Biggest Finance Mistakes in the FI Community

[Paul der Krake]

Signup bonuses are where the real value lies. The 1-2% for purchases is just a very thin layer of icing on the big, fat, morbidly delicious cake.

Unless you get into manufactured spending.....If you can do it efficiently, manufactured spending can be VERY lucrative, exponentially more than the signup bonuses.

With my extremely low expenses (under $500/month), I already have to MS to even get the signup bonuses. I could go all out and MS the crap out of my cards, but at this point in my life I value my future relationship with financial institutions more than accumulating a pile of points. All I want to do is get 1-2 free trips per year, which is easily attained while staying well under the radar.

[Davids]

I definitely need to get in on the credit card churning. Question i have though is how much of a hit does your credit score take for all these hard inquiries you invite when you sign up for several credit cards over the course of a year.

[Mississippi Mudstache]

Signup bonuses are where the real value lies. The 1-2% for purchases is just a very thin layer of icing on the big, fat, morbidly delicious cake.

Unless you get into manufactured spending.....If you can do it efficiently, manufactured spending can be VERY lucrative, exponentially more than the signup bonuses.

With my extremely low expenses (under $500/month), I already have to MS to even get the signup bonuses. I could go all out and MS the crap out of my cards, but at this point in my life I value my future relationship with financial institutions more than accumulating a pile of points. All I want to do is get 1-2 free trips per year, which is easily attained while staying well under the radar.

Ditto. We put less than $1000/month on credit cards under normal circumstances. Manufactured spending allows us to hit even the most ambitious sign-up bonuses.

Far from being the financial drag that WYOGO assumes that it is, credit card rewards have allowed us to travel for free and get extra money back. For example, last year while I was job hunting, I flew out for two interviews, putting the flights on my cards. The companies that interviewed me then paid be back for the flights, and the credit card companies also reimbursed me. That was $700 in pure profit.

But I'll admit, it's not for everybody. I certainly wouldn't go so far as to say that it's a mistake not to do it.

I definitely need to get in on the credit card churning. Question i have though is how much of a hit does your credit score take for all these hard inquiries you invite when you sign up for several credit cards over the course of a year.

My credit score improved by about 20 points. I'm assuming that's because I have about $60,000 in revolving credit at my disposal.

[I'm a red panda]

I just got an amex card that pays 6% on groceries, which is fantastic. But, it has a 75$ annual fee.  This year that will be offset by a $100 bonus if I spend $1000 in the first three months.  But what about next year? Do I cancel the card then?

Yeah I usually cancel the card once the annual fee kicks in. If you call, they may throw a few more points your way to keep the card or waive it altogether. The only two cards that I permanently keep are the Chase Sapphire Preferred and Amex Starwood Preferred card as these are the two best when it comes to rewards.

Everything else I'll churn through based on the current bonuses.

Our AA Citi card when we told them we were going to cancel they gave us a statement credit for the annual fee plus an extra 1,000 bonus points per month for 6 months.  Our AMEX Delta card they said "okay, bye".

Neither of them were the benefits great enough to pay the fee.  If we book on Delta again and need to check bags, I will apply for the card under my name, since this one was in my husbands.

[BlueHouse]

Regarding sign up bonuses in general: I spent about the last year churning through all of the sign up bonuses, made several thousand tax free for minimal effort, but now am afraid that I've done them all and will have to wait a few years before cycling through again *sniff*.

Last year I used bonus points and was told by my accountant that they are taxable income and must be reported.  So when you say you made several thousand tax-free, is there a secret that I don't know about or do you just not have a super-strict CPA? 

[BlueHouse]

Signup bonuses are where the real value lies. The 1-2% for purchases is just a very thin layer of icing on the big, fat, morbidly delicious cake.

Is anyone else worried about the number of times you "share" your personal information by applying for additional cards?  I feel like the more applications I make, the more likely my identity is to be compromised.   I don't know if there's any actual truth behind this, just a feeling.  Can someone enlighten me on this?

[Iron Mike Sharpe]

It might be because I am single, but I find it nearly impossible to churn credit cards.   I just don't have that much I need to spend money on.  And a lot of what I do, I can't put on credit cards:  mortgage,groceries at Aldi's, etc.

Home improvement projects? The materials for insulating my attic netted my last bonus. I don't fly much, so I usually cash them out as a statement credit or gift cards. The $500 Home Depot gift card will pay for the materials to re-work some duct work in the crawl space and insulate, which freed up some cash for a new mountain bike to replace my childhood bike that has been retired to street rides.

LOL.  My townhouse is about 8 years old and the previous owners did a lot of upgrades to it:  new kitchen cabinets and backsplash, replaced downstairs carpeting with wood laminate, remodeled downstairs 1/2 bath, and added a ton of attic insulation.

[HawkeyeNFO]

Blue House, your CPA is the FIRST time I've heard that.  Here is some background, as this is a relatively new phenomena.....

http://www.forbes.com/sites/kellyphillipserb/2014/08/28/tax-court-sides-with-irs-in-tax-treatment-of-frequent-flyer-miles-issued-by-citibank/

[seattlecyclone]

Regarding sign up bonuses in general: I spent about the last year churning through all of the sign up bonuses, made several thousand tax free for minimal effort, but now am afraid that I've done them all and will have to wait a few years before cycling through again *sniff*.

Last year I used bonus points and was told by my accountant that they are taxable income and must be reported.  So when you say you made several thousand tax-free, is there a secret that I don't know about or do you just not have a super-strict CPA? 

What I've read is that if they just give you money for signing up, that can count as taxable interest income and needs to be reported as such. If they give you $X after you spend $Y, that counts as a discount on a purchase and is not income. However if any of the items you purchased with the card are tax deductible (donations, business expenses, etc.), you should deduct only the cost after subtracting the value of the points you got for that purchase.

[No Name Guy]

Failure to comprehend the idea of risk adjusted returns and counter party risk.

As in, for risk adjusted returns:  Well, I borrow money at 4% and make 6-8% in my index funds, therefore, all is good.

Well, no, all is not (necessarily) good.  Quite frankly, I MUST earn more on stocks, since the risk of loss is far, FAR higher than the return I get in paying off even low cost debt.  Higher risk must come with higher reward to compensate for the risk.

With paying off debt, there is no risk in avoiding the interest payments - if I pay off the debt, I avoid the interest payments, period, 100% of the time.  I've permanently reduced my income requirements by the avoided annual interest cost, and also thereby reduced the required 'stache by 25x to 33x of said annual interest payments.

With an index fund, say the S&P, the risk of loss of principal is there - pick your own crash - 1987, 2001, 2008.  Also, pick your period when dividend payouts crashed - real dividends for example dropped from 31.71 to 24.36 (12/31/08 versus 12/31/09).  Returns must be higher to compensate for this risk to the disruption of the income stream.

I'm not saying that borrowing money is ALWAYS wrong, but since this topic is about big mistakes, yes....not understanding risk adjusted returns is a huge mistake, that can leave a person in a shitty situation where they have obligations to pay interest on borrowed money while the income stream they're counting on (dividends, for example) drys up.

This is related to counter party risk - in this case, the counter party (parties) are the S&P 500 companies.  They could cut the dividend, or stop doing buy backs which prop up the share price.  In a rental property, the counterparty is the renter - they could turn deadbeat on your.  In a bond, the borrower and their default risk.  Yes there is even counterparty risk with a bank....if you're over the deposit insurance limits, but that assumes there is no Cypress style "bail in" for smaller depositors who are below the limit so even a little person could get whacked.

[Teddy25]

Regarding sign up bonuses in general: I spent about the last year churning through all of the sign up bonuses, made several thousand tax free for minimal effort, but now am afraid that I've done them all and will have to wait a few years before cycling through again *sniff*.

Last year I used bonus points and was told by my accountant that they are taxable income and must be reported.  So when you say you made several thousand tax-free, is there a secret that I don't know about or do you just not have a super-strict CPA? 

What I've read is that if they just give you money for signing up, that can count as taxable interest income and needs to be reported as such. If they give you $X after you spend $Y, that counts as a discount on a purchase and is not income. However if any of the items you purchased with the card are tax deductible (donations, business expenses, etc.), you should deduct only the cost after subtracting the value of the points you got for that purchase.

If the points/miles received from a deposit account (checking etc) then it is taxable you will get a 1099 int or 1099misc.if the points are from credit card they are not taxable, because they are considered rebates. ( that is until irs changes the interpretations)

[Bob W]

I agree with credit card churning being vastly overlooked.  (could be a 10K a year deal for most readers here)

I also think that most people, on this site at least, are overly focused on the saving/cost cutting side of the equation when the gold ring is on the income side.  MMM would still be a working slob if he was earning 35K per year.  Instead his wife and his incomes were well 200K.   That is where the real deal is for FIRE.  (make more! spend less = FIRE)

But for my money  ---- assuming a 10% return with a SWR of 4% when a safer 17% and a 6% SWR is easily doable.  That would be a difference of 10+ years working life for most people.   

See here -  http://www.milesdividendmd.com/two-faced-investing/  for how to easily use Vanguard funds to achieve the mythical 17% return. 

So here are some easy steps to check off -

1. Earn a very good income
2. Invest in tax deferred then taxable accounts at a high percentage of your income (over 65%)
3. Spend very little on crap, experiences and general shit
4. Drive an inexpensive efficient car
5. Buy a home or rent that is less than 2 times your annual income
6.  Use a dual momentum strategy to vastly improve your investment results and retire 10 years sooner
7.  Cheap cell phone service, cut the cable and other reoccurring stuff.
8.  Use Republic Wireless or a very cheap phone provider
9. Churn rewards cards
10.  Figure social security and pensions into your equation
11.  Enjoy life!  Live Better! 

Stuff you can safely ignore --- line drying clothes,  making your own booze,  driving without AC,  riding a bike,  gardening, freezing in your house,  never watching TV, avoiding restaurants.

A big mistake is focusing too much on relatively inconsequential stuff while there is huge low hanging fruit.  (see 1-10 above)     Yet I do agree that once all the low hanging fruit is picked you can add stuff to infinity.   Just be sure you are maximizing income, savings and investment returns as priorities. 

[Paul der Krake]

Signup bonuses are where the real value lies. The 1-2% for purchases is just a very thin layer of icing on the big, fat, morbidly delicious cake.

Is anyone else worried about the number of times you "share" your personal information by applying for additional cards?  I feel like the more applications I make, the more likely my identity is to be compromised.   I don't know if there's any actual truth behind this, just a feeling.  Can someone enlighten me on this?

I used to worry about this, but now I really don't care and view identity theft as an inconvenience such as a flat tire or a broken arm: fix it and move on. I have made peace with the fact that my identity is floating around on some criminals' computers that I will surely suffer a little from it. If you pay attention to the horror stories floating about people getting denied for mortgages, it's usually people who don't keep track of their credit at all for years. It sucks to have to wait 6 months longer for your tax return because some punk in Miami pretended you had 5 kids while working at McDonald's to get a huge refund, but eventually you will be made whole. You can alleviate a lot of this by keeping tabs on your identity using tools such as creditkarma or creditsesame and report thieves immediately. Yes it's a pain in the butt, but with a little discipline you should be able to catch bogus accounts before their first payment is due. Dispute and document early, and everything should work out in the end. By and large, businesses really want to extend you credit.

In addition to this, there really aren't that many institutions to get good churnable cards from- it's mostly Barclays, Chase, Citi.

[mxt0133]

It might be because I am single, but I find it nearly impossible to churn credit cards.   I just don't have that much I need to spend money on.  And a lot of what I do, I can't put on credit cards:  mortgage,groceries at Aldi's, etc.

I was able to do a Soutwest card last year.  Only needed to spend $1000 in three months, but I had a few bigger items I needed / wanted to buy.

There are ways to manufacture spending by using the credit cards to buy gift cards, load paypal mycash debit card, load target Redcard and then turn around and buy money orders with those gift cards and deposit them back into your account to pay off the credit cards.  There is some drag on fees and time but it's minimal compared to the value of the bonus rewards. 

Again I learned all this from the Miles for Mustachians course.

[johnny847]

Stuff you can safely ignore --- line drying clothes,  making your own booze,  driving without AC, riding a bike,  gardening, freezing in your house,  never watching TV, avoiding restaurants.

A big mistake is focusing too much on relatively inconsequential stuff while there is huge low hanging fruit.  (see 1-10 above)     Yet I do agree that once all the low hanging fruit is picked you can add stuff to infinity.   Just be sure you are maximizing income, savings and investment returns as priorities.

[Emphasis added]
I'm pretty sure a lot of Mustachians, myself included, would disagree with at least my first emphasis, riding a bike, and still a good number of them would disagree with the second.

Heck, just go look at the February Cycling Challenge spreadsheet. This month so far, the average participant has saved $574 in gasoline alone (assuming $2.32/gallon) and $3046 using the IRS estimates which take into account maintenance, depreciation, etc. I don't agree that $3046 a month can be safely ignored (or if you dispute iRS estimates, then at a bare minimum, $574 a month).

And there's also a very nice health benefit to biking.

[Teddy25]

Credit card churning and MS are good short term boost to you wallet or travel budget.  It is not a long term play.  As more people getting in to the game, the available reward will be reduced. Just look at MS for the past five years.

If you want to learn more about ms and churning, checkout flyertalk.  They have the most up to date  "public" info available on these topics.

[BlueHouse]

Regarding sign up bonuses in general: I spent about the last year churning through all of the sign up bonuses, made several thousand tax free for minimal effort, but now am afraid that I've done them all and will have to wait a few years before cycling through again *sniff*.

Last year I used bonus points and was told by my accountant that they are taxable income and must be reported.  So when you say you made several thousand tax-free, is there a secret that I don't know about or do you just not have a super-strict CPA? 

What I've read is that if they just give you money for signing up, that can count as taxable interest income and needs to be reported as such. If they give you $X after you spend $Y, that counts as a discount on a purchase and is not income. However if any of the items you purchased with the card are tax deductible (donations, business expenses, etc.), you should deduct only the cost after subtracting the value of the points you got for that purchase.

Thanks to Hawkeye for the link - interesting info there.  Last year, my CPA flagged it because I tracked it in Quicken as income and then an expense against a reward (I bought gift certificates and a set of knives).  This year, I apply the cash back to my balance on a regular basis and then it really is more like a rebate.  So I don't think I'll have that issue again this year.   

[user43423]

Signup bonuses are where the real value lies. The 1-2% for purchases is just a very thin layer of icing on the big, fat, morbidly delicious cake.

Unless you get into manufactured spending.....If you can do it efficiently, manufactured spending can be VERY lucrative, exponentially more than the signup bonuses.

This is true, but I think a lot of the loopholes have been closed. I used to take advantage of the mint program a few years ago but that's no longer.

[user43423]

I definitely need to get in on the credit card churning. Question i have though is how much of a hit does your credit score take for all these hard inquiries you invite when you sign up for several credit cards over the course of a year.

There's a lot written about this on other sites (Flyertalk and The Points Guy), but if you already have solid credit, it's not as bad as "they" make it out to be. Since I started churning a few years ago, my credit was in the ~715 range, and last I checked, it's now 805.

[user43423]

I agree with credit card churning being vastly overlooked.  (could be a 10K a year deal for most readers here)

I also think that most people, on this site at least, are overly focused on the saving/cost cutting side of the equation when the gold ring is on the income side.  MMM would still be a working slob if he was earning 35K per year.  Instead his wife and his incomes were well 200K.   That is where the real deal is for FIRE.  (make more! spend less = FIRE)

But for my money  ---- assuming a 10% return with a SWR of 4% when a safer 17% and a 6% SWR is easily doable.  That would be a difference of 10+ years working life for most people.   

See here -  http://www.milesdividendmd.com/two-faced-investing/  for how to easily use Vanguard funds to achieve the mythical 17% return. 

So here are some easy steps to check off -

1. Earn a very good income
2. Invest in tax deferred then taxable accounts at a high percentage of your income (over 65%)
3. Spend very little on crap, experiences and general shit
4. Drive an inexpensive efficient car
5. Buy a home or rent that is less than 2 times your annual income
6.  Use a dual momentum strategy to vastly improve your investment results and retire 10 years sooner
7.  Cheap cell phone service, cut the cable and other reoccurring stuff.
8.  Use Republic Wireless or a very cheap phone provider
9. Churn rewards cards
10.  Figure social security and pensions into your equation
11.  Enjoy life!  Live Better! 

Stuff you can safely ignore --- line drying clothes,  making your own booze,  driving without AC,  riding a bike,  gardening, freezing in your house,  never watching TV, avoiding restaurants.

A big mistake is focusing too much on relatively inconsequential stuff while there is huge low hanging fruit.  (see 1-10 above)     Yet I do agree that once all the low hanging fruit is picked you can add stuff to infinity.   Just be sure you are maximizing income, savings and investment returns as priorities.

Amen. I'll still pay for things if they save me time. Sometimes the frugality gets a little too crazy, especially if it backs out to less than minimum wage. My time is worth something, and I know what that value is.

I've been able to increase my earnings a lot over the my 5 year career, but my expenses have never really gone up. I just save a lot more now than when I started.

[Sid Hoffman]

My contribution:

• Market timing
• Individual stock picking

I didn't see this listed so far, but the biggest mistake I was guilty of in my 20's and even to a certain extent after that were the related mistakes of trying to time the market with my 401k (between their cash/bond funds and the stock funds) as well as trying to pick my own stocks in my taxable account.  While I'm still convinced my marriage and subsequent divorce was far more damaging, I know for a fact by looking at my returns that I did measurably worse when I was trying to manage my investments myself instead of a "set it and forget it" index fund method of investing.

I'm not sure how common this mistake is among those who are truly FI, but I can see how it might be common for those who like the idea of FI but don't know how to get there from where they are today.  I was simply ignorant and didn't have access to, or was simply getting advice from the right places.  Thanks to MMM and many other accurate blogs, I can see now how investing and reaching FI really isn't about playing stocks, timing the market, or trying to beat the S&P500.  It's about managing your expenses, steadily seeing inflows into your investment accounts, and leaving the money alone once in a good and safe allocation that's pretty stock heavy when you're still 10-15+ years away from hitting FI anyway.  Even post-FI, it looks like up to 75% stocks might work.

Timing the market and individual stock picking statistically does NOT work however.  I used to consider myself of above average intelligence because of my old school test scores and how much money I make.  Now I see that in terms of personal finance intelligence, I was a total dummy with an "F" in actually keeping my money's performance in line with what an index fund could have done.  At least I learned that now instead of a few decades from now!

[minimalist]

Using 5% back cards isn't bad, but hitting sign up bonuses will get you anywhere from about 20-75% back on all of your spending.

I don't really agree with the Black Friday comment.  I would be taking vacations whether I knew about churning credit cards or not, so now I have brought my annual vacation expense close to zero while still enjoying the same vacations (hit five national parks last year).  This allows me to throw more money at my student loans or into investments.

Hard cash is rarely given freely...

Domestic trips are far less expensive than the associated international travel and expense.

Last year I went to Monument Valley, Arches, Canyonlands, Mesa Verde National Park, Black Canyon of the Gunnison National Park, Great Sand Dunes National Park, Rocky Mountain National Park, Glacier National Park and Devils Tower National Monument. The impact outside of fuel at reduced rates was almost nothing.

I will increase my travel in scope, variety and expense as greater levels of freedom are attained. Make no mistake, financial independence is far more important than delays that may be incurred due to certain vacation types that otherwise should be postponed. And that is my perspective even with a personal savings rate that hovers consistently at around 80%.

Remember taking kick ass vacations does not necessarily have to mean Phuket...

Credit card churning works great for domestic travel too. I vacation in California from DC three times a year for free using credit card churning to see family and friends, and stay in their homes for free.

[devan 11]

I'm not a card churner.  Hidden risks are too high unless you have a large enough liquid stashe  to pay off the balance without dipping into emergency funds.  I consider it pawn grabbing.

I nominate following and investing from financial porn.  The trends are manufactured, and fleeting as the eventual correction or black swan wipes out the profits and moxie of the followers. I visualize it as a ponzi that rewards the early adopters that bail early and the vultures that feast on the carcasses of the disillusioned.

[WYOGO]

Credit card churning works great for domestic travel too. I vacation in California from DC three times a year for free using credit card churning to see family and friends, and stay in their homes for free.

My vacations are virtually free because of the amount of travel I do for work charged to my credit cards. I have not paid out of pocket for a flight or hotel in years. Vehicle mileage reimbursements very frequently cover three times the operating expenses. I understand the value and capitalize on it well. Manufactured spending is where the real risk is. I understand the value, my concern is with the idea that avoiding this is a "mistake". I am not convinced.

[kpd905]

It might be because I am single, but I find it nearly impossible to churn credit cards.   I just don't have that much I need to spend money on.  And a lot of what I do, I can't put on credit cards:  mortgage,groceries at Aldi's, etc.

I was able to do a Soutwest card last year.  Only needed to spend $1000 in three months, but I had a few bigger items I needed / wanted to buy.

Open an Amex Serve account.  Load $1000/month to your credit card from your couch.  My fiance and I both have one so $2000/month spending for free.

I also just opened up a PNC checking account to get a $300 bonus, and was able to fund $2000 to the checking account with my Barclay Arrival card.  So I'll get the $300 plus $44 from my credit card.

Hard cash is rarely given freely...

Domestic trips are far less expensive than the associated international travel and expense.

Last year I went to Monument Valley, Arches, Canyonlands, Mesa Verde National Park, Black Canyon of the Gunnison National Park, Great Sand Dunes National Park, Rocky Mountain National Park, Glacier National Park and Devils Tower National Monument. The impact outside of fuel at reduced rates was almost nothing.

Solid list.  I made it to Zion, Joshua Tree, Rocky Mountain National Park, Smoky Mountains Nat'l Park and Cuyahoga Valley National Park last year.  Looking to hit Redwoods, Crater Lake and Lassen Volcanic National parks this year.

[johnny847]

I also just opened up a PNC checking account to get a $300 bonus, and was able to fund $2000 to the checking account with my Barclay Arrival card.  So I'll get the $300 plus $44 from my credit card.

I did this too. But as a notice to others - just be careful with this. Funding bank accounts with CC's may result in a cash advance. Set your cash advance limit to zero before doing this to avoid such issues.

[kpd905]

I also just opened up a PNC checking account to get a $300 bonus, and was able to fund $2000 to the checking account with my Barclay Arrival card.  So I'll get the $300 plus $44 from my credit card.

I did this too. But as a notice to others - just be careful with this. Funding bank accounts with CC's may result in a cash advance. Set your cash advance limit to zero before doing this to avoid such issues.

Good point.  Yes, don't try this with any card.  I made sure the Arrival card would code as a purchase before I did this.

[MrsPete]

I'd say arrogance. 

[Sid888]

I'd say arrogance.

You made my day!

[The Money Monk]

I think the biggest way FI oriented people leave money on the table is by not having any kind of side hustle or supplemental income.

Especially for people at lower income levels who are already frugal, finding ways to make an extra couple hundred bucks a month is easier than shaving a few hundred more from an already spartan budget.
 

[mtnrider]

cards: I rarely fly, so FF points don't do much for me.  Is there a list of cards that get you 5% or more back?  I probably only spend around $10k on credit cards/year, and I have a 2% no-fee cash-back card now.

cooking: yes!

[johnny847]

cards: I rarely fly, so FF points don't do much for me.  Is there a list of cards that get you 5% or more back?  I probably only spend around $10k on credit cards/year, and I have a 2% no-fee cash-back card now.

cooking: yes!

I don't know of any card that consistently gives you more than 5%. If anybody does, let us know!

The Sallie Mae Mastercard gives 5% back on the first $250/250/750 spent on groceries/gas/bookstores each month, where Amazon counts as a bookstore. You do not have to be a student to get this card - you can get cash back as a statement credit.

The Chase Freedom and Discover It have 5% in rotating categories. The categories typically include Amazon/online shopping in Q4, gas stations for sometime Q1-Q3, restaurants Q1-Q3. But it varies year to year.

[kpd905]

cards: I rarely fly, so FF points don't do much for me.  Is there a list of cards that get you 5% or more back?  I probably only spend around $10k on credit cards/year, and I have a 2% no-fee cash-back card now.

cooking: yes!

Probably not exactly what you're looking for, but if you use your $10,000 yearly spend to hit these three sign up bonuses, you'll get 12.5% back on your spending for the year, and they all allow you to redeem for statement credit. 

1. Chase Sapphire Preferred: get $450 after spending $4000 in 3 months and adding one authorized user
2. Wells Fargo Propel: get $400 after spending $3000 in 3 months
3. Capital One Venture: get $400 after spending $3000 in 3 months

[RootofGood]

I definitely need to get in on the credit card churning. Question i have though is how much of a hit does your credit score take for all these hard inquiries you invite when you sign up for several credit cards over the course of a year.

Close to zero.  I probably have a hundred cards or more and our FICOs remain in the 810's or 820's (on a 850 pt scale).  I think 833 was the highest score in my state last year, so we're darn close to perfect.

[WYOGO]

Is there a list of cards that get you 5% or more back?  I probably only spend around $10k on credit cards/year, and I have a 2% no-fee cash-back card now.

cooking: yes!

I don't know of any card that consistently gives you more than 5%. If anybody does, let us know!

The Chase Freedom and Discover It have 5% in rotating categories. The categories typically include Amazon/online shopping in Q4, gas stations for sometime Q1-Q3, restaurants Q1-Q3. But it varies year to year.

These two cards are powerful if you harness them. The Freedom card actually pays 6% on up to $1500 in groceries. 5% plus 1% everywhere in the category at the time. That covers my entire grocery bill over the year. Gift card purchases in advance can then be used throughout the year earning the full bonus. The Discover It/Chase Freedom are a powerful duo.

[WYOGO]

It might be because I am single, but I find it nearly impossible to churn credit cards.   I just don't have that much I need to spend money on.  And a lot of what I do, I can't put on credit cards:  mortgage,groceries at Aldi's, etc.

I was able to do a Soutwest card last year.  Only needed to spend $1000 in three months, but I had a few bigger items I needed / wanted to buy.

Open an Amex Serve account.  Load $1000/month to your credit card from your couch.  My fiance and I both have one so $2000/month spending for free.

I also just opened up a PNC checking account to get a $300 bonus, and was able to fund $2000 to the checking account with my Barclay Arrival card.  So I'll get the $300 plus $44 from my credit card.

Hard cash is rarely given freely...

Domestic trips are far less expensive than the associated international travel and expense.

Last year I went to Monument Valley, Arches, Canyonlands, Mesa Verde National Park, Black Canyon of the Gunnison National Park, Great Sand Dunes National Park, Rocky Mountain National Park, Glacier National Park and Devils Tower National Monument. The impact outside of fuel at reduced rates was almost nothing.

Solid list.  I made it to Zion, Joshua Tree, Rocky Mountain National Park, Smoky Mountains Nat'l Park and Cuyahoga Valley National Park last year.  Looking to hit Redwoods, Crater Lake and Lassen Volcanic National parks this year.

Unfortunately, the PNC offer is only valid in certain states. If I can recall they also usually require high cash holding amounts for this.

I think checking account churning can be valuable as well and one without manufactured spending risks. Chase generally leads the pack in these offers.

Very nice, Want to do Smoky and Lassen Volcanic on your list. Out of the others you list Zion is amazing closely followed by Crater Lake especially in winter. Have fun!

[kib]

Biggest Mistakes:

Setting up a SEPP because I was worried I might not have enough income before I actually FIRE'd and saw how much I needed.  I do reinvest the money, but lost all the benefits of tax deferment. 

Not looking at the real reasons behind purchases that seemed like a good idea in the moment.  For example, buying a fixer upper van I actually had no idea how to fix, because the idea of taking road trips by myself during my first marriage sounded so nice.

As a woman, having moments of Donna Reed Doubt when confronted with a confident (emphasis on Con) man.  Really, breath breath, blink blink, you think I should?  Goodness, Ma'am, of course you should!  Would you like another roofie with that kool aid?

[Eric]

I think the biggest financial mistake is One More Year syndrome that goes on for more than one year.  Being so risk adverse that you're willing to work years more than necessary just for some iron clad measure of security that's essentially useless when the future is unknowable anyway.  You could also consider this the opposite of Mrs. Pete's above.  :)

And now some foam:

Looking to hit Redwoods, Crater Lake and Lassen Volcanic National parks this year.

I did this exact trip last summer.  I loved it.  Surprisingly (at least to me), Lassen was my favorite.  The whole park is so varied.  The main part with the sulfuric vents feels like you're on the moon.  The fantastic lava flows don't look like much in pictures, but in person they're incredible once you realize they're 20 feet tall.  And if you're in reasonably good shape, you have to climb the Cinder Cone (below).  I'm happy to answer questions on any of the parks if you want to PM me.

It's a steep hike up:



But the view from the top is incredible (every tree you see is full sized, to give you some idea of scale):

[kpd905]

Unfortunately, the PNC offer is only valid in certain states. If I can recall they also usually require high cash holding amounts for this.

Yes, it is available in 20 states, but not all.  And I will have to set aside $5000 for 6 months to get the bonus, but I keep more than that as an emergency fund anyway.  I'll get a 12% return if I can do this twice a year with the same $5000.  Most accounts say you can do it again 12 months after getting the bonus.  I'll probably try for Chase after this 6 months is up.

This is the site I use to watch for checking account bonus offers: http://www.doctorofcredit.com/best-bank-account-bonuses/

[Thegoblinchief]

Except (personally) I think card churning is unethical. Is it legit legally? Of course. But it's just financial vampirism that makes you just as extractive as the corporations you're exploiting.

That's a very strong position, and it's something that runs counter to nearly all of y'all but that's how it is and I'm going to stick to my ground. TANSTAFL.

My contribution to the mistake discussion is similar to ioseftavi's nomination about missing the forest for the trees:

-Avoid obsessions of all kinds. I'm guilty as hell about this, but we don't embark on lifestyle design to be obsessives. We embark on it to be free.

[Livewell]

I'm sure there are many scenarios where it makes mathematical sense to pay down debts first. No argument from me there.

Where you can argue it can be a "mistake" is when pshychology trumps mathematics. Not in all circumstances, in some instances people might literally feel crushed by even holding small debts. But there are a lot of answers in that thread where it seems like reason and accountability are trumped by fear.

It was just very surprising to me, that's all.[/i][/i]
[/quote]


I used bonuses and savings to pay down the mortgage, and recently we paid it off in full.   I get the argument around low interest rates, and the math.   You could say psychology is "trumping" mathematics, and that is true except that psychology does matter.   Sleeping at night does matter.   Feeling good about having zero debt and not paying anyone interest does matter.   Having flexibility in a market downturn does matter.    (note I wouldn't feel comfortable putting a majority of savings into a house, for us it's about 30% of our total stock/bond/cash porfolio)

I would also add that we have two young kids, so having a paid off "home base" is of more importance to us.  If we were younger or still DINKs, I think I might have been more aggressive and left it as is.   

[Cheddar Stacker]

I'm sure there are many scenarios where it makes mathematical sense to pay down debts first. No argument from me there.

Where you can argue it can be a "mistake" is when pshychology trumps mathematics. Not in all circumstances, in some instances people might literally feel crushed by even holding small debts. But there are a lot of answers in that thread where it seems like reason and accountability are trumped by fear.

It was just very surprising to me, that's all.

I used bonuses and savings to pay down the mortgage, and recently we paid it off in full.   I get the argument around low interest rates, and the math.   You could say psychology is "trumping" mathematics, and that is true except that psychology does matter.   Sleeping at night does matter.   Feeling good about having zero debt and not paying anyone interest does matter.   Having flexibility in a market downturn does matter.    (note I wouldn't feel comfortable putting a majority of savings into a house, for us it's about 30% of our total stock/bond/cash porfolio)

I would also add that we have two young kids, so having a paid off "home base" is of more importance to us.  If we were younger or still DINKs, I think I might have been more aggressive and left it as is.

I'm not a DINK either. 2 young kids just like you. I sleep just fine with $235k in debts, and $250k in investments. Just this week I came up with a strategy to downsize my house, cash out some equity, and obtain a shiny new 30 year mortgage on 80% of the value of the new smaller home. Then to retire shortly after that while using that freed up capital to invest in more passive investments. This won't happen for a few more years until passive income is higher, but I plan to carry 29ish years of a mortgage into retirement.

Not for everyone, but when you run the math that leverage is very powerful. Over the last 2 years while carrying 250k debt and 100-200k investments, we paid $13k debt interest and earned about $55k investment returns. This year so far $1,200 interest paid, $9K investment returns. I know it can go the other way, but really the math even helps me psychologically as well. I like math.

Edit: sorry, had to fix the quote tags.

[bye-bye Ms. FancyPants]

following ...

[nanu]

posting to follow

[bacchi]

Having flexibility in a market downturn does matter. 

Please explain this. If I invested $100k into an account called "mortgage money," and kept the $100k mortgage at 3.5%, how would I not have flexibility in a market downturn? Do you mean the flexibility to buy low?

[andystkilda]

Not for everyone, but when you run the math that leverage is very powerful. Over the last 2 years while carrying 250k debt and 100-200k investments, we paid $13k debt interest and earned about $55k investment returns. This year so far $1,200 interest paid, $9K investment returns. I know it can go the other way, but really the math even helps me psychologically as well. I like math.

I agree - leverage is a very powerful force multiplier - it has probably sped up our movement towards FI by at least 100% (i.e. doubled our pace).

Regarding credit card churning - we do this on a regular basis and usually just sell the points for cash - we make on average $1500-2000 cash a year doing this between the wife and I.

[ender]

I'm surprised this isn't in the thread yet.

Not choosing to relocate incurring higher costs of living, commute/vehicle expenses, etc, without realizing the real effect of those decisions.

A surprisingly large percentage of us here still live in areas requiring significant expenses and time for commuting.

[retireatbirth]

Can you say more about churning credit cards?  It seems like a lot of bother for little return.  What am I missing?

I'd say you're missing about $5000/year in money and travel credit, for a few hours of your time.

I'd estimate that it takes me around 20 minutes to sign up for a card, and hit the minimum spend (Amex Serve), so the return is somewhere around $1000-1500 per hour.  If I round up to an hour to pretend I'm researching every card, it is still about $300-500 per hour.

Here is a list of cards, updated when new offers come out: http://www.flyertalk.com/forum/credit-card-programs/1177334-special-credit-card-offers-master-thread-subscription.html

Could you explain your Amex Serve strategy? I was looking into this, but it appears to only allow $1000/mo. in credit card funding.

[nanu]

Serve does only allow you to load up to $1000/month ($1500/month with softcard IIRC) with a credit card,
but you might be able to buy visa/mastercard gift card and load those, and if you use Serve to manufacture spending
on some new credit card with a really nice sign up bonus (after spending $X in the first Y months) then you could get a very high return

[kpd905]

Can you say more about churning credit cards?  It seems like a lot of bother for little return.  What am I missing?

I'd say you're missing about $5000/year in money and travel credit, for a few hours of your time.

I'd estimate that it takes me around 20 minutes to sign up for a card, and hit the minimum spend (Amex Serve), so the return is somewhere around $1000-1500 per hour.  If I round up to an hour to pretend I'm researching every card, it is still about $300-500 per hour.

Here is a list of cards, updated when new offers come out: http://www.flyertalk.com/forum/credit-card-programs/1177334-special-credit-card-offers-master-thread-subscription.html

Could you explain your Amex Serve strategy? I was looking into this, but it appears to only allow $1000/mo. in credit card funding.

Yes, it is only $1000/month in online loading.  But that is $12,000 a year you can use to hit probably 3-4 sign up bonuses, getting you $1000-2000.