Cash back boy here! Since I seem to be the running joke for all things cash back, I wanted to provide some context into why I believe cash is king. So at the risk of being a pilgrim in an unholy land, and discussing cash back on a point’s blog here we go….
At a basic level when we put aside money for savings, we are putting off spending today in the hopes of higher spending power in the future. I prefer cash back, because it allows me to delay current spending in the hope of higher spending power in the future. For example, in a typical year I usually earn an average of $250 in cash back simply by using my Discover cash back credit card (I fully admit I’m not as determined as JD to identify the best opportunities to earn cash back, though I appreciate his suggestions). Annually, at the end of each year I request the cash back I’ve earned be deposited into an EFT (exchange-traded fund) that historically mirrors the market (S&P 500). $250 invested annually into a market EFT averaging a 5 percent annual return, would yield you $1,381 in five years, $3,144 in ten years, and $5,394 in fifteen years. Why would you spend $250 now when you can spend $131 more in five years, $644 more in ten years, or $1,644 more in fifteen years?
Anyway you get my point. I’m not going to try and convince you to come over to the dark side (especially not on a points blog, that would be blasphemy). I would argue however that any financial decision, whether that be traveling on your dream vacation, accumulating points via a mileage or mattress runs (not entirely sure what those are), or accumulating cash back should never be looked at as a one-size fits all approach. These decisions should all be made considering your financial goals and objectives.
Look for cash back boy’s next post on the arbitrage theory on Vanilla Cards.
----------------------------------------------------------------------------------------------------
Follow us on Twitter @doit4thepoints! Have a question for me? E-mail me at jd@doitforthepoints.com
No comments:
Post a Comment