Welcome to a weekly feature on the Delta Points blog. Each week this series covers in a “rookie” way either a Delta or travel related theme and attempts to break down to a basic level each topic. You can read up on all the previous posts HERE. Now on to this week’s feature.

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The day that changed my life and if this is new to you it has just changed yours. I was sitting in college and the professor started talking about opportunity cost. I am a computer geek. I not only multitask, but I think multitask. It has helped me in life, but there is also something to be said for living in the moment too. Either way, there is always a cost to anything you do. How does this apply to the true value of points?

the reef resort sign grand cayman island delta points blog

Black Friday weekend OfficeMax had the stunning $20 off Visa debit gift cards (that could be loaded to BlueBird at Walmart). There was an activation fee of almost $7 but you still ended up with $13 free. Oh, and then when you paid with a card that pays 5x at office supply stores you got another $12 in Ultimate Rewards points when redeemed for travel.

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I expected the short line of people waiting for the store to open that night at 8PM to rush in and all grab one and I would maybe get none or just one. But no one “got it”. I checked out, asked if I could walk out and back in and get another and was told sure. I did not push it and just go two for me and Lisa got two as well.

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We had some traveling to do Friday and Saturday and I ended up with 17 of them since even over the 3 days of the promotion no one even with time “got it” and the value of $425 of cash and points for my time. In the end I had to get a few of the MasterCard ones but we can use those at Sams Club and we do shop there so why not.

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I have more airline points than I can spend. They also keep coming as with each new round of cards Lisa & I get we get more. Once the AA & US Air merger happens we will combined have almost 1 million AA points I must burn at some point. So I just spend my Ultimate Rewards points on places like you see in all these photos in the post.

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This is the point of today’s post. Many mainstream travel writers and journalists poo-poo “free” award travel saying it is NOT free. You know what – they are right. It is never free but that is such a myopic view it makes me want to YELL each time I read it. Here is why.

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Let’s just look at my gift card example. Say it took me 4 hours all in to go get the cards and then drive to Walmart over two days to unload them. Say I burned $25 in gas. So I made $100/hr for my time. I don’t know about you but to me $100/hr is just – wow – and I wish I made that much from my computer work (I do bill $75/hr but after expenses don’t make that much).

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Now here is where we dial this up. Your time is valuable. If you are going to take a vacation, and it is going to cost you $5000 for you and your family it will take many hours of work to pay for that.

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But, if you are willing to adjust your lifestyle a bit, to burn the “opportunity cost” of some of your free time, by say stopping by a pharmacy to buy some “things” on the way home, to be organized to get some new credit cards every 91+ days or so and NEVER EVER carry a balance on them.

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Then, evaluate what to do with the card when the annual fee hits. Also make time to read BoardingArea blogs and multitask about ways to save on each facet of a trip and you may end up paying just 10-20% of the retail price of any trip you take.

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Is the trip free then? No, clearly not! But you did NOT have to spend $5000 of you own money you worked so hard to earn. So is the trip free now? I would argue not just free, but you are getting paid for your time and effort. I have discussed this in the past and others disagree but as I sit drinking 2 for 1 rum punch I am living in the moment and enjoying the fact that I get almost “free” travel and wish others would too. Got a doubter in the family – send them the link for this post – please! – René

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Posted by Delta Points | 13 Comments

13 Responses to “Rookie Wednesday: Opportunity Cost & the true value of points!”

  1. Andrew G says:

    Enjoyed your post. It helps me keep some perspective on some of the point and MR decisions I’ve made recently. I was 6K away from PM and made the decision to pay more for a MR 12/17 that was still less than the Delta MQM only purchase. I also payed more for the MR so I could get it done in one day in A class. If I can get same day confirmed to work for me I will almost double the miles and mqm. I believe PM will be very helpful next year if only for the award ticket redeposit so it seems like I good use of the time and money.

    Thanks again for all the great posts.

  2. Cogswell says:

    Hi, when you say it took you 4 hours in your example, you don’t factor in the opportunity cost of what else you could have been doing. This could be anything from relaxing, enjoying life, spending time with your family, doing something creative, looking for a better job in which the salary bump far outweighs the gains from your OfficeMax excursions.

    Additionally no one ever factors in the amount of effort it takes to search for deals, and then manage miles and points (and deal with customer support when the bluebird cards don’t load!). Even at just 10 minutes per day, this is over 60 hours per year! If you value your time at a modest $30/hour, you this amounts to over $1,800 of time spent each year!

  3. Delta Points says:

    @Cogswell – well read the blogs, we give you the steps so you don’t have to take your time, and in literally hundreds of VRs I have never had one issue with them so I doubt it will take most 60 hrs of their year! But, by all mean, work and make money and pay retail if you wish!

  4. Cogswell says:

    @Delta Points. Signing up for around a dozen credit cards per year is definitely worth a few thousand dollars, but beyond that I think most people would be stunned to realize how much time is spent reading blogs, searching for deals, understanding the deals, doing the deals, following up on issues, managing points, keeping points from expiring, and then actually using the points.

    If you are talking about opportunity cost, everyone needs to provide a dollar value of what one hour of their time is worth. I’m curious as to how you would value it.

  5. Slava says:

    @Cogswell – The answer is “it depends”.
    I have taken two trips this year – a weeklong trip to Europe and a two weeks long trip to Australia. I flew to Australia in all business class with some great layovers that allowed me to spend some time in Seoul, Beijing and Singapore. These are the trips that I otherwise would not have had the money for even if I worked second job. At the same job I’m happy with the job I have. But, yes, I have spent a lot of time reading blogs, studying all available info, signing up for cars and then finding flights. All this time spent can be viewed as a part-time job with a payday as a close to free trip that many can only dream of.
    But the point is, that I can’t think of something else that I could have been doing to earn THAT much money to pay cash for both trips. But I learned a lot. I gained knowledge. And this knowledge essentially “earns” me return by saving my money and allowing traveling to various places.
    At the same time the term “enjoying life” can be stretched into anything. Because I can take a walk with my wife but stop by CVS to pick up VR card. These events complement each other.
    Relaxing can also be anything. I can read a book, newspaper, sleep, walk. That is relaxing. Or I can read a blog and find out some new interesting idea. Still doing the same relaxing thing.
    How should I value my cost of doing either nothing when I watch TV or getting VR while taking a stroll with my wife?
    The answer is “it depends”. I know my goal. I know it costs a lot. There are two way to get there – spend either money or time. Either or. So I spent time and it could be called part time job, thought it is not the type of job to hate, and earn your income by traveling.
    Some people don’t want to spend the time and they spend money. It is simple.
    People give up their time for a lot less like $200 off the TV over Grey Thursday rather than spending time with their family.

  6. glenn says:

    In the theory of opportunity cost, all hours are not the same cost. If you could be working 8 hrs. a day, but choose to do something else, then your opportunity cost is the value of the paycheck. However, the opportunity cost of your after work hours doing a hobby is much less since you would not normally be earning during that time. Giving up hobby hours is a very low opportunity cost when you compare it to the return on investment in FF and CC programs.

  7. Cogswell says:

    @Slava – yes I agree “it depends”, but Delta Points originally brought up the concept of opportunity cost. So when calculating the benefits of accumulating miles, everyone must assign a value to their time (yes it might vary depending on the situation), for example:
    1. What is the value of losing one hour of my free time on a Saturday?
    2. What is the value of each hour away from my family while doing a mileage run?
    3. What is the value of each extra hour spent during an airport layover when booking with miles vs booking a more efficient itinerary through cash?
    etc.
    None of these ever seem to be taken into consideration.
    The fact is, most people could just cancel their cable service and would probably save enough money to take a vacation each year. 2 minutes of work required :)

  8. Cogswell says:

    @Glenn – yes the opportunity cost hours can vary, but so how do you value the time? $20, $40, $100/hour?

  9. Delta Points says:

    @Cogswell – I will jump in here. I think, for some extra work, not having to work hours and hours of overtime, away from my family, to take them on an AMAZING vacation for 10-30% of retail, is worth consideration! :-)

  10. Slava says:

    @Cogswell
    The part of assigning the value can be done only at individual level. Each person can spend different amount of their time and each person values their free time differently.
    I can read about some deal but then I would decide that I won’t go out of my way for $X. Which I guess is my price for my free time.
    And I would decided if I need to have 15 programs to manage or 3. Because I would think that 15 would cost to much of my time.

    So there is an opportunity and there is a cost. Each person chooses how much to pay and for which slice of this opportunity.

    Cancelling cable and saving enough money for the vacation is a debate in and of itself. To me that would be saving at most a $100 per months since I still need to have internet (Even though my total for all services is $85) . Over 1 year that could come to max $1200. Two people can’t fly to Fairbanks for 3 days to see northern lights for this sum. But this could be enough to go to Naples, FL for 1 week for two people. Not sure if that would work for the family of 4. Just 4 airline tickets at low price of $300 is already $1200.

    So the exact $ number varies for every individual. But then you still have the opportunity. And it will cost you time. Each person must answer to themselves what are they willing to pay.

    I agree that there is much more time involvement required that may appear on the surface. But that’s with everything. You can do very little or go all the way and try to chaise every idea. YMMV

  11. pawtim says:

    @René You accidentally said “AA and UA” merger in your original post. May want to correct it, as this is aimed at “rookies”

    @Cogswell — I’ve been an adjunct Econ professor, and you seem to have a misunderstanding that’s pretty common among some of the students. The opportunity cost of spending time doing something is valued based on the next best way you could be spending your time. If you would have spent the time doing something great, then your opportunity cost is high. If you would have spent the time doing something you don’t care much about, the OC is small.

    I think that you are also not recognizing that a lot of us get a sense of “utility”, or satisfaction and happiness from figuring out a way to get something of value at a discounted price. It’s sort of like a puzzle and it’s fun to figure out. I enjoy reading blogs and strategizing with other people.

  12. Delta Points says:

    @pawtim – txs yes fixed.

  13. […] have shown some of the amazing views and video clips of the diving we did this year. It was so relaxing and I just loved my time coming […]

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