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.
Get your 2018 FinCon tickets now before prices go up!
Have a great time at FinCon, and wherever your next (free) vacation takes you.
I’m a huge fan of using points for leisure and claiming the expenses when I am on business. Preferably if I can accumulate points while traveling for business it’s even better :) Hope you have a great time at FinCon!!!
Thanks for that reminder GCC! Wishing we could have met you and Winnie at FinCon but hopefully somewhere else in the world over the next few years! This will be the first year I have a “business” blogging – so we definitely need to track our expenses. I’ve already got a bunch of your posts bookmarked to read as we get closer to tax time to make sure I am doing things right!
Exactly why I used cash to pay for all of the accommodations for my upcoming FinCon trip. Even better, I opened up a few business cards and threw expenses onto there, so not only am I using pre-tax income, I’m also getting a return on all of the spend I was going to do anyway. It’s basically a double win to do it that way.
Making all of your business travel part of a min spend plan is the ideal. Nice.
How old is the little one now guys? Time flies quickly yeah?
2 1/2 years. So fast.
This is exactly what we do. We make sure that every trip has a business component to it. And we just rack up miles for any leisure trips.
I mean if they’re gonna offer the benefit, might as well take it!
Completely agree. I would add that making sure you have complete receipts with notes on who was doing what with whom and what was discussed will very much smooth the inevitable tax audit. Contrary to popular belief, IRS agents want all of your affairs to be in order. They don’t work on commission and it makes their lives much easier.
I’d like to add a 5th exception for when using points makes sense: When you have a large surplus of points that probably won’t be used for a long time.
As we keep opening up new credit cards for the signup bonuses, our earning currently outpaces our spending (at least for airline miles). Rather than saving them for an upcoming personal trip, we would be saving them just to save them for some unknown trip several years out (potentially). For that reason, we bank the “savings” now by using them towards business flights in most cases.
Hotels on the other hand, we haven’t been able to earn points fast enough to cancel out all of our personal hotel needs, so we often pay cash for the hotel and deduct it as suggested.
FinCon this year is the perfect example, we used miles for the flights and paid cash for the hotel. Too bad we won’t see you this year, but I’m sure you’re living it up in Asia.
Cheers!
I’m sitting on a ton of points and weighing options for redemption. The ‘drowning in points’ problem is real.
Did you get a decent valuation on the Dallas flight?
Ended up transferring UR to Southwest, so not great (~1.6cpp) for UR. We do get to fly into Love Field that way which is a lot closer to downtown than DFW, so that’s a plus. Should save us some $ on the uber ride to the hotel.
Still better than the 1.5¢ CSR purchase rate
Hey, we stayed in Santa Monica at Le Méridien Delina too! What a great redemption!
It is a great hotel. We had a lot of good pool time.
For FinCon this year, I went with a mixture of points, cash, and some alternate travel.
Points:
– 4 Nights at Sheraton Dallas (14,000 SPG Points total)
– Breakfast and Dinner served free from Sheraton (via SPG Business Card Perk)
– Ubers paid for via mixture of AMEX and Chase Travel Credit
Cash:
– FinCon Basic Ticket ($269)
Alt Travel:
– Work paid trip to FinCon
Total expected cost (minus networking and catch-up with other bloggers): $269
I would say, ultimately, the individual should weigh out each option and then decide after all considerations on which is the cheapest and bang for the buck option is.
Cheers!
How did you get 4 nights for 14k points? The price I was seeing was 7k/night (28k total).
I also have the SPG biz, so maybe we’ll run into each other at the lounge. :)
I have the same question as Noah… Cat 3 SPG hotels are 7k per night, no?
What was the block rate on the Sheraton Dallas? I’m curious what the valuation was
The block rate was “$169/night” which came out to $194.79/night with the taxes and fees. Works out to ~2.8cpp which is pretty solid by SPG standards. If you can find availability…
When I booked the room, there wasn’t any points availability showing online (possibly due to the FinCon block of rooms), but it’s possible some opened up later on. Either way, I think I still would have paid cash for the reasons you mentioned above, plus we get to earn even more points to use in the future (not sure if you mentioned that extra perk above).
2.8 is pretty solid. And the 5th night is free if you wanted another day in Dallas. Although it would be fair to discount that 2.8 by the loss of the tax deduction.
I’m not sure how my Sheraton was so cheap.
https://imgur.com/eUzka49
Here’s the image of my confirmation email… I blocked out some personal data. If needed, I could send some more proof.
The only thing I could think of is that I booked way ahead of time — a few days after tickets were released.
We’ll miss you guys this year!
You too! Maybe 2020
Nice tip GCC! I’ll have to remember this one for the future if ever SE taxes actually happen!
That’s what I do too. Have fun at FinCon. I won’t make it this year, but maybe next year.