Miles Ahead

How Travel Hacking Itself got Hacked – and what we can learn from it.

Many airline passengers whose trips got cancelled some months ago are still waiting for their ticket refunds as carriers and travel agencies are running low on liquidity. As of August 2020, airlines are withholding billions in refunds – that’s Billions with a capital B!!!

The current corona pandemic leaves airlines stretched.

They are suffering liquidity shortages. While this may seem historic for most, it’s for sure not the first time airlines are struggling. Let’s take a walk down history lane to see what we can learn from the past: This has happened before!

We shall get back to 2020 and the Covid pandemic towards the end of this post!

First let us travel back to 1981.

In that particular year American Airlines was in deep sh*t.

After the oil crisis of the 1970’s, in 1978 the US enforced the Airline Deregulation Act to deregulate the airlines industry. Just a few months later in the early 1980s the economy was in a period of sky-high interest rates and roaring inflation. In 1980 AA posted a $76 million loss while facing new competition, lower ticket prices and high borrowing costs and fuel prices.

It was a tough time and AA was in urgent need for cash. Due to exorbitant interest rates borrowing was not an option to consider.

Therefore AA came up what later got coined as the one of the most epic marketing failures ever: They started offering the best deal frequent travelers could ever lay their hands on – ever!

First Class for LIFE!

The legendary AAirpass was born.

For a hefty $250,000 the AAirpass offered nothing less than:

UNLIMITED FIRST CLASS TRAVEL FOR LIFE!

Can. You. Actually. Imagine. That!?

FYI: $250,000 would be $700,000 inflation adjusted to 2020

Over the course of the years, AA sold about 65 unlimited lifetime first class passes until they stopped selling them in 1994. Apparently, Billionaire entrepreneur Mark Cuban said that it was “one of the best purchases he’s ever made – it opened the world to him: He could go anywhere anytime he wanted to – first class! Other notable customers included Michael Dell and Willie Mays.

And hey, it doesn’t stop here!

For some extra cash, you could also get yourself a companion pass.

First class is more fun if enjoyed together!

Originally the idea was to offer this product exclusively to existing frequent business travelers…

However, some travel hackers did their math correctly and this was how a certain Mr. Rothstein purchased his own AAirpass plus the companion pass for $383,000.

Mr. Steve Rothstein was a Chicago based investment banker and he loved the idea: “Instead of getting interest paid from a bond, you could redeem your returns in air travel.” A very fair deal in his view: “They need cash and they can pay me in miles.” Why not! Right?

Travel Hacking Itself Got Hacked

Soon American Airlines had to learn the airfare market is not comparable with, let’s say an “all-you-can-eat” buffet or “all-inclusive” vacations where customers would have natural limitations of how much they were able to consume.

When it comes to first class tickets just imagine how many folks are literally ready to go “the extra mile” to profit from such an offer.

Starting from 1987 Mr. Rothstein went many many extra miles with his AAirpass, he booked more than 10,000 flights to anywhere. Sometimes he simply flew somewhere to grab his favorite sandwich. He also frequently just took complete strangers along into first with his companion pass.

He basically used the airlines’ network like a bus…

From Chicago, he reportedly flew:

  • 1,000 times to New York City
  • 500 times to San Francisco
  • 500 times to Los Angeles
  • 500 times to London
  • 120 times to Tokyo
  • 80 times to Paris
  • 80 times to Sydney
  • 50 times to Hong Kong

Another gentleman, Mr. Vroom from Texas, even took out a loan (!) to finance (!!) the $400k (!!!) – by the time he bought – AAirpass fee.

He flew well above 2 million miles per year thereafter. Mr. Vroom sometimes simply flew to Paris to have lunch and would return shortly thereafter.

The next time AA got into financial trouble was in 2007. Once again, they went through their books just to figure this time the AAirpass program was costing the company too much. What a surprise. American calculated the two top-clients Mr. Rothstein and Mr. Vroom cost them well above $1 million in taxes, fees and lost ticket sales – per year!

What an amazing return on investment for the two of them!

They were miles ahead!!!

The Revenue Integrity Team Steps In

Unfortunately, good things seldom last. The story ended bitter for our unlimited lifetime loyal frequent flyers! Once the airlines’ “revenue integrity team” (what a name…) started to get active, their AAirpasses got revoked.

The airline claimed the reason being “fraudulent activities”. Both clients got stripped of their passes and were told they would never be able to fly on the airline again. Ever.

Nowadays, the American Airlines Airpass is merely known as an all-inclusive membership program that offers elite status, flight discounts, and other rewards. It now comes with an annual fee.

In hindsight this offer was coined one of the worst marketing disasters in human history.

According to an American Airlines spokesman, there are still about 25 valid unlimited passes out there in use as of 2018. It seems therefore unclear if all the unlimited passes got cancelled…

Let me know if you are a passholder please, leave a comment below or shoot me an email, please!

If you want to improve your life with similar or other life-hacks and imagineer your life, please consider to follow me on Facebook or Twitter:

Miles Programs Used as Collateral for Bank Loans

This is all history, so why do I write about the above story at the current point in time?

Well, due to the current pandemic, we have arrived at a similar “situation” once again. Airlines are short on cash! And as before, in 2020 airlines are reaching out to their largest customers and are offering to sell miles directly to them – to secure liquidity.

History doesn’t repeat itself, but it often rhymes.

While in the early 1980’s the largest clients where direct business travelers, the largest clients in 2020 are – yes – you guessed it: Credit card companies with reward systems such as American Express, Chase and others! These large corporations are currently winning big and can purchase points at deep discounts – just to offer them to you later.

American Airlines and United Airlines also ventured out to conduct more innovative financial engineering recently. They are mortgaging (!) their mileage programs with financial institutions to borrow against and “monetize it”. Due to this new way of “banking points” both airlines have recently disclosed valuations of their mileage programs.

The numbers are in the tens of billions of dollars!

Why is this scary? Imagine that both, American Airlines and United would be worth a negative valuation after discounting the value of their points programs…  

Here some numbers:

Just the U.S. portion of the AAdvantage program is currently valued around $19.5 billion (subtract that from it’s market capitalization of $5.6 billion…).

Uniteds’ MileagePlus program got valued at $21.9 billion (now compare this with it’s market capitalization of $10.1 billion…).

This is how valuable the reward systems have become and how crucial they are for the industry.

While I don’t believe the airlines will disappear just yet and like that, there’s a certain risk also on the respective banks’ books now. Hope they know what they’re doing. But the main point I’d like to convey today is another one.

Travel Hacking in 2020

Since Mr. Rothstein got his AAirpass, airline loyalty programs have transformed from a way to simply increase customer loyalty to a massive profit center.

The above example of how American Airlines and United are even empowered by the system to “mortgage” these hugely valuable assets – to unlock billions of dollars in bank loans to help survive the pandemic – shows the world the true size and value of their programs.

According to my opinion the most recent developments may lead to the following potential outcomes.

View from Singapore Airlines “old” Suite Class chair 3F on their A380-800s

Here my considerations for travel hacking in 2020:

  • There will be some sort of “inflation” in point values coming up – your points today are more valuable than your points tomorrow. In other words: The earlier you book your flight, the better deal you can get. Airlines are happy at the current moment for miles holders to redeem points!
  • With inflation and more points being “monetized”, the rewards, in terms of points – not in actual value – will move up in the near future. Look out for a changing landscape of reward systems and re-position yourself if needed.
  • Buying extra miles could be a true bargain during this period of time. Try to take advantage of it strategically. AA has launched a new offer allowing frequent flyers to purchase miles with up to 100% bonus through Aug. 31, 2020. This offer brings the cost per mile down to as low as 1.71 cents.
  • Be sure to understand the involved risks such as prolonged insecurity regarding flight plans, countries having closed their borders, airlines getting stretched, potential airline bankruptcies and still yes: getting exposed to the virus itself.
  • If you hold a substantial amount of travel points and miles (like me), make sure you keep them with the right “bank” – or airlines. Some airlines might go bankrupt depending on how long this pandemic will continue. Nobody knows. If your points are with them, you may lose them. One way to secure points is to keep them with the credit card company or bank first and only convert them to miles once you’re about to redeem a flight. Buy points now and buy yourself time!

Maybe as of 2020 we can’t just buy a first class for life pass quite yet, but I’m looking forward to learn more about improving deals coming our way to stay miles ahead.

How do you travel hack in 2020?

Happy travel hacking!

Matt

Picture by Christophe Randy, Singapore Airlines A350 from Hong Kong to Singapore over the South China Sea

Bake Yourself Rich

We are all kneaded out of the same dough but not baked in the same oven. Baking yourself rich is not some half-baked idea but a simple proven way to up your creative skills, increase the quality of your bread and lower your expenses sustainably – so you can bake your world a better place without cutting back too much in life.

We are baking our own bread for many years already. It all started one fine day when my Singapore neighbour Jason knocked on the door. In his hands, he held a freshly baked bread – as a gift for us – thanks again Jason for sharing!!!

Jason’s bread came straight from the oven, it was still warm. The smell was irresistible. Therefore, we did the only thing reasonable human beings would do: We sat down together, got some olive oil and salt, and started to devour this loaf of goodness – on the spot.

It was a snaccident.

Imagine the crispiness, the cracking of the crust, then the fine vapor escaping the warm, moist and soft inside of this wonderful bread.

Yes, getting good bread in Asia is difficult – and I was starved.

I wanted to try to bake it myself.

Baking bread is no rocket science doesn’t take a lot of time. Hey I could do it and I’m a trained economist and banker… how hard can it be!? It’s just some flour and water mixed and baked.

Give me your 5 minutes and I shall show you how.

How to Bake Awesome Bread

My friend Jason introduced this plain simple but perfect recipe (click here to download printable PDF) to bake my own bread a few years ago:

Before you get started be sure to have:

Ingredients: flour, water, yeast and salt.

Tools: a dough kneader or food processor (although you could use your hands as well – but beware, it’s a wet dough!), a dutch-oven or coverable pan (we have a Le Cleuset) and an oven.

Click on the above links – just some recommendations: You can use similar tools as well of course.

Step 1: Mix it! Put all ingredients together and mix them for about 5 minutes.

Step 2: Let the dough rise for at least 8 hours. Cover the dough with a towel! We prefer to let this happen overnight in order to have warm bread for breakfast. Spend around 5 mins before going to bed and leave it till the next day.

Step 3: Baking: Put additional flour into your dutch-oven to avoid the bread to stick later on, add the cover and bake for about 30 minutes. Then take cover off and keep baking for about 5 minuts or until crust is brown.

Step 4: Done! Let it cool down somewhat and enjoy!

My neighbour Jason and me became good friends, he later also taught me how to brew my own beer – I used to refer to him as the Beer Doctor! We frequently savoured our own beer creations in our condo jacuzzi and brainstormed more ideas.

But that’s another story.

Rise Your Own Dough $$$

The necessary ingredients are cheap, in average it cost me less than $1 to bake one loaf following the above recipe. Depending where you live and what flour and yeast you use, there will be different costs.

Try to experiment.

For us, each bread baked results in savings of about $2-3 in Europe and even more if we are in Asia.

If you’d like to check out how small but regular savings can compound into a substantial amount of money, please also make sure to check out my recent post “Million Dollar Haircut” to save more.

For bread, money is not the main reason for us to bake.

It’s the combination of having fresh quality bread – we simply LOVE this bread over the stuff we could buy – and second convenience: Once you do it a few times, your active “working time” required is less than 10 minutes per loaf.

What is better than baking your own $$$

Conclusion

Freshly baked bread right out the oven is just so much better than buying from the store. Baking your own bread is no rocket-science. It also saves you money and you can explore more fancy alternatives if you like.

Nothing says home like the smell of of baking.

Now, don’t be procrastibaking and get started. Be sure to at least try it once.

Download the above recipe and give it a try.

Let me know in the comments how it tasted and felt to start baking.

If you like it please bake someone else happy by sharing your bread or this recipe with family and friends just as Jason did with us one day. .

Happiness is having self-baked bread!

Bakers gonna bake!

Matt

Disclaimer: Please be made aware that the some of the links used above may be affiliate links for which Financial Imagineer could receive a compensation.

If Youth Knew If Age Could

Have you ever wondered what advice you would give to your younger self? Or similarly, have you ever thought about how your future self would show up and how it would want to guide you today?

Since we haven’t built a real flux-compensator [yet], wouldn’t it be easier to simply start asking those older and smarter than you to share their most valuable lessons?

I’ve spent some time to gather some nuggets of wisdom from people I’m surrounded with and decided to sort them systematically. Maybe first and foremost, one of the key lessons that I’ve learned is that’s it worth it to pursue what your longing for, especially if it’s difficult.

The most valuable things in life are often hardest to obtain.

This rule of thumb is valid for experience, wisdom, skills, technical talent and of course wealth. At the same time, the most valuable lessons of life are often the ones you try to avoid, resist, or simply miss for years – as you’re following your current routine indefinitely.

If you are willing to do only what’s easy, life will be hard.

But if you are willing to do what’s hard, life will be easy.

Life is simple. But not easy!

In this post, I’ll try to summarize all the thoughts and ideas about what I’d be telling my younger self.

No Fear

Dream big – if your goals don’t scare you, set bigger goals!

Your true potential is only limited by your passion and imagination. Imagination is the workshop of your mind, capable of turning mind energy into accomplishment and wealth. What the mind can conceive and believe, it shall receive.

Work on making your dreams come true by finding your true ikigai. This planet needs more people that dare to dream – learn to dream with eyes wide open. Keep in mind that if it doesn’t challenge you, it most likely also doesn’t change you.

“It’s kind of fun to do the impossible.”

Walt Disney

The biggest risk in life is actually to play it too safe. You might end up with regrets for not having tried. We all just have one life. Use your time wisely. Time is the only wealth we’re given.

The biggest obstacle to get started is fear. People are afraid to think big, of trying new things and of making mistakes. However, if you think too small, you’ll only achieve small things.

Some of my friends confirmed they achieved the greatest advances in life in moments where they stayed calm and did it anyways. This is true for your career, for love and for making new experiences!

I would tell my younger self: “Trust me. The best things in life are on the other side of fear!”

“The problem human beings face is not that we aim too high and fail, but that we aim too low and succeed.”

Michelangelo

Find your true north, your direction, your why.

Then stick to who you are and keep building on it.

Do not try to impress parents, partners, the other gender, friends and bosses. In doing so, you would only head in directions that are at odds with who you really are or could become.

Yes, you will make mistakes.

Yes, you will have to learn more on your journey.

But all this is worth your while as long as you keep an open mindset and stay open to possibilities and chances.

“Anyone who has never made a mistake has never tried anything new.”

Albert Einstein

In order to strengthen your foundation, do keep your partner and family onboard, you have higher odds as a dream-team!

Don’t be the guy that spent his entire life in the comfort zone.

Have no fear!

Start Now

Some say, the best time to get started was twenty years ago. The second-best time of course is today, not tomorrow. Don’t wait for the perfect time – it will never be perfect. Forget about waiting until you know everything – you never will. Start now.

The actual root of procrastination is doubt. Find a way to increase your belief and you will increase your activity. Of course you will be disappointed if you fail, but you are doomed if you don’t even try.

Keep in mind that people who never try are failing already.

For all you know, no one else knows what they’re doing either. Everyone feels insecure sometimes (some even a lot of the time).

Simple truth of life is: Those who keep going, keep winning.

Keep in mind: Tomorrow is not promised to anyone. Take risks while you’re young and while you can.

“Everybody dies, but not everybody lives.”

A. Sachs

In case you don’t like where you are now, move. You are not a tree.

Move towards your goals starting now. Other than your partner and family (teamwork!) don’t wait for someone to give you permission – they won’t.

Just start now!

Stay Curious: Keep Learning

Unless you are completely retired, earning money is still the best form of building and preserving wealth. Anything that you learn will somehow become your wealth, a wealth that cannot be taken away from you anymore.

Invest in yourself so that you’ll never have to worry about earning an income whether it be from a full time job, side-hustle, or business.

There are many ways to learn new things: Reading books, attending classes or through experience. I’m a strong advocate of learning desirable skills and my favourite way to go about it is through exposure: Experience is king.

Experience are the raw form of learning and will put you in a situation which pure (book-) knowledge cannot give. Life greatest lessons come from experiences.

Get started with learning “how to money”. Use this key-skill to buy more of your time and expose yourself to learning more: New languages, new technical skills, how to write, give public speeches, how to start a business and so on.

Make your brain faster, smarter, more confident and more savvy!

Stay curious and keep learning!

Move the Needles

How to money?

The very first step to building wealth is to spend less than you make.

Simply put, focus on increasing the gap between income and expenses.

The bigger the difference, the more “free cash flow” you have flowing and the faster you cruise towards your (monetary) goals – be it net-worth or cash-flow.

The Crossover Point — illustration from “Your Money Or Your Life” – by Vicki Robin

The higher your monthly income and the lower your monthly expenses, the more you can save and invest. The more you invest, the faster the third curve, the monthly investment income, will move higher up. Once the “passive income” reaches your expenses, you’ve reached the crossover point. Congratulations, you are now financially free!

Read more about this in the wonderful book “Your Money Or Your Life” by Vicki Robin.

Reduce your expenses by listing them all up and question them one by one. You will be surprised how much potential most people are able to unlock doing this exercise. Focus on ongoing savings, not on one-offs. Explore saving more money by going for the “Million Dollar Haircut” or work on similar new habits. A budget might help.

On the other side, work on increasing your income either by adding more value to this world either on your job or with your business or by investing more into cash-flowing assets.

Move the needles [income and expenses] into the right direction over time.

Pay yourself first!

Don’t save what’s left after spending, spend what’s left after saving.

Start Investing Now

Very often people tell me they don’t have enough money to get started with investing. Well, how much is enough? I’d say, if you found a way to have your basic needs covered, anything above that is fair game.

No amount is too small, so start NOW!

Know the power of compounding in investing in financial assets as well as other areas in life. Whatever it is you like to get started investing: Start your compounding journey with your first paycheck and keep going from there.

Never stop.

By setting-up automatic bi-weekly investment contributions to a stock market index fund as soon as you open a bank account you’ll most likely be well served. Try not to look at it until you’re much older.

“Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

Albert Einstein

Buy Assets instead of Liabilities

Learn the difference between assets and liabilities.

Assets are anything that puts money into your pockets.

Liabilities are anything that takes money out of your pockets.

Simple as that!

Following this definition your car, expensive toys, boats or even your oversized home most likely qualify as liabilities (!) while investing into your education, equities or your business will be assets.

Never finance depreciating “assets” and be careful with financing liabilities even more. Better to purchase second-hand cars or wait until you have sufficient free cash-flow to indulge purchasing “fun-items” – if must be.

Most people can afford NOT to be a great investor, but probably can’t afford to be a bad one. Invest early in Index funds: You’ll worry less and earn more. Index and chill.

Once your assets are accumulating capital understand that capital is that part of wealth which is devoted to obtaining further wealth. This can be human capital (yourself) and/ or financial capital.

Keep accumulating capital.

Understand Your Taxes

The average person will view taxes as something inevitable and therefore not spend too much time understanding the “tax-code”. Each tax jurisdiction has different rules and loopholes. Understand the rules of the game before you start playing.

For most tax-codes the advice is similar: Maximize your retirement-account contributions, untap others such as health savings accounts, know how to optimize mortgages, debt, and real estate. Figure out how capital growth and dividends are taxed. Implement more tools if and when needed as your net-worth grows.

At a certain point in time you should consider starting your own business for employing yourself and/ or holding assets. From eight digits upwards the topics could be your personalized fund vehicle or to collateralize your assets within or establishing foundations and trusts with insurance shields to prepare for handing over your wealth to the next generation.

Beware, the rules keep changing.

Keep yourself updated.

Socialize with intention

You’ll become the average of the five people you spend the most time with!

Choose your friends wisely.

Who you hang out with determines what you dream about and what you collide with. And the collisions and the dreams lead to your changes. And the changes are what you become. Change the outcome by changing your circle.

Seth Godin

Take people for who they really are and not for who you want them to be. They show you everyday just look. Make sure you don’t confuse looking rich, (buying fancy toys and big houses), with being wealthy. The people we think are rich are often deep in debt.

Stay away from people that think you’re lucky if you succeed or that you’re greedy if you acquire wealth. Pay no attention to them. They simply doesn’t understand. Avoid people that don’t understand.

Choose your tribe. Surround yourself with energetic people that like to discuss their ideas instead of talking about other people. Engage in some #JacuzziBeerstorming for getting more creative with your social circle. Wealth flows from energy and ideas.

It is the product of man’s capacity to think.

Build your relationships, your network is your networth.

Fuck the Joneses

Avoid keeping up with the Joneses.

Avoid herd-mentality and most money problems will avoid you throughout your life. Instead of spending too much time with what the average Joe on your street does, says or thinks of you, focus on what you can control.

Why bother trying to “fit in”?

What other people think of you is none of your business. Don’t be in a race with your social media neighbours. No one is so miserable as the poor person who maintains the appearance of wealth. Be content with enough and stay clear of lifestyle creep.

“I’d like to live as a poor man with lots of money”

Pablo Picasso

Never ever, ever, ever give up! Ever!

Be patient and be prepared for set-backs.

Life is not a sprint, it’s rather a marathon. The greatest of all works have not been performed by strength but by perseverance.

Be more tough!

You may have to fight a battle more than once to win it.

Every journey starts with a first step. Get started and then focus on daily progress. Take small steps if needed. But steps into the right direction. Patience, persistence and perspiration make an unbeatable combination for success. Most of the important things in the world have been accomplished by people who have kept on trying when there seemed no hope at all.

Aim high, be unrelenting in your pursuit of your goal, but flexible in your approach of it. Stay true to your values and don’t compare yours with anyone else’s journey. Challenges are what make life interesting. Overcoming them is what makes life meaningful.

„When the going gets tough, the tough get going.“

Ignored the haters in the late 1990’s and 2020 again, never give up.

No Regrets

Sometimes when you think back you will realize in your life there are certain important decisions that have led you to where you are today. It could drive you mad if you keep thinking in “what ifs” all the time.

Imagine, back in 2004 I got accepted to work for Google through an AIESEC traineeship, said no and decided for the more adventurous challenge of working in Taiwan. Was this a stupid decision? You could argue so. However, I chose to venture out to Taipei instead and got to know my wife. There are many such crossroads in anyone’s life.

My advice here: Once you’re at that crossroads, listen to your heart, your passion. Choose wisely. Make a decision. Go for it. The path you take will define and form you. In the end, it doesn’t matter which path you take, as long as you move forward. And have no regrets.

Listen to your heart – keep your passion alive.

Seriously, it doesn’t matter too much what others think.

Regrets don’t help.

Take Care of Yourself so You can take Care of Others

When you fly on an airplane, the flight crew instructs you clearly to “put your oxygen mask on first,” especially before helping others, including your own children!

Wrong (credits to “Fight Club”)

Why is this such an important rule? It’s a rule to ensure a higher rate of survival. If you run out of oxygen, you wouldn’t be able to help anyone else with their oxygen mask anymore. Put more simply: if you die, you can’t help anyone else.

That’s how to do it.

Again, the life advice here is not to push forward at any price. You got to know how to take care of yourself. Especially when to take a rest. If you don’t take care of yourself, you can experience burnout, stress, fatigue, reduced mental effectiveness, health problems, anxiety, frustration, inability to sleep, and more.

Keep in mind, whatever you try to attain here: You’re doing this to improve your life! Money is not the end goal. It’s a means, a tool, a way to have options to build the life of your dreams but not worth anything in its own right. Don’t lose sight of what really matters. Happiness over being “rich”. The journey should be as remarkable as the destination. While wealth is the ability to fully experience life please ensure to enjoy the ride: Life is about being and becoming, not having and getting.

Remember: You only live once!

What advice would you give to your younger self if you could?

Tomorrow is the first day of the rest of your life.

Financially Imagineer Your Life!

Matt

Disclaimer: Please be made aware that the some of the links used above may be affiliate links for which Financial Imagineer could receive a compensation.

The Million Dollar Haircut

Most people might not enjoy the process of going to a hair salon. In the past I loved to go to the same hair salon repeatedly. My hairdresser knew how to cut my hair and over time we became friends. However, hairdressers do change jobs. That’s when the pain starts. You must explain your hairstyle preference to a new person from scratch. There is a high chance you will not like the “new” haircut – but you have to pay for it anyways.

Money – and time – that you could save and invest otherwise instead. For instance by cutting your own hair. Yes, learn how to cut it yourself. It’s not that hard. It saves time and money. In itself this new habit can be worth a million dollars. Read on!

Safe Time

For myself, going to the hairdresser was usually a series of activities wasting my time: First, make a phone call to reserve a time slot, then by commute to the hair salon, followed by more waiting time – despite the previous arrangement – as the customer before you takes somewhat longer than planned. A simple hair salon visit could easily take up more than one hour of [my] time, all actions combined.

Time is my most valuable asset and I love any hacks to optimize and reduce time spent.

Safe Money

Haircuts are available at discount or at super high prices. They all have one thing in common? You will pay money to someone else – repeatedly – to get the job done.

Never ask a barber if you need a haircut.

A simple haircut in Taiwan sets you back about $4, in Singapore around $10 and in Switzerland $40. Some people might even spend more than just for their regular trim! Repeatedly.

Let’s assume you could get this job done yourself. You could actually save $40 per month perpetually going forward, isn’t it? Now, that’s where the magic starts…

Cutting Your Own Hair – A Million Dollar Habit

While $40 does not sound like a lot, saving it persistently WILL amount to a lot – over time. In my case, if I keep cutting my hair until the end of my days – expecting I can live to a 100 years – and keep investing (!) the savings at 10% annual returns – keeping a 2% inflation in mind – we are talking:

1 MILLION DOLLARS!

Assumptions: $40 per haircut, 12 trims a year, invested at 10% instead. Haircuts increase in price by 2% per year due to inflation and proceeds are accumulated and compounded:

1 MILLION DOLLARS (!) by age 92, and THEN ANOTHER ONE MILLION by age 100.

The true power of compounding!

How To Cut My Own Hair?

Chances are you have never cut hair. Not your own, and not other peoples’ hair. Do NOT despair. In the age of the almighty internet there are plenty of free resources available for getting yourself ready for the task.

You might want to prepare yourself by watching as many YouTube videos as you need to get comfortable before getting started.

Give it a Try!

Not sure if you can do it?

You think DIY haircuts are more a guys thing and nothing for ladies to try?

Well, guess what.

First, I’m not so much the technically gifted kind a guy… and second, if I can do it: You can do it! …as my friend Chrissy from “Eat Sleep Breathe FI” concluded in her own recent blogpost “It’s the perfect time for DIY haircuts!” – yes, she’s a lady – check it out!

Not sure if you will like the result?

Don’t worry, go for a trial run first!

Cutting your hair is like most things in life:

Sometimes you win, sometimes you learn.

Rest assured: Even if the result sucks, you did not spend $40 for it and you have just skilled up yourself. Most likely your results will improve when you keep trying.

Life’s too short for boring hair.

Once you’re mentally prepared, invest into a good tool: A hair trimmer.

I gave it a try and bought this badass-cuts-twice-as-fast machine!

The Philips Hair Clipper Series 7000 worked extremely well for me. I can highly recommend it if you like to give it a try:

If you truly like to “try before you buy”: Maybe one of your friends might have a trimmer. Ask if you can borrow first.

Keep in mind: During times of Corona, a self-cut head will still look much better than letting your hair grow wild.

Worst come to worst: Just still go to a hair salon and have your hair fixed there.

Opportunity Costs

I’m an economist by training. That’s why I have the habit of justifying the way I spend my time very systematically. Hence, you might also be asking: “Why should I spend time on cutting hair if I could delegate to someone else instead? Wouldn’t I preferably be generating more value focusing on my vocation?”

My conclusion on this one is simple:

Cutting your own hair is a relatively “easy-to-acquire” skill. Similar with cooking your own food, it doesn’t cost you much time or money to “skill-up”. Indeed, over the past two years my hair cutting skills have improved. Not only did I get faster but also better at it. This will make you increasingly competitive vs. outsourcing.

Opportunity costs represent the benefits you miss out on when choosing one alternative over another. Because – by definition – they are unseen, opportunity costs can be easily overlooked if one is not careful. Understanding the potential missed opportunities foregone by choosing one way to spend your money or time over another allows for better decision-making.

Sometimes I trim my hair more often than one per month – because I can…

To sum it up: Yes, I prefer cutting my own hair multifold over going to any hair salon. Opportunity cost-wise it’s not an either or, it actually does save me both: Money AND time!

Bonus

If you invest the little money (for a trimmer) and time required to learn the skill, cutting your own hair is as awesome as can be. It’s a creative new skill that adds freedom and independence to your life. No more scheduling, no more waiting at hair salons, no commute, no hassle, you can cut your hair whenever and wherever needed. You may even experiment with new hair styles – up to going bold to cover up mistakes!

You will usually be done within 5-10 minutes (yes!) and most importantly you do not have to pay someone else and can save the proceeds!

That’s how your own haircut is a “Million Dollar Haircut”!

Happiness is: A fresh new “Million Dollar Haircut”

Extra Bonus

If one million is not sufficient: Your ROI can be multiplied if you – like me – start cutting your kids hair! During Corona lock-down some friends where asking me questions about my hair as it was usually finely trimmed while some others let it “grow wild”. That’s where I figured this skill might potentially even be marketable. However, cutting other people’s hair – outside of my family – is surely not my goal.

Let your haircut do the talking!

Happy cutting, Matt

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