So, how much did I ACTUALLY spend?

One of the interesting things about accumulating hotel/airline points for travel is that when it comes to for vacation, you don't actually have to pay anything. All your costs of obtaining these miles are front loaded, meaning you paid for that hotel/airplane ticket months ago via annual credit card fees, gift card fees, money orders, or square fees. Today I wanted to give you a quick overview of how I calculate the costs of my points so I can get a good idea of how much to budget when I go on vacation.

The first thing I do is set up a spreadsheet that adds up all the miscellaneous fees I rack up over the course of the year. These include the following:

1. Gift card activation fees (that $5.95 added on to the $500 gift card purchased at the grocery store)
2. Annual credit card fees
3. Money order fees (this is the main way of liquidating those gift cards now that Bluebird has bitten the dust)
4. Square Fees (Instead of purchasing gift cards and trying to liquidate them, the easy way out is to "pay yourself" via Square. This is rather expensive at 2.75%, but can be handy if you just need to finish out the minimum spend on a certain card)

Next I categorize each card into what type of points I get with it. For example, I have 4 cards that give Hilton points, 2 that give Starwood Preferred points, 4 that give me Aadvantage miles, and so on. 

Then I split out each fee by the associated card to get a breakdown of how many fees go to each category. I then divide the fees by the total number of points I have for each category, and viola! I get my cost per point, which lets me know when booking that hotel how much I am actually saving. See the table below for my actual numbers from the past year.

As you can see, this hobby has cost me quite a bit! Without careful tracking, these fees can become easily lost. Luckily I do some other activities that more than make up for those fees (Selling gift cards/iPhones on eBay, opening checking accounts for bonuses, etc)

So what now? Why go through the process of tracking all these fees if you don't do anything with that information? What I do is set up another tab on my spreadsheet that tracks every time I redeem a point for something. I'll break it up into separate vacations as well so I can know what to budget for each vacation. The table below shows how much our most recent trip to Hawaii (See my wife's lovely blog on the details) and our upcoming Paris trip cost vs what we saved.

This breakdown allows me to know how much I actually paid for all those points that I redeemed in Hawaii (and will redeem later on this year for Paris). As you can see, the actual value gained is tremendous. Is paying $32,000 for a 10 day vacation in Paris over the top? Most definitely! (at least for my tax bracket) Would I actually pay that much by flying first class and staying in fancy hotels if I were paying for it? Not in a million years. But when I only have to pay for 3% of the actual cost I'd call that a pretty sweet deal.