I don’t like unions. In fact, I have a viscerally negative reaction to them. This isn’t based on politics. It’s not based on macroeconomics. I also have a viscerally negative reaction to both politics and macroeconomics. This is based on the simple fact that a union is, by definition, an organization that is designed to force management to treat employees not as individuals, but as cogs in a machine.
If you are a member of a union, you are paid based on the rules that the union drew up with management. A bunch of guys in bad suits met with a bunch of guys in overpriced suits met with a bunch of lawyers (who, generally speaking, I don’t consider as people), and they hashed out a set of terms that dictate how you, as an individual employee, will be paid and treated at the workplace.
In an industrial, company-town society, this is a good thing. Upton Sinclair was not writing in 2013. Eastern European immigrants to Chicago in the early 20th century needed unions. I applaud the work that they did. It’s different in 2013.
As an individual working in an industrial society, you are an easily replaceable cog in a giant machine. As an individual, you do not have the freedom to choose between different employers, because you cannot leave your hometown—transportation options are expensive and infeasible.
The post-industrial society is based on competition and specialization. As an employee—even at the entry-level—there are a multitude of potential employers that I can choose from. For those with very limited skills, the options are more limited, but they aren’t non-existent. North Dakota has 1.9% unemployment. The bus ticket from Chicago to Williston is $90. Everyone has options. Sometimes the options are all relatively crappy, but that doesn’t mean that they are all equally crappy.
Companies compete to attract the most productive employees and the most profitable customers. For the 95% of people who stick to the script—not effectively negotiating salary, not bargaining, not shopping around, not researching potential alternatives—companies profit off of offering the cheapest possible option at the highest possible price. If I am Nike, I make my $250 sneakers in Bangladesh using $4/day contract labor because I can and because I know my customers will pay.
The cultural norms of society lead us to choose things, by default, that often run counter to rational decision-making. In the mortgage crisis, people who were making basically nothing were buying houses that were overvalued by a factor of two, just because they had this idea in their head that they had to purchase the biggest possible house for the most money that their mortgage officer would allow.
Today, we see an explosion in college costs as young people are duped into believing that a four-year degree is the only way to a middle-class life. We see people actually believe that they have to take four (or five or six) years to get that degree.
When you accept what seems to be at face value, you are signing yourself up for mediocrity. When you look at the way that the world was, and you assume that the world will remain stagnant, you set yourself up to be rudely awakened.
America faces massive challenges because we fail to recognize that the unseen can be just as powerful—if not more so—than the seen. We take what is, and we don’t stop to consider what could be.
In 2013, I’ve spent eight nights in hotels, taken two first-class & two coach flights, skied in Park City, partied in Boston, pub crawled in Greenville, S.C., and spent time at an Irish bar in Queens. I’ve driven over 1,200 miles in a rental car, flown over 4,000, and ridden 400 in a bus. Tomorrow, I’m headed to New York to reconnect with a cousin I haven’t seen since 2006.
On January 1st, I didn’t have any of that planned, booked, or paid for.
The perception is that travel is expensive, time-consuming, and an all-around big hassle. The reality reflects none of the above.
If I wanted to do my Utah trip using the “normal” path, here’s what I would have done: 1) looked at airfares; 2) decided not to go.
Unfortunately, a lot of people get to step one, and assume that because airfares to their pre-determined location on their pre-determined date at their pre-determined times from their pre-determined airports are expensive, than ipsofacto, TRAVEL IS SO EXPENSIVE THAT I CAN NEVER GO ANYWHERE.
Another “real-world” example is the following: people all across America are unemployed because they are looking for a pre-determined position in a pre-determined industry in a pre-determined location at a pre-determined salary. Oh, and by the way, they expect that if they submit their unedited and untested resume through a website, magically, a job should rain down from the sky.
The people who succeed in the real-world understand that life is not that simple. You have to go through the backdoor, using your experience, connections, and professional relationships to get access to the opportunities that are shut out from the riff-raff.
In travel, the people who go lots of places for minimal cash money understand that you have to hack the system to do it. You have to exploit the fact that most people are lazy and ignorant to take advantage of programs that were built to pray on the weak.
The best way to do this is to take the credit-card game, which traps millions of people in serious debt without rewarding them, and use it to your advantage.
Sixty percent of credit card holders carry a balance. These people pay interest ranging from 13 to 25%, on an annualized basis, for the privilege of buying things that they can’t afford. Over time, these people end up padding the pockets of the credit card issuers.
Because of the poor decision-making of the people who don’t pay their bills in full, credit card companies make it incredibly rewarding for responsible people to use their product. Every single dollar I spent (with the exception of D.C. cabs & my utility bill) is paid on a credit card…even my rent, which I transfer directly to my roommate—without a fee—using Amazon Payments. He then pays our landlord with a good ol’ fashioned check.
In exchange for using plastic, I get reward points for every dollar that I spent. On my AmEx Platinum, I get AmEx Rewards points, which transfer to hotel & airline programs or can be spent directly on travel. On my Starwood Preferred AmEx, I get Starwood points. On my AA Citi card, I get AA miles. Etc, etc.
That’s great, but one measly point per dollar is not that good. It takes 25,000 AA miles to book a roundtrip reward.
The average person sees credit cards in one of two ways: 1) an opportunity to spend money that they don’t have; 2) an opportunity to pay without using cash.
These are the people who make money for the credit card company. These are the people whose ignorance feeds the profit engine of the banks as well as Mastercard, Visa, and American Express.
The jetsetter, on the other hand, gets between 10-20 credit cards per year, using them to generate huge sign-up bonuses that fuel free travel.
In September I got the Citi Hilton Reserve Visa card, which comes with automatic Hilton Gold (normally requires 25 stays at Hilton properties) and two free Hilton nights.
The Average Joe gets that card, and they use their free nights on an already pre-planned vacation at a $150/night run-of-the-mill Hilton (yes, I consider Hilton hotels run-of-the-mill). That’s a $300 return on investment, minus the $95 annual fee. Not terrible. The Average Joe then continues to keep spending on the card, even after the $3,000 in 3 month minimum spend requirement is met. The Average Joe uses the new card as their primary card for two or three years, paying $95/year for the privilege of earning (what are now basically worthless) Hilton points.
On the other hand, I got that card, put three months of rent, cable, and cell phone bills on it, and used my two free nights at one of the most expensive Hilton-family properties in the U.S. While I did have to pay a $95 annual fee, I got two nights in a hotel room at the Waldorf-Astoria Park City that would have cost me $2,000 out of pocket.
Likewise, I booked my flights to Salt Lake City using American Airlines points that I got almost entirely from a credit card sign-up.
While the peasants of the world fly Southwest, I was with my dad in first class on American. And, using the free lounge access that I get through my American Express Platinum card, I didn’t even have to sit in the dirty gate area.
To do all of these things, you have to challenge a number of assumptions:
- Credit cards will kill your credit score—False! You take a 3-5 point three month ding for each sign-up, but the extra credit that you get actually helps your score, in the long term.
- You have to have a long credit history to get credit cards—False! While it’s nothing like the pre-Dodd-Frank days of instant approval for anyone with a Social Security number and a pulse, you don’t have to have decades of credit and make $100k+ to get top credit cards.
- Credit cards make it more difficult to budget, because you can spend money you don’t have—False! Credit cards make it easier to budget because they automatically track your spending. Using an app like Mint.com, you can instantly view, track, and categorize your spending. You can set spending limits on your cards, or use a charge card (like an American Express Platinum or Gold) if you are really worried about spending too much.
In the quest to give financial advice to the lowest-common denominator of society, popular figures tend to assume that you are a complete idiot. They assume that if you get a credit card, you will immediately go out and buy 20 flat-screen TVs, just for the F of it. If you are reading this blog, you’re not that stupid. A lot of people are, however, so take the “popular” advice with a bag of salt.
Ultimately, you only have to take one look at “Middle America” to know that you deserve better than that. But it’s not enough to simply sit around and daydream about a better life. You have to take concrete steps to make it happen. The good news is that it is a lot easier to travel around the world for free than it is to identify, develop, and hone a set of specialized skills that will make you a member of the 1%. And, it’s much easier to sign up for credit cards than it is to go back and time to get adopted by Angelina Jolie and Brad Pitt.
So, here’s my “wrap-it-all-up” advice:
- Go to creditsesame.com and check your credit score (No, I don’t get referral credit if you do).
- Find out why you have the score that you do. Is it low because you have very little credit history?
- If so, apply for a basic, no-frills credit card. Pay off your balance on-time, every month for six to nine months.
- When your credit score hits the magic 725, start getting into the credit card game, for real.
- Is your credit score low because you missed a payment?
- Don’t do that again.
- Call your credit card company and find out if you can have that ding wiped from your report. Generally speaking, your first missed payment shouldn’t count against your credit score.
- Is your credit score low because you have a lot of debt?
- Pay it off.
- Sign up for Mint.com, and rigorously track every dollar that you spend.
- Do you have major loans (student, car, or mortgage)? Stop spending money on garbage and start paying off the loan that has the highest interest rate.
2. Think about your travel priorities and your willingness to spend time tracking credit cards.
- Traveling without having to pay out-of-pocket money is great, but it’s not exactly free (despite what I say all-the-time on this blog). It takes time and attention to detail to ensure that you get the right credit cards, meet the requirements, and pay them off. Are you willing to spend an hour every three months to sign up for credit cards? Are you willing to be flexible and spend time researching reward redemptions?
- Think about whether you value international travel or domestic travel. Do you take one mega-vacation per year, or are you more of a weekend warrior (I know I am)? Do you want to save money? Do you want to be able to cash in on one-in-a-lifetime rewards?
3. Go out and do it!
Editor’s note: I apologize for not including 30,000 links in this post. Normally, I would take the time to come up with an excuse for not having the time to put in a bunch of links. I’m not going to do that today. There is a wonderful website called Google that can direct you to any of the topics discussed here. If you can’t find the answer on Google, I apologize for nothing.