Brad Barrett: ‘Start With a Small Win’

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Our guest on the podcast today is Brad Barrett. Brad is the co-founder of ChooseFI, which is a website focused on achieving financial independence. With Jonathan Mendonsa, Brad is co-host of a popular podcast also called ChooseFI. Brad received his bachelor’s degree in accounting from the University of Richmond and became a CPA. He practiced public accounting for years and eventually achieved financial independence by age 35. Brad is passionate about all aspects of personal finance, but especially the topic of scoring good deals on travel, which is a topic we discussed in depth on the podcast.

Background

Bio

ChooseFI

Resources and Inspiration

Smart Couples Finish Rich, by David Bach

“The Shockingly Simple Math Behind Early Retirement,” Mr. Money Mustache blog, mrmoneymustache.com, Jan. 13, 2012.

Jlcollinsnh.com

The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life, by JL Collins

Financial Independence and Real Estate

Karsten Jeske: Early Retirement Now

“Karsten Jeske: Cracking the Code on Retirement Spending Rates,” The Long View podcast, Morningstar.com, Oct. 14, 2020.

Paula Pant: Afford Anything

“Paula Pant: A Different Path to Financial Independence,” The Long View podcast, Morningstar.com, Jan. 18, 2022.

Coach Carson

BiggerPockets

Nick Maggiulli: Of Dollars and Data

“Nick Maggiulli: ‘The Biggest Lie in Personal Finance,’” The Long View podcast, Morningstar.com, April 12, 2022.

“What to Do With $2.5 Million & Real Estate Update | Scott Trench | Ep 426,” ChooseFI podcast, choosefi.com, Feb. 26, 2023.

Travel Hacks

ChooseFi.com/travel

“The Ultimate Guide to Credit Card Travel Rewards | Part 1,” by Jonathan Mendonsa, choosefi.com, April 3, 2022.

The Points Guy

View From the Wing

Million Mile Secrets

Travel Miles 101

Transcript

Jeff Ptak: Hi, and welcome to The Long View. I’m Jeff Ptak, chief ratings officer for Morningstar Research Services.

Christine Benz: And I’m Christine Benz, director of personal finance and retirement planning for Morningstar.

Ptak: Our guest on the podcast today is Brad Barrett. Brad is the co-founder of ChooseFI, which is a website focused on achieving financial independence. With Jonathan Mendonsa, Brad is co-host of a popular podcast also called ChooseFI. Brad received his bachelor’s degree in accounting from the University of Richmond and became a CPA. He practiced public accounting for years and eventually achieved financial independence by age 35. Brad is passionate about all aspects of personal finance, but especially the topic of scoring good deals on travel, which is a topic we discussed in depth on the podcast.

Brad, welcome to The Long View.

Brad Barrett: Thank you so much. I’m really excited to be here.

Ptak: We’re really excited to have you. Let’s start by talking about your story and how you got involved with the Financial Independence movement. While you were working as an accountant, you saved assiduously and reached financial independence at age 35. What attracted you to the supersaver mindset to begin with?

Barrett: It’s a good question, Jeff. I think I have always naturally been a saver. I think that is somehow just a part of my DNA on some level. But I had some very early career items happen, let’s say, like within the first year of getting out of college. So, it was doing all the right things growing up, the “right things.” I did really well in high school and college and so on, got a job at what at the time was, to my mind, the number one accounting firm in the world. This was circa September of 2001. So, this is a historical event for most people. I know, Jeff, you’re intimately familiar with this as well, but Arthur Andersen. And within nine months of starting that job, Arthur Andersen essentially no longer existed. And that’s one of those just aha moments where you look around, and there were these senior managers and partners who had, again, done everything right, had succeeded at the highest level and their lives were turned upside down. And for many of those people who were living, no matter what their income was, they were living paycheck to paycheck, they were in deep, dire straits unless they found something within 30, 60, 90 days.

That was just one of those exogenous shocks that I just said, I cannot ever allow this to be the case in my life. And again, just some other of these minor things where, it was 2 a.m. at, I don’t know, April 13 (before I was in the tax department) and we’re sitting there. This was the old-school days of stapling tax returns. And as silly as it sounds, seeing that this was the carrot. When you’re in any of these big accounting firms or law firms, there’s always the carrot of you could be a partner someday and you’re going to make $0.5 million, $1 million a year, whatever it may be, a couple of million. But to see that person sitting there with me at 2 a.m., something didn’t compute. It just didn’t seem right.

And I guess, finally, just seeing, oh wow, there’s a realistic likelihood that I’m never going to be able to take more than one calendar week off in a row, basically nine calendar days when you throw the two weekends in. And I had just come from my life growing up and having summers off, and it didn’t seem like the dream, I guess, is that’s what I’m trying to paint here, Jeff and Christine. And I just figured there had to be a better option. And for me, it very simply started with saving money, and then I only found the Financial Independence community after that.

Benz: We’ve heard, Brad, from a few of our previous guests about ChooseFI, how influential that was in their own journeys. So, I’m wondering, as you as you think about, well, what set off the light bulb for you in terms of financial independence, ChooseFI wasn’t there. So, what were your main influences? Or who were your main influences in thinking about this concept of financial independence?

Barrett: I think when it came to financial independence, I at first was wholly unaware that there was a community of people like me out there, and I think I do want to come back to that concept of a community later. But my wife and I, again, we both just happened to be savers. We saved a significant amount of our income. I think the first book we read was actually a book called Smart Couples Finish Rich by David Bach, I think it is. And that was a book that was an aha moment for us.

But really, when it got into the world of financial independence was probably, I think, around 2013 when Mr. Money Mustache, I’m sure you’ve heard of him before. It’s an odd-sounding website. But Mr. Money Mustache was the first mainstream, if you will, financial independence blogger. And it was just unlike anything I’d ever seen before. He has a blog post called “The Shockingly Simple Math Behind Early Retirement.” And that single post—hopefully, you guys can put it in the show notes—that post changed my life. It basically put numbers to something that I had kind of conceptualized but didn’t understand that there was an actual path to this.

And the beautiful part about financial independence and I think why it resonates so much is that the control and the power, it’s in your court. It’s not someone else. There’s no elusive they to complain about or who is impacting you. At its essence, it’s how much money do I spend every year. Plain and simple. End of story. That’s the number that I need to cover. It’s not, OK, I make X—the amount you earn actually doesn’t ultimately matter on what do I need to cover, what assets or passive income or however you want to conceptualize that. How much do I need to live each year?

So, I think, frankly, a lot of the retirement calculators—and I think, in fairness, a lot of them have been updated over the last 10 or 15 years. But they always started from, in my opinion, a fundamentally flawed starting point, which was current income. And current income, in essence, has nothing to do with how much do you need to retire, because baked in there is obviously a huge savings rate because if your savings were zero, you will never be able to retire. So, just by definition, and also presumably, you’re at your highest marginal and effective tax rates at that point. So, digressing here, but I think for me it was seeing that and seeing that there is a way here.

And then, I guess, the other—to be somewhat succinct—the other one was J.L. Collins website, which is actually an odd one. It’s called jlcollinsnh.com. He has these series called The Stock Series, which eventually turned into the book, The Simple Path to Wealth, which I know people have referenced on your show before. That gave me just this North Star for how to invest over a 50-year time period. So, I think, really those two were the real changing points for me.

Ptak: One key challenge for people saving in their 20s and 30s is that those are peak experience years, so to speak. So, the question is, how can people who are at that life stage and targeting financial independence, how can they balance those two sets of considerations: on the one hand, wanting to live in the here and now and fully participate in activities that their friends are pursuing while also targeting an aggressive savings rate? Maybe you could draw how you personally approached that.

Barrett: I think I certainly understand the framework. You hear the YOLO mentality. I think I say, as much as anybody, we get, if we’re lucky, 80 to 90 years on this planet and to waste any of them seems needless. I usually term that in reference to your job. And so many of us just mindlessly go through and we don’t think that there’s another option. So, I use it in that term. But when it comes to this mindset, I do understand it, but I think it’s fundamentally flawed. I think it’s starting from this presupposition that you have to spend money by definition to have a good life or spending all of your money or potentially going into the red, again, by definition means you’re having a better life than otherwise. I fundamentally reject that. I think it’s the wrong starting point.

My wife and I chose to look at—how we’ve always thought about this was, how can we live the same middle or in our case, upper-middle-class lifestyle as everybody else around us, and instead of living paycheck to paycheck, we’re getting wealthy and pursuing and reaching financial independence at the same time. So, again, it’s like gamifying. We’re both the big board game players. And I think that was the fundamental little fun tweak that we took on it. And that might mean, in our case, we actually moved from a high-cost living area, Long Island, New York, down to Richmond, Virginia. And if we wanted to just buy the same-priced house that we would have gotten there, we would have been able to live in a palace here. But what we said was, how can we maximize this? If we were smart, what would we do?

We wound up buying basically essentially the cheapest four-bedroom house in the best school district in all of Richmond metro area. And the house cost, it was a fraction of what it would have cost on Long Island. So, same middle-class lifestyle as everybody else, just winning. How can we do that with food and drink? We can, instead of going out to eat all the time or scrambling and going to the $12-per-pound hot bar at the local supermarket, we could plan ahead. We could meal plan. We could cook at home all the time. And I know these sounds small, but they add up when you’re talking about the big three. It’s essentially, you don’t have to worry about the little lattes and things like that when you get your housing, your car, and your food right. And for us, we drove old cars, very happily drove old cars. We’re not car people really. They get us from point A to point B. And when you look at the compounding savings and benefit of that over our 20-year adult lifetime, it’s literally hundreds of thousands of dollars, which sounds preposterous until you actually look into it and you realize, wow, if I get those big three right and then maybe you throw in travel—and that’s another thing we’ve done with credit card travel rewards points. So, you really get those four items and life becomes a lot easier financially.

Benz: We do want to delve into travel and get your tips on that front. But I wanted to ask about impressing other people. It sounds like that is definitely not a concern of yours. You’ve said that you drove old cars, and so on. So, why is that such a trap? Can you talk about why you think so many people are really, really into impressing other people and just how that is a recipe for not doing well financially?

Barrett: This is a hard one. And obviously, I’m a CPA and not a psychologist. So, this is just armchair-expert type thing. But I think a lot of it—and this is maybe my second part of my answer to Jeff’s prior question of the YOLO, is getting down to what are we doing here? What’s your why? What are you actually trying to get out of life, out of your money, out of your career? What are you doing? I think, for me, it was—and for my wife—we decided very early that we didn’t care about impressing people. What we actually cared about was being here when our kids got home off the bus every day. And that was the North Star why. So, how can we build a life where that’s what we focus on, where we’re going to be engaged parents, we’re going to be here all the time? And when we set that as a why, all these little things—like we give up tiny little things. Everybody has to make—you have to make choices. If anybody thinks like there’s a free lunch here, obviously, you have to make choices. But I think when you orient those choices based around value and what you’re actually looking to get out of something, then it changes everything.

I’ll give you a little example. This is a tiny example, but actually it adds up. So, I look at my cellphone, for instance. So, even nowadays people are still spending like $80 to $100 per month per line for their service. And I looked around and I said, wow, I’m actually on Wi-Fi 99% of the time because I’m home all the time. And there are, I guess, different services through places like Republic Wireless or Mint Mobile—Mint Mobile I think is like $15 a month and you might get unlimited data. But let’s even just set it up. I use Republic Wireless and it’s like 1 GB of data. So, all that I had to give up—and again, this is a microcosm, and I’m sorry I’m spending so much time on this, but I think it’s important—is that, literally all I have to give up to save $60 to $80 per month per line, which is a lot of money at the end of the day. We’re talking $1,500 a year between a couple of us, is not downloading podcasts or streaming YouTube when I’m out of the house. So, that was the decision.

Is this a free lunch? Did I absolutely give up nothing? No. But that was a tiny, tiny, tiny little thing. And that’s a probably $1,500 a year decision. Most people who are living paycheck to paycheck, if they had $1500 in their bank, they’d be a lot less stressed. So, look at what these tiny things, what can I give up but still get the essence of it? So, I think, Christine, going back to your question is, yeah, it’s tough because I think a lot of us want to feel good about ourselves. We want to show off how successful, how smart—how many decisions just generally are about signaling? Where did you go to college? Where are your kids going to school? All these little things, a lot of it comes down to signaling and impressing other people, and I think that’s just hardwired into humanity. So, I’m not going to castigate all of us, certainly. But I think when you reorient around what’s your why, I think it makes it a lot easier to worry less about impressing people and worry more about how am I getting to my goals.

Benz: I wanted to ask about this pandemic period. Do you think it has been a catalyst for people to think about some of these choices that they were making? I was reading a Wall Street Journal article this weekend about people who are going part time and don’t want to be full time anymore. So, decisions like that. Do you think it has been a catalyst in a good way for people?

Barrett: Yeah, I do. It’s only anecdote, of course. The three of us could have a fun conversation around that. But I think anecdotally people are awakening to, oh, there’s something different. And I think that’s all we’ve ever tried to do with ChooseFI. I think honestly to our detriment on some level where I think there was a sense of the FIRE movement, being these extremists who are cutting and saving every penny and eating brown bananas in some Wall Street Journal article and these ridiculous, ridiculous things. I think on some level, ChooseFI has actually hurt the FIRE movement, if you will, because we’ve just oriented around taking action and buying what you value and coming up with, hey, what are your goals, in essence.

I think, that’s kind of putting that aside, anytime people take that step back—and unfortunately, in this case, again, this was this horrible outside shock that maybe caused this, and nobody would have wished that obviously—but sometimes just that little, even a little shakeup, could make you realize, oh, there’s something else, there’s some other way. I don’t have to do exactly what I believe society tells me what to do. And I emphasize that very specifically, because I don’t know that there is a prescribed path, but I think we all just marched to this because we don’t know there’s another way. And I think, again, that to me is the beautiful part about financial independence is, it’s a whole worldwide community of people who have realized there is another way, and it doesn’t have to be horrible. There’s no aspect of my life that looks like deprivation at all, even ever so slightly. You would never know. But, again, when you get those big things right, everything else gets a lot, lot easier. So, I don’t have the greatest answer for your question, but I hope that just gives a flavor for how I think about it just generally.

Ptak: Switching over to financial independence and investing, for people who are living off their portfolios for all or part of their spending needs and they are many years from traditional retirement age, how do you think they can arrive at a safe spending rate?

Barrett: Safe spending rate is certainly a very loaded question. I love the question, and I don’t think you intended it as loaded. But let’s just start from that very broad, what is financial independence? So, in very, very broad terms—and we call this the 4% rule of thumb. Obviously, you both have heard of this and certainly, talked about on the podcast undoubtedly. But the 4% rule is what you hear, which essentially says you can pull out 4% of your portfolio, your invested portfolio every single year and it adjusts, I guess, technically for normal inflation, so in normal times. And in theory, that’s going to last you 30-plus years—potentially, into perpetuity.

But what that really means in practice—and again, I view this and why I set this up, Jeff, as a loaded question is, nobody knows the future. You can run every Monte Carlo simulation that you possibly can. And we’ve had experts come on the show and they say that a 3.2% withdrawal rate is safe in essentially everything other than the zombie apocalypse, more or less. I don’t like to get bogged down in the numbers because I think for most normal people it’s just, hey, do I have some directional accuracy, whereas most people have none, because all they hear is fearmongering, whether right, wrong, or not. You hear the Suze Ormans of the world say: You need $10 million to $15 million because health insurance is going to be so much—and I’m loosely paraphrasing, of course, in a ridiculous way here—but you do hear that kind of stuff. And what it creates is a drumbeat for: you’re never going to be able to retire; you’re going to be lucky if Social Security is still there; you’re going to have to eat cat food unless you have planned—all these ridiculous things.

I think, for most people, they’re scared out of their minds that they have no chance. And I think where the 4% rule of thumb and where the Financial Independence movement comes in is, we say no, no, no, it’s actually not based on what Suze Orman is scaremongering. It’s based on what do you spend every year. And that’s something that you have an ability to control. And when people have an ability to control something in their lives, they feel better, they feel some level of power. I think that again is why we could argue about the numbers, and we can have experts far, far smarter and more knowledgeable than me on this, and so, I’m not going to hold myself out to be an expert—but if you said 4% rule, you take your annual expenses, you multiply by 25. And that gets you to your financial independence number. If you want to say, OK, this guy, Karsten, from Early Retirement Now, who is an economist for the Federal Reserve and has run every scenario, he says 3.2%. OK, that sounds reasonable. Maybe you want to be a little more conservative—3%. So, multiply it by 33. So, you take your annual expenses, you multiply it by 33, you’ve got your fine number, regardless of where you want to fall in there, I genuinely don’t care. It’s just having that directional accuracy of, I actually control this, and my number is somewhere in this range.

Benz: We’ve had Karsten on the podcast previously, actually and did a deep dive on withdrawal rates and other stuff with him. I wanted to ask about real estate because it seems like owning real estate and renting out properties is a big part of the calculus with a lot of folks who consider themselves financially independent. So, can you tell us, has that been part of your own approach to financial independence?

Barrett: That is a great question, Christine. So, it has, but in a very odd way, because real estate was probably my biggest loss, if you will, in my journey really as a financial adult. So, I unfortunately in the 2006 to 2008 time frame, as the great financial crisis was happening, decided in my brilliance in my early to mid-20s to more or less speculate on vacant land in these golf course communities that were popping up all across the American South. And it wound up turning into just an absolute fiasco, probably deservedly so. But that scared me off of real estate investing for 15-plus years, I would say.

The nice subtext of that actually is, OK, but Brad, you still reach financial independence in your mid-30s, mid to late-30s, let’s say. And I think that’s actually one of the cool aspects of it is, when I look at my savings rate and say, OK, a 50% savings rate or thereabouts, plus or minus depending on the year, that cures all, even absolute stupidity of something like that, which cost me potentially really hundreds of thousands of dollars ultimately when compounded. So, I think I have a very negative real estate story at the beginning. But through my education and through the podcasts and having guests like Paula Pant and Chad Carson on the show, our friends from BiggerPockets, they made me look at it like an accountant would, which is what I am—I’m a CPA—and look at it as a business. And I think that was kind of the aha moment.

I think so many people get caught up in real estate and it comes to—it’s ultimately speculation, whether it’s as raw and naked as my version or buying a house because they think it’s going to increase in value, which we have no impact on. As opposed to, is this something that has net income and is cash flowing and can provide me some income stream? And I think the short answer to your question is, yeah, about four years ago, I ultimately wound up purchasing two single-family rentals in a small town in Georgia. They were, again, small-town Georgia, fairly inexpensive there. I think after renovations, they’re about $55,000 each, and paid cash for both of them. It’s a small sample size. It’s only four years. But they’ve been doing really well. And I’m at now the decision point of is this something that I want to double down on? Do I want to purchase more of these units, more of these houses, whether in Georgia or some other place? Or am I satisfied with that as an experiment?

So, I think the jury is still out, honestly. Because then you get into—and I think you’ve had Nick Maggiulli on the podcast also. He talked about the return on hassle, I believe, which is, even though there’s some level of, OK, I have a property manager, and so on, there is still some hassle, and there’s still some worry that you’re going to get this call in the middle of the night that your house burned down or some such thing. I honestly don’t know, Christine. So, I think that’s where I am today, but I can’t tell you where I’ll be five years from now.

Ptak: Do you think the increased borrowing costs that come along with higher interest rates might make rental properties a bit less attractive than was the case when interest rates were much lower?

Barrett: Yeah, Jeff, I do. And it’s interesting because as we’re recording this—we’re recording this on Monday, Feb. 27, and I had an episode come out today of ChooseFI with Scott Trench, who’s the CEO of BiggerPockets, and he talked very specifically about this exactly. And we were talking under the umbrella of leverage versus no leverage. So, I think, again, I bought these houses in all cash because it would have been too nerve-wracking for me to have this leverage on a property. That was after my prior real estate experience, I didn’t want to get into that. And he was describing that, yeah, with the increased borrowing costs that he expects to see—basically, when you review the deals where with the current increased interest rates versus paying all cash that people who are not leveraging, so people paying all cash, are actually going to see better returns on this type of investment, which is really a wholesale change from the prior X number of years at these all-time lows. So, that is not something that I personally have done a lot of research. But again, he’s the CEO of the biggest real estate community online. So, I’m certainly trusting him and parroting what he’s saying now.

But, yeah, I think at the end of the day, it’s going to come down to, OK, do these numbers make sense? And in a lot of places, they just simply don’t, because they talk about the 1% rule, which is essentially, hey, can I get 1% of the purchase price per month in rent, and for most of us, that sounds preposterous wherever you live for your normal single-family home. But if you think about 1% per month, that’s a 12% gross return. So, if you have borrowing costs and then all of your normal real estate taxes, insurance, you have your property manager, and so on—the normal things that go wrong on a house, you’re looking at a tiny, tiny, tiny return. So, something has to give. I think, Jeff, would ultimately be my answer is, there are going to be a lot more people swooping in with all-cash offers, which you’re also seeing in the normal single-family housing market. I think it’s something on the order—I think, in 2022, it was somewhere between 30% and 40%, which is an astronomical figure and was mind-blowing to me. But I’ve heard it now repeatedly. So, I feel pretty comfortable saying that again. But yeah, it’s something ultimately has to give, because if the numbers don’t make sense, if there aren’t real estate investors coming in, do the prices start coming down? I think they might ultimately have to. The jury is still out. But I think 2023 is going to be an interesting year.

Benz: We wanted to ask about the various aspects of ChooseFI. You’re involved in a weekly podcast with Jonathan Mendonsa, ChooseFI, and you also have the ChooseFI blog and there’s lots of great information and materials there. So, what’s the business model for the ChooseFI empire? How do you cover the operating costs for these various entities and also monetize your efforts, if that’s a goal?

Barrett: It’s a good question, Christine. I think there’s definitely a lot of different things. And we’ve had a journey just in our own first six years now. A lot of it was through affiliate marketing. I think one thing we’ve always wanted to set up and one thing I’ve always done with any of my online endeavors is set up win-win situations. I would never want to recommend something. I think this also gets down to how you relate to your audience, and I want my audience to like, trust, and respect me. And your reputation can go away really, really, really quickly, especially when people are reading through that you are just doing something to earn money and not look out for them. So, I think it is the ultimate shortsighted kind of scenario to do something like that.

I think we always set it up based on very, very, very limited affiliate partnerships and most of them, frankly—and I know you said we’re going to talk about travel rewards—where just in the credit card travel rewards space. So, if I could talk about how I was using a particular credit card—and literally, that was the card that I was using at the moment—that was something I could send someone to and they could potentially use our link, which, again, they could always Google it and find the card on their own, but if they used our link, we earned an affiliate commission. So, always tried to set up those win-wins.

That really has been and continues to be the largest source of revenue for ChooseFI. And like you said, we have a number of aspects of the business, but I think the COVID crisis has been very clarifying for our business and for obviously millions of businesses across America and the world. And I think we’ve seen some changes. If you would have asked me this at the end of 2019, I would have said, we think we are building something that could rival Dave Ramsey or something like that. And I think we’ve realized that that’s not really the intention of what we want to get out of our lives. So, we, in all honesty, have pared some things down. We’re publishing books and we’re certainly still supporting the ones that we have published, but I don’t think we intend to do that down the line and just little things like that. We’re trying to have more clarity. So, I think, for us, the ChooseFI side of the business is really about the podcast and it’s about our email that I send out every Tuesday, and it’s about our ChooseFI local groups where we actually have 300-plus of these local groups having in-real-life meetups in 300 cities across the world. And that’s something that’s largely decentralized. It’s a community-run organization, if you will, where we have volunteer administrators in these cities, because of course, I don’t live in Sydney, Australia, or Chicago, Illinois, but I’m here in Richmond. And it’s been a pretty amazing thing to see this community pop up. I hope that gives some clarity on what we’re up to generally.

Ptak: You mentioned travel. One of your personal passions is scoring great deals on travel. One key element you say is staying organized. Can you give us an example of how being organized has made a difference for you personally and why you found that so important?

Barrett: Just taking a step back—when we are pursuing credit card travel rewards points, you’re opening up very targeted credit cards and using those cards and earning these sign-up bonuses that are really extremely, extremely lucrative, and you see them all the time, of course: earn 50,000 miles or 60,000 Chase Ultimate Rewards points or something. They all have some different flavor to it. Then there are always some stipulations of, OK, spend $4,000 in the first four months, or in the first three months, is usually what you’ll see. I think really the key, Jeff, to your question is, OK, you need to not lose sight of that, because it would be pretty catastrophic to open up a credit card expecting to get a 60,000-point bonus that you believe you could earn, let’s say, even $0.02 per point, so $1,200 worth of free travel, in essence, and let’s say, you miss that because you didn’t hit that spending requirement, that minimum spending requirement.

And when I say organization, this is not like some crazy fanatical, like CPA-type thing where we’re creating wacky spreadsheets. It’s just really very simple. Everything I do with my finances at its heart is simplicity. So, just in that case, the organization of how much have I spent the first two months, so then I know what I need to spend in that third month and literally down to having your logins or having your account numbers. Again, the organization of, let’s say I have Chase Ultimate Rewards points and I want to transfer them to Hyatt to book a hotel. Well, I need my Hyatt account number. So, just something as simple as that. Just having this data at hand makes it so that you don’t potentially lose a reward redemption because of a couple minutes or because somebody else booked it. As we all know, when you go to book frequent flyer flights, sometimes they’re gone. They’re gone real quick because there are a finite number of these seats on every single plane, and people book these things. So, you don’t want, as I see it, to let lack of organization or some silliness make you lose out either on earning the bonus or potentially getting that reward that you searched long and hard for and just then needlessly miss, basically.

Benz: It sounds like the right card is really important and that getting these signing bonuses is important too. So, how should people shop for these things, shop for the best card? What are they looking for? And also, how often are you supposed to be switching this up? Should you be changing credit cards frequently to take advantage of these bonuses? Can you talk us through that?

Barrett: I think in terms of finding a card, it’s not terribly complex. But, of course, I can’t give specific advice to every single person out there, because it’s going to differ on where do you live, what are your travel goals, do you have kids, and you can only travel during certain school breaks. So, there is some aspect of nuance in this. But I think for me, I would just find out, what flight options do I have from my local airport or local airports if you’re lucky enough to live near a couple of major airports. So, it would just simply be, in my case, Richmond VA Airport Wiki. No joke. Go to the Wikipedia page, and at every airport Wikipedia page, you scroll down and it’s airlines and destinations, and it shows you all of the airlines and their direct flights at that airport. So, very simple. You can see really visually when you scroll down. And let’s say, you’re at Baltimore and you scroll down, and you see this massive number for Southwest. Well, that’s you’re aha moment of, oh, OK, maybe I need to find a way to get Southwest points. So, that would be, in this case, Southwest credit cards or transfers from Chase Ultimate Rewards, so that you would pick up along the way.

But it would start with, what are even my options? I think that is a decent starting point that might even frankly, Christine, being a little more nuanced than our listeners are looking for, like, I would in very, very broad terms say you want the most broadly useful points that you can find. So, something like the Capital One Venture is a card or the Venture X card, those are as stupid simple as you can possibly come up with in the sense that you don’t even at the end of the day have rewards points. They are now transferable, but that’s nuance that we don’t need to dive into. But you basically just use your credit card to pay for travel. Nobody knows or cares that you have rewards points. And then, you log in to your Capital One card and just offset that expense with your points. That is as easy as it comes.

And then, you look at points where I really would start is the Chase Ultimate Rewards and Amex Membership Rewards points, because those points, while they sit in your bank or in your credit card account, they are there. But let’s use Chase, for instance. There are, I think, somewhere right around 13 travel partners. Don’t quote me on that because it does change from time to time. But four of them are just extraordinarily useful. So, you have Southwest, United, Hyatt, and British Airways. British Airways is a little nuanced. But those four, you can basically get hotels with Hyatt in hundreds of cities across the world, and those are the easiest redemptions ever. Southwest is another one. You can tell I focus on ease and simplicity. So, Southwest, there aren’t any of those limitations of frequent flyer seats. It’s just simply, do they have a flight that you can pay for? If so, then you can use your miles. So, that makes it easy.

Now, again, going back to—and I could touch on United and British Airways, but we’ll get too much into detail here—but what the starting point was by having Chase Ultimate Rewards points, which you get from, let’s say, Sapphire Preferred, Sapphire Reserve, Ink Business Preferred, those are the transferable cards for Chase Ultimate Rewards. And when you have one of those cards, then having those points sitting in your credit card account means at any given moment, you can transfer them and they become Hyatt miles, they become United miles. That’s the critical part. And I hope that makes sense because you then just have so much flexibility and flexibility—along with organization—flexibility is really the name of the game. Because in travel rewards, as we know, when you hear people complain all the time about, oh, it’s impossible to use miles, or there are blackout dates. Yeah, there’s some shred of truth to that, but what it really means is the people who are saying that don’t understand the game. The game is: Can you be flexible?

So, any ability to add flexibility into your travel plans will give you a higher likelihood of success. And that’s how I look at this, is what is my highest likelihood of success? If I am dead-set on using this for a wedding that I have to go to in Jamaica on July 7 through July 12, that’s going to be pretty hard because there are finite number of flights, there are finite number of hotels. But if I said, hey, I want to go to Europe next fall, well, going to Europe next fall is really, really, really easy. That’s incredibly easy because you just need to get the miles. You have then dozens of airports to fly into. You can use your points. Like I said, you could use Hyatt points easily, Marriott, Hilton are fantastically easy to come across and there are thousands of those hotels. A trip like that, I think, for anybody listening, if they said, hey, I want to go to Europe next fall on points and get it for free or close to free, I think virtually every single one of them could do that.

Ptak: Some of the highest inflation we’ve seen over the past few years has come in the realm of travel costs—hotels, rental cars, and until pretty recently, airfares. Has it gotten harder to game the system for good deals?

Barrett: It’s a good question, Jeff. And I realized that I didn’t fully answer Christine’s prior question in talking about the sign-up bonus, and I think that’s actually part and parcel of your question as well. I think in terms of how to get the most value from travel rewards, it’s clearly from these sign-up bonuses. So, you could just look very simply at something like, again, that Sapphire Preferred, so the Chase Sapphire Preferred right now at time of recording, it’s a 60,000-point bonus I think when you spend $4,000 in the first three months. So, I think roughly you could get $1,200, again $0.02 per point, $1,200 worth of travel from that. And that’s from just putting $4,000 of your regular spending on that credit card. Again, you’re paying it off on time, in full every single month, so it doesn’t cost you anything. There’s no interest expense. You don’t have to hold that as a balance. You’re paying it off on time and in full. And that’s $1,200 for a $4,000 worth of spent. If you had done that on a normal credit card, you would have gotten 1%. So, $40 as opposed to this, you’re getting 30%—$1,200 out of $4,000. So, you can see why the sign-up bonuses are fantastic.

And obviously, if you can put a couple of those sign-up bonuses together over a year or two period, then you’re going to start amassing a significant number of points that can turn into some type of travel and some significant travel. Like I said, that trip to Europe or a trip to Disney World is something that I put together for my family. If you have a spouse, significant other, each adult can open up every single one of these credit cards, which is nice. So, it doesn’t preclude you; you’re allowed to open it in your name and social.

And getting into your question, Jeff, is where the intersection here is, I think it’s all gotten harder. When I first started this travel rewards hobby, which probably 10 years ago now, it was incredibly easy to open these cards and amass really dozens of these bonuses. And the credit card companies, to their great credit, cracked down on that, and they have these bonuses for customer acquisition and when people are gaming them needlessly and egregiously, of course they’re going to crack down on it. It’s just the way it’s going to work. So, I think they very smartly did that. And I think there’s some balancing act between customer acquisition and watching out for this gaming. My wife and I have been very, very measured, certainly over the last five-plus years in terms of these credit cards and only opened a few of them at this point. But still, that’s a nice number of points and miles that we would not have had. I think that aspect has gotten harder.

In terms of the actual redemption, I haven’t anecdotally noticed that it’s that much harder to redeem, but I think it’s also self-selection in terms of, like I mentioned to you both, really, simplicity is at the heart of everything I do. I’m not looking to redeem for absurdly difficult routes. I’m trying to build flexibility in. I am going for hotels because hotels are the absolute easiest aspect of travel rewards to book and to get free travel from. Because most of the hotel chains, everyone has their own different fine print. But if they have a standard room available for cash, it’s similar to what I described about Southwest. If the hotel, let’s say, Hyatt, they have a standard hotel room available to pay with cash, you can use your miles. And the beautiful thing is, they still have an award chart, which is very simple. If it’s a category one hotel, it’s 5,000 points a night. If it’s category two, it’s 8,000. It is clear as day. That certainty and that simplicity makes it just really, really easy to use hotel points. So, that’s why I like that.

But in terms of flights, flights have certainly gotten dramatically more expensive. Maybe when I talked about the Capital One Venture, there’s probably less value to that because you’re not literally getting as far, but it still is the dollar-for-dollar saving. So, let’s be clear on that. If you were going to pay for it in cash, it’s still that dollar-for-dollar saving. So, there’s that. And then, in terms of the actual quantity of award seats from miles on, let’s say, American, United, and Delta, I haven’t anecdotally noticed a dramatic drop, but I suspect there have been some studies done on ThePointsGuide.com or sites like that that we could dive into. But yeah, honestly, I don’t have that data in front of me.

Benz: Wanted to ask about lodging. You mentioned that you really like some of the hotel programs. But seems like some of the most budget-conscious travelers I know use Vrbo or Airbnb for their trips versus hotels. Do you agree that that can be some of the most economical lodging, especially it seems like if you’ve got a family? And do you have any tips to share on getting the best deals for people who choose to go that route?

Barrett: Yeah, definitely. That’s certainly what my family has been using, Airbnb, the last couple of years, certainly much more than we have in the past. But I think there has been some pushback, and you see a lot of this on Twitter and places like that of people complaining about just all of these fees and the meme of getting the 50 pages of instructions on what you have to clean and then paying a $200 cleaning fee on top of it. So, I think there is some frustration with Airbnb at this point.

Airbnb for very short-term stays doesn’t seem overly economical to me. And I know it’s hard to quantify this specifically, because yeah, you generally have to pay that cleaning fee regardless of whether you stay there for one night or X number of nights because it’s just the turnover cleaning fee. So, if you can amortize that over a greater number of days, it makes it slightly more economical. It’s hard to justify, I think, depending on what the situation is, Airbnb for a day or two—that’s where my family has come down on this a little bit. But again, what type of travel are you doing? Which is why it’s hard to give advice for one particular person when we’re talking to, obviously, many, many, many thousands of people.

I think depending on your situation, if you’re going with multiple families, if you’re going for a long time, yeah, Airbnb and Vrbo can be fantastic. The only way that I’ve found to really offset those expenses with travel rewards are—and I hate to keep repeating this like a broken record—but that Capital One Venture card and the Venture X, those are just really broadly valuable points, because anything that codes on Capital One side using a merchant category code for basically how would that expense code in their system. If it codes as a travel expense, then you can use your miles for full value, which is $0.01 per point, so 10,000 points would, I guess, be $100 in that case. So, a Capital One Venture sign-up bonus for 60,000 miles, for instance, would be at $600 of offsetting expenses just to set it up more rationally there. But yeah, at last check, Airbnb can be offset with Venture miles. I am not 100% sure about Vrbo. That would be a very quick Google search that we could do here. But I believe that it is, but don’t quote me on that certainly.

Ptak: Reading some of your posts on how to save money on trips, it seems like it could be pretty time consuming to find good deals. Does it have to be time consuming?

Barrett: No. That’s a good one, Jeff. So, I think, it doesn’t have to be, and that’s hopefully what I’ve tried to paint the picture here in the last five or 10 minutes is that everything I do when it comes to travel rewards is based around simplicity. I’ve hopefully given our listeners a toolbox for, if you want it to be easy, build in some flexibility, but then go for programs that are just, you can’t help but succeed. So, again, using points like those Ultimate Rewards to transfer to Hyatt, you can’t help but succeed basically if you’re going to any city that has a Hyatt. It’s incredibly easy. And I would make the same argument for Marriott and Hilton, though those points have a little less value. So, that’s why I don’t talk them up quite as much, but they’re so, so, so easy. Again, Southwest, could not be easier. And I know there’s the Southwest meltdown and maybe Southwest is at the lowest point now. But people have loved Southwest for its entire existence, and it’s been a wonderful airline and really just so easy to use with their points. And yeah, those offsetting cards like the Venture and there used to be a Barclay card that was similar. I suspect at some point in the future, there will be another similar card.

If you’re worried about, is this doable, start there and then prove to yourself that it’s doable. I think that again is just another aspect of how we look at ChooseFI in general is take that one little action and just keep taking small actions that make your life better and you’re going to wake up and your life is going to be dramatically changed. And I think you can see that with this. Start with a small win. You might be hearing this random guy Brad talk about travel rewards and it sounds impossible to believe. That’s what I thought. I’m a skeptical CPA. That is exactly what I thought 10 years ago, and I dipped my toe in and there was no downside, and I tried it, and from that very first British Airways credit card that I opened, I was able to get—again, we used to live in New York—I was able to get something like 11 round-trip flights from Richmond, VA, to LaGuardia on, at that point, it was US Airways. So, that’s another cool aspect. And Jeff, it’s the opposite of your question of simplicity, but you can use airline alliance. So, you can go as deep as you want. But at its heart you can start and just get a win and prove to yourself this works, and then listen to some of our podcasts on travel rewards or go to thepointsguy.com and learn all about it. You can go as deep as you want, but you can also succeed really, really easily.

Benz: I’m feeling like kind of a slacker as I’m listening to this. I have not done a good job of optimizing my travel expenses. I wanted to ask about resources. There are all sorts of websites and other services that purport to help people sort through this and flag good deals. Are there any that you think are really good that people should bookmark and refer to?

Barrett: I would certainly stay away from any if there are paid services like this. I think you can get most of this information for free. That said, just like anything in life, when we’re talking about any aspect of personal finance, if you get value from what you’re paying, then great, go for it. If you don’t want to do it, if that’s going to make the difference, then I get it. There are also people who can actually—and Christine, this might answer your question better than I was going to is—who can actually book the trips for you. They have specialized knowledge. You have the miles and a little bit of money. There’s a guy that I’m good friends with who helps me with my Travel Miles 101 site, which is actually a resource that people could get started with. We have a free course that’s right there just getting started. But he has a website called BoundlessMiles.com, and he has a service—there are many of these services—that you pay them a fairly nominal fee. You tell them what miles and points you have and where you want to go. And they find out if it’s possible and the best way possible to do it and on the cheapest number of miles. That’s a great way to do this. Nobody would begrudge you for one second getting a $6,000 free trip and paying $100 or $200 for somebody to help you actually do this when you weren’t going to do it. So, I think that’s a great resource. Again, this is but one person. There are many of these.

I think “award-booking services” is what you’d Google, and you can find a whole list of them. I’ve personally used that guy, Dominic. But, yeah, I mentioned The Points Guy. There are all of these websites: viewfromthewing.com and Million Mile Secrets. There are tons of these sites that you can go as deep as you want. I think thepointsguy.com is really the industry centerpiece, I would say. But websites like ours, Travel Miles 101, or choosefi.com. If you go to choosefi.com/travel, we have all of our travel resources. We have a “getting started” series of five posts. We have, I think, probably 10 or 15 podcasts that are on travel rewards. So, you could do a lot worse than starting there for sure.

Ptak: Well, Brad, this has been a very informative discussion. Thanks so much for sharing your time and insights with us.

Barrett: You bet. Thank you again for inviting me. This was fun.

Benz: Thanks so much, Brad.

Ptak: Thanks for joining us on The Long View. If you could, please take a minute to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.

You can follow us on Twitter @Syouth1, which is, S-Y-O-U-T-H and the number 1.

Benz: And @Christine_Benz.

Ptak: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.

Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com. Until next time, thanks for joining us.

(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. While this guest may license or offer products and services of Morningstar and its affiliates, unless otherwise stated, he/she is not affiliated with Morningstar and its affiliates. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis, or opinions, or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)