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Another post from The Man:
Mommy Points is away being Mommy Points at a blog conference, and, after editing her recent twin travel interview, I thought to myself, “Self, getting the business and personal cards from Southwest might be achievable for the average person, but is $10,000 charged on two cards in one year feasible to secure a year-long companion pass? A Companion Pass requires 110,000 Rapid Reward points earned within a calendar year. Getting the 100,000 Southwest Rapid Reward points from the two credit card sign up bonuses, plus 10,000 points from spending $10K on the card, would get you 110,000 points. With Southwest, that would essentially equate to $1832.60 in “Wanna Get Away” fare credit. So, you would have over $1800 to use on the first ticket, and then the companion would fly free for the duration of the companion pass. I have learned that a companion pass is good for the remainder of the current year, plus all of the next year. Therefore, there is some value in doing this at the very beginning of a calendar year.
Let’s take a fictional example of a family of three: Sue, Pierre, and baby Theo. Sue is a full-time office manager earning $38,000 annually. Pierre stays home with Theo, and earns about $7000 a year as a freelance short story writer. This family earns the national median, or middle, income (according to the 2005 census) of $45,000 collectively, before taxes. Assuming a 15% tax bracket for a married couple filing jointly, this would be a take-home income of $38,250. Unfortunately, although we are six years beyond this census, incomes on average have not increased substantially, yet cost of living is arguably higher. For the purposes of easy math, we’ll assume that Sue’s had a Roth IRA for years, and puts $2,250 of annual post-tax income into this investment vehicle, primarily to help send Theo, who possesses an impressive percussion proclivity, to Juilliard. The remaining income is $36,000, which over the course of twelve months, works out to an even $3000 a month. Isn’t Sue smart?
Pierre and Sue rent a nice home from Pierre’s uncle, Miguel. Although Miguel picks up the cost of landscaping, water, sewer, trash, and electricity, their monthly rent is $850. If Miguel were able to accept the rent payment through a credit card, this exercise would already be over: 12 payments of $850 on the Southwest cards would exceed the minimum spend by $200. But for the purposes of their story, Miguel still wants his rent in a check, because he likes to visit with the nice tellers at his credit union when he deposits his rent payments.
Sue and Pierre are down to $2150 after rent. Sue’s commute to work is 36 miles one way. She drives Pierre’s old truck now that the family car is needed to transport baby Theo, and there’s not enough (comfortable) room in the truck for a baby seat. The truck gets 12 miles to the gallon. It sits at home on the weekends, so fifty weeks out of the year, it’s driven five days a week, for a total of 18,000 miles a year. At an average of $3.25 a gallon for gas, Sue can put $4875 on the personal Southwest card each time she fills up at the tank. Since Pierre has his own Southwest business card, he fills up the family car throughout the week as needed, and charges an additional $1600 a year in gas.
After gas and rent, Sue and Pierre are down to $1610.42 left per month. They both are huge Apple fans, and have a family plan for their iPhones which costs them $110 a month. This is another $1320 toward the companion fare, which now puts them at $7795 total.
Sue and Pierre are not big TV watchers. They don’t have cable, or satellite, and really don’t miss it. They keep their grocery costs down by working in their backyard garden, which produces more than enough fruits and vegetables for them year-round, but they aren’t vegetarians. They buy their supplies, meats, drinks, and staples at the grocery store like everyone else. With the arrival of baby Theo, costs at the grocery store have risen; Pierre estimates that their twice-a-month trips to the grocery average $450 a month (he can’t wait for Theo to be done with diapers!)
By putting only three of their living expense costs on two cards, Sue and Pierre, with their median family income, have charged $13,195 in one calendar year. They pay the balances each month, as these are not big charges that create debt. Sue still has some student loans, and Pierre has $4300 charged on an old Sears account from when he furnished his first home out of college. The couple still enjoys some of the things he purchased, but Sue’s sense of style required a lot of it to remain out in the garage when they moved to Miguel’s house after getting married. Long-term charges can be very detrimental to current financial positions, but our heroes are managing.
The key piece to note about Theo’s parents and their financial activity is that they are not wealthy by American standards. They are not debt free, she drives an expensive (to run) vehicle, and they pay their taxes diligently. Sue even puts some money away, despite the hardships it creates some months. All in all, they still have over $700 a month that is either discretionary spending, or goes to non-budgeted items, like new tires, holiday decorations, or birthday gifts. They do not live an exorbitant lifestyle, and the only thing that really sets them apart is that they aren’t raising Theo to be glued to the tube. Sue tries really hard to put at least $200 into the vacation fund each month, because what good are free flights if you have no money to take a trip? Theo loves Donald Duck, and is going to see him when he turns two. In the mean time, Sue wants to use the first two trips while he is younger and can fly free to visit her parents. Pierre doesn’t mind while Theo is still young, but loves this strategy of earning miles with every-day purchases, because he knows Theo will love to see the marching band at Pierre’s alma mater, Notre Dame, when he’s a little older.
I may have taken some creative liberties with fleshing out the characters of this family, rather than just showing a spreadsheet and going, “See, it’s easy!”, but this little narrative was meant to demonstrate that there are very few people who can’t take advantage of the opportunities to travel at reduced cost. Granted, credit needs to be at an acceptable level, and being diligent about what is affordable is always necessary, but an average young family should have no problem enjoying the ability to travel the world (almost) for free. You can get some additional ideas on how to increase your points earning by just being more strategic about how your family pays for day-to-day expenses by reading this previous post that Mommy Points wrote.
You may make more or less than Sue and Pierre, but are you working on your miles and points? Do you have a family member that is in a similar situation who would love to travel but isn’t aware of the opportunities to earn free flights?