FinCon or Bust

It’s that time of year again, when the world’s financial bloggers converge to communicate, collaborate, and carouse, aka FinCon.

We will miss out since we are back in Asia, but hundreds of others will be converging in Dallas this week. As with any gathering that involves travel, there will be airplane tickets and hotel rooms, a bit of dining, maybe a car rental or Uber, and perhaps even an alcohol related expense or two.

Sounds like a great opportunity to use credit card reward points to get some free travel, right?! Several people on Twitter were considering last minute trips and trying to decide, cash or points.

imho, cash. Every time. Twice on Sunday.

Business Travel & Taxes

The IRS has a name for people who spend their free time attending financial content conferences: business owners. This is the case even for those researching / planning / evaluating being in a financial content business.

Many attendees are bloggers or plan to be bloggers. (Are you one of them?)

From money losers to the insanely profitable, these blogs / businesses all have one thing in common: expenses are tax deductible, including travel. Side hustle or main hustle, it is all the same.

We could use points to book free flights and/or a free hotel, but then… no tax deduction.

Cash or Points?

I’m a big fan of free travel, but when it comes to business expenses, with few exceptions cash is king.

An example:

Our 2016 FinCon attendance cost about $1,100 (See our complete FinCon 2016 Expenses.) Had we used points for a free hotel and free flights, we would have spent $731 less but paid $250 more in taxes. And of course we would have been in a stuffy hotel room instead of on a sweet house boat.

Still, that is a net savings of nearly $500. Who wouldn’t want to save $500?

Well… me. I want to save more than $500.

By using those same points for personal travel, instead of 4 free hotel nights in San Diego we had 5 free hotel nights in NYC (plus free bagels and coffee every morning!) for a savings of about $1,400. Instead of a free flight from San Francisco to San Diego, we had free flights from Minneapolis to Seattle and then from Seattle to San Francisco for a savings of ~$550.

But wait, there is more! To spend $1,400 on a NYC hotel, we would have had to earn $1,874. Uncle Sam gets paid first.
To spend $550 on flights we would have had to earn $736.

Looks like we saved closer to $2,500. In summary, pay cash for business travel and use miles & points for personal travel

Gaining Advantage

There are 2 factors at play here

1. Pre vs post tax expenses

All business expenses are pre-tax; they come directly off the top line.
Personal expenses are post-tax; first we pay taxes, and then we get to spend the rest.

All else being equal, it is better to pay pre-tax, which means prioritizing business expenses over personal expenses.

2. Points valuation

Same as with cash, it is better to get more with less. I’d rather use 25,000 frequent flier miles for a free $1,000 flight from SF to NYC than a $150 flight from LA to Las Vegas.

In our FinCon example above, we were able to leverage both advantages

Exceptions

There are some exceptions, where it can be beneficial to use points to eliminate business expenses. There are 4 that I can think of.

  • If you expect a zero tax bill now and in the future, then there is no pre/post tax advantage.
    (This will seldom be the case for bloggers due to SE taxes.)
  • If money is tight and the only option is to use points.
  • You never travel except for business.
  • You can get an insanely high point valuation

I’ve personally only done the latter… we were meeting with a TV producer in LA and hotels were $350+/night with an additional $50/day for parking. Instead of paying $1,200 for 3 days in LA, I used points to book one of my fav hotels in Santa Monica (Le Méridien Delfina) with free valet parking (but a $25/day resort fee.) This gives an SPG point valuation of 3.4¢, maybe a 25% premium.

Jr enjoyed the nearby beach

Conclusions

Whether you are headed to FinCon or elsewhere on business, it is almost always better to pay with cash than with points.

Pre-tax expenses are a great advantage for a business owner, reducing overall tax burden (and earning additional rewards points.)

All points can then be utilized for personal travel and maximum point valuation.

Have a great time at FinCon, and wherever your next (free) vacation takes you.

Free Travel is the Best Travel

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Travel the World.

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