe we don't want to risk being thought of as stupid.  Of course, these are generalizations, and it's not fair to say that every man parades around like a proud peacock who knows everything there is to know about money, but I do seem to meet an awful lot of women who behave rather like financial ostriches.

In a recent National Geographic article on The Evolution of Narcissism (god, I love that title), researchers explain that overconfidence can be to one's benefit when the cost of failure is low, the potential benefit is high, and the strength of the competition is uncertain.  For example, a man trying to pick up a woman, will overestimates his charm and attractiveness, see there are no competitors around, quickly assesses the consequence of rejection as something he can live with, and then, by coming off as strangely confident, he succeeds in winning the woman's affections.  

But if the cost is high (let's say, losing all the money you have in the world), then overconfidence isn't always very useful.  Overconfidence can make you feel comfortable taking on big risks, but it can be a problem when not matched by the ability to asses the degree of risk, or ones ability to overcome it.  The Avengers are overconfident, but they have superpowers, whereas you should probably not anger that really large guy in the car next to you with the shotgun rack.  He may not find your overconfidence all that charming.  Therefore It should also be said that this willingness to take big risks does not result in more frequent successes.  Your overconfidence in your investment skill does nothing to help you overcome the statistical improbability of beating the market.

In the area of finance, women tend to be under-confident.  We don't want to risk losing money on an investment, so we leave the money in the mattress, and lose buying power to inflation.  We don't want to make the mistake of trusting the wrong advisor, so we don't get advice, or we don't invest at all.  We generally don't ask for as high a salary, because we don't want to risk alienating the boss and not getting the job.   If OVERconfidence is a reflection of underestimating risks, and costs, UNDERconfidence must be a matter of OVERestimating them.  

Overconfidence may be foolish, but sticking your head in the sand is not sexy either.   And somewhere in the back of a (heterosexual) woman's brain is the ever-present idea that a man will come along and take care of her, and that he will unburden her of the need to get involved with all this high stakes financial stuff that she doesn't really want to deal with.  Maybe he will be on a white horse……with chocolate… and a Merit Badge in finance….. 

But then the list of risks shifts to include things like:

1. Risk of (overconfident) man underestimating risk and making unfortunate decisions with our money.

2. Risk of disagreement with (overconfident) man about allocation of our resources (i.e., "You bought WHAT??"). 

3. Risk of losing money in expensive divorce from (overconfident) man.

Of course, the good part about the guy-on-horse strategy is that unlike all those scary things like overcoming your fears and risking failure, it's surprisingly easy to find the confidence to blame him for making dumb financial decisions.

The Curse of the Credit Card Points

Psychologically, the concept of rewards is a powerful thing.  We really like to receive rewards and they can be a very effective motivator.  Trader Joe's gives my daughter stickers at the check out, and that motivates her to be still long enough for me to pay them.  My credit card company gives me reward points, teasing me with the idea of free travel, so I will use their card and help them make money.  But accumulating points is only half the story.  Ever try to actually use those points to take a trip? You'll often spend so much time trying to make it work and get the best deal that it becomes your second job. There's that pile of points that you have worked every angle to amass, and now you want to use them.  But you soon discover you either can't use them on the dates you needed, or you can't get the best prices because you have to book through the company giving you the points (AMEX, for example), or you can't share points with your spouse, and eventually, you give up and just pay full price so you can stop thinking about it already.  

I have 68,000 Amex points, and I'd like to take a trip with my family.  That should get me a reward equaling about $600 off air travel, but while a $600 ticket costs you 60,000 points, a $601 ticket can cost you 90,000 points because of the tier structure.  Also, the mileage award is on EACH ticket, not the total price for all the tickets, and you have the fun of comparing all the different ways you can use your points. 

So if, for example, I take my family to Chicago for a few days, and buy the tickets through AMEX, each one costs $319. here are the options:

1. I can use 60,000 to get a 15,000 point reward of $150 off each of 4 tickets, plus pay $169 in cash on each one, and buy one ticket for cash, for a total outlay of $998 in cash, OR
2. I can us 67,500 point to buy three 22,500 point rewards and then pay $923 for the other two tickets (and be left with no points)  OR
3. I can use 50,000 points to buy two 25,000 point rewards and then pay $1,098, thereby spending an extra $100, but having 18,000 points left, which is worth a $150 travel reward.
4. mind numb yet?

With AMEX, I have to book the travel through them, and that means I can't always get the best prices on tickets.  So am I better off just trying to get cheap tickets on my own, paying with my credit card to accumulate more points to spend at a later date? 

And let's face it, $600 won't get a family of five very far on a plane, so am I better off trying to use my points for a hotel stay, for example?  I proceeded to spend more hours researching this, and discover that the really cute hotel in San Francisco that would be just perfect for my family is not available for booking through Amex.  While I can get 5 bonus points for every dollar if I book it through Hotels.com through the Perk Central part of my Capital One Venture Card website (see yesterday's column), the price isn't as good as if I book it through the AAA site!  The experts always say you should just call the hotel directly and ask them for their best rates, and so I do, and they tell me that if I join their rewards program, I can get 15% off, which makes the price even lower than the AAA rate, but then I can't book it through hotels.com and get 8x the points!

I am preoccupied with the "opportunity costs".  If I use my points for flights, would I have gotten more value using them for hotel stays or merchandise?  If use my points now, when I can't get very much for them, will I regret it later, when I could have saved up so many points that I could take us all somewhere great for free?  What if I use my time to work and earn money rather than wasting it researching this stuff?

Ok, so what about cashing in points for gift cards?  I see Amex has Marriott gift cards, what about cashing in points for those and then using them to pay for a few nights in a Marriott?  Turns out a $100 Marriott gift card costs 14,000 points, which isn't a very good deal at all, in my opinion, because my amex points would only buy me 4  $100 Marriott cards, and I'd be spending 56,000 points to get a $400 benefit, which is probably less than the price of two nights, and I don't want to stay at the Marriott, anyway.

What if I just book a trip through Groupon or Living Social or Jetsetter?  Won't that just be cheaper overall?  I know I can't use Amex points to pay for that, because I can't book it through them, but what about Capital One points?  I call Capital One again (I figure they'd miss me if I didn't call them today), and I learn that I can not only use their points to pay for those types of discount deals, but I can pay for ANY travel expenses, like dining and shows with their points too!  I like that.  Capital One is now pulling ahead of Amex in the race for my spending dollars.

And what about stuff?  How about if I just cash in my miles for a new TV?  Or I can cash in my miles for a Best Buy gift card and get a TV there that's on sale and then just buy my travel separately…  I can get a decent little Samsung flat screen for 58,000 points, or I can get a $250 Best Buy or Amazon gift card for 35,000 points, which would probably be enough to buy me a decent little TV…

And then there are those points I accumulated on Continental before it merged with United and became United points?  What can I use those for?  Wow, look, I have enough points for one free ticket somewhere in the U.S., and so do 2 of my kids!  We should go somewhere!  And I'm really exhausted right now!

There is just no right answer.  You just have to choose.  You can spend your life obsessing over this minutia and end up wasting 3 days to save $10. I think the best idea is to use the points as a "travel savings program", and just let the miles accumulate until you have enough to save a substantial amount on a really great trip. 

And me? I think I'll just book the hotel I wanted in S.F. for the best price I can get (yes, I'll join their loyalty program too, what the hell.), using the 2-mile-per-dollar Capital One card, and keep the Amex points, the United points and the Capital One points for now.  

Now I really need a vacation.

Getting Totally Greedy about my Reward Points

After spending the week getting over having been a 1-point-per-dollar-sucker for far too long, I'm now determined to be rewarded much better.  In fact, I want to be rewarded BIG for every dollar I spend.  I tried to pay my health insurance with my new 2-point per dollar Venture card, but was told I can only pay by check.  Damn!  That's over 2,000 points per month that I can't get.  I wonder if I can pay my mortgage by credit card, but I think that might be a risky thing to do ---- paying off mortgage debt with revolving debt just can't be a good idea.  But I can pay my utilities, wireless and other bills with a credit card, and that should get me a bunch of points right there.  I'm buying all our groceries during this 3-month period with my Chase Freedom card because it's giving me 5% cash back (the categories change every quarter. Right now it's groceries and movies, last month it was gas and Amazon).  

Apparently I can earn even more with the Capital One card if I shop through their "Perk Central" website.  So I went into the Perk Central to see what I can buy there that will earn me the most points per dollar.  You can earn big bonuses on things you may not want (35 bonus miles per dollar for magazines.com, which would be so great if I wanted magazine subscriptions), but there are lots of things like Best Buy, Apple, iTunes and Target that give you 5 bonus miles per dollar, and various clothing and shoe retailers give you 9-12 bonus points per dollar.  But here's something intriguing:  Expedia, Orbitz and Priceline give you 2 extra points, Travelocity gives you 3 extra points and Hotels.com gives you 6 extra points.  That means that if you book a night in a $200 hotel on hotels.com through this portal, you get 1200 points.  Or is that 1200 points on top of the 400 points you'd get just by using the card?  I'll have to call them again.  I call them all the time now.  I have a new question pretty much every day, and I now expect lots of service.  I've become such a diva this week.  They have live chat, which I now love for the purpose of transcription (see below).

Tamar: Hi Pamela. I just signed up for the Venture card and I'm looking at the Perk Central list of bonus miles, and wondering if the bonus points are ON TOP of the 2 miles you get for every dollar spent with the venture card, or instead of.

Pamela: That's a great question.  I'm sorry for any confusion that you may have experienced.  Yes, the bonus miles that you get on Perk Central are on top of the 2 miles that you get with your card normally.

Tamar: so if hotels.com, for example says they're giving 6 bonus points for every dollar, and I book a $200 hotel stay, I'm getting how many points? 8 per dollar? 1600 miles??

Pamela: Yes, as long as you go through our website to get to hotels.com to book the reservations.

Tamar: wow, great, thanks!

Pamela: I am happy to help! Is there anything else I can help you with today?

Look at that, they thank you for being a pest in this country. I love that. 

And what, pray tell, am I going to DO with all these points?  Tune in tomorrow, when I involve you in my exploration of the smartest ways to SPEND reward points!

I can just tell this is going to turn into a series.