Blog

Short blog posts, journal entries, and random thoughts. Topics include a mix of personal and the world at large.

Subsidized lifestyle

Word on the street is the Chase Sapphire Reserve card - the preeminent travel rewards credit card - is increasing its annual fee. What started at an already hefty $450 per year is now a whopping $795 per annum. COVID-era inflation comes for everything eventually.

Of course, Chase has all sorts of new card benefits to potentially offset the price jump. But it’s all predicated on one thing: cardholder spending. This is a classic case of spending money to save money, which only works if that money is what you would have spent regardless. If you wouldn’t have in the first place, then you really shouldn’t have.

I did sign up for the Sapphire Reserve when it was first introduced many moons ago. The signup bonus was super generous: 100,000 points on a $4,000 initial spend (worth a thousand dollars in cash value.) Coupled with the $300 travel credit per year, the true annual fee was only $150 at the time. As an annually traveler, it was not difficult to for me to “break even”, so to speak.

That 100,000 bonus point allowed me to fly first class to Korea in 2017. Truly living the champagne life on a beer budget. But that was during a time when lots of capital was going toward subsidizing a rich person’s lifestyle for the mundane middle class earner. Surely you remember: UBER rides used to be cheap, thanks to the company continuously burning through VC cash to hide the real cost.

Did we honestly think we can afford to have our burritos hand delivered from the taqueria for only a few bucks? DoorDash fees used to be not so exorbitant, too.

Well, those sweet subsidized days are over. The premium travel reward credit cards are now only for those who can comfortably spend the high amount necessary to reap the rewards. Good news for me, I cancelled my Sapphire Reserve soon as COVID prevented any sorts of traveling.

I am priced out

I was walking through my local Target store when I noticed a 20 ounce bottle of Coke now costs $3.19? And that is before tax! I am old enough to remember when 20 ounce bottles were 99 cent. A dollar bill at the vending machine was enough to obey your thirst.

Talk about things I am priced out of. Buying soda drinks at a store is one of them. Filtered water is just fine, thank you very much.

But then people would argue that saving that three dollar on a daily soda (or four dollars on a daily coffee) is not going to get me to buying a house. The math on that in the San Francisco Bay Area is indeed tragic. Those people are right: keeping that $3 in my pocket is merely pissing in the wind of houses that start at a million dollars.

A better use for that $3 is to buy the lottery. At least there’s a infinitesimal chance!

In the grand scheme of things, buying a soda bottle here and there is not going to monetarily affect me one bit. But it’s the mindset that counts here. We can all agree that spending money is easy. The American credit system is fantastic in that regard. Therefore I think we have to train our resistance muscles (not to be confused with resisting a certain presidency). The calculus has to be more than: can I afford it, if yes, then buy!

Saying no to the $4 coffee helps me say no to a new iPad Air I’ve been eyeing, or a newer laptop to replace this “aging” M1 MacBook Pro. Those are the money decisions that really slice chunks: the hundreds and thousands of dollars at a time. Money that can otherwise grow significantly if put to proper investing.

If I really want to drink soda, I’d go buy in bulk from Costco.

No magic pill

Personal finance is easy. Spend less than you make. Put that extra money into the market in a low-cost index fund. Rinse and repeat every single month for decades, until you are ready to retire. You can say it all fits on an index card.

But like losing weight - eat less than you expend in energy, what’s easy on paper is difficult for people to execute. That’s why American obesity rate is top 10 in the world. (GLP1 agonists to the rescue!) And consumer credit card debt is at an all time high.

From watching personal finance shows like Caleb Hammer, what I am seeing is that people do understand what needs to be done, but the salience of that action is buried under a pile of emotions hijacking the brain. That forthcoming vacation is way more exciting to think about. The DoorDash delivery person is coming soon with that burrito you deserve after a long day at work. Why yes you absolutely should spend a year’s salary on a brand new car.

The boring and unexciting slog of wealth accumulation never stood a chance against those positive emotions. Just like the cozy and comfortable couch beckons you to abandon your difficult and tiresome workout plans for the day.

It can’t be all down to willpower, right? To mentally fight against the easy and pick the hard. Because we all know that willpower is fleeting. Our marvelous minds can convince and rationalize us of (and out of) anything. Spend six-figures on a car? Of course! I am a card-carrying car enthusiast. Hashtag man maths.

Unfortunately, unlike weight loss, there’s no magic pill for debt.

Sitting pretty

With the (supposedly) looming 25% tariffs on all automobiles assembled outside of the United States, the people in the best position is drivers like me: owning a fully paid off car that’s made in this decade. So long as my BMW M2 doesn’t get totaled in an accident (knocks on wood), I don’t have to worry about the price increases that are sure to come. That is, if President Trump actually goes through with the threat.

With so much economic uncertainty in the near horizon, a debt-free position, with multiple months of cash in reserves, is more crucial than ever. The only reason a recent auto insurance premium increase did not cripple me is because my car is paid off. Funds that would otherwise have gone to service a loan (the average new car payment currently is a whopping $742 a month) now acts as a buffer.

And it’s having a money buffer that keeps the stresses at bay. Friends have checked in on me recently, because my place of employment is facing a budget deficit. Layoffs are definitely on the table. Am I worried about my job? Not as much as I should be, as perceived from the outside. A emergency fund runway for many months of spending allows me to not stress about any job loss. The world is not going to end. I’ve got the time and resources to reset at my own pace.

Even outside of losing a job, life will keep throwing financial curveballs at you. That’s just part of the game. Unexpected expenses are unexpected. Living on thin margins month-to-month leaves you vulnerable. Having a buffer is just good preparation.

I know, I know: sob story about how everything is more expensive, and people aren’t as privilege as me. Okay, someone please square this hole: if many folks are so struggling, then explain the record-breaking 2024 holiday shopping season?

Price sensitivity

The goal of President Trump’s tariffs threat is to bring manufacturing back to America, right? The downside of course is that things will become more expensive. Manufacturing didn’t leave America because of some evil corporate plan. The simple reality is that labor is cheaper elsewhere. Lowering cost of goods sold is a big lever to increase profits. Or have profits in the first place.

Tariffs are merely tacking those labor savings back onto the purchase price. There’s one for sure loser, and it’s the consumer.

For sure there are plenty of cheap crap coming out of China. But in the year 2025 it’s beyond pass time to acknowledge that China can also produce things of the highest quality. Did we forget the iPhone has been made in China since inception? The Apple smartphone is as precise a device as it gets.

“Made in the U.S.A.” still denotes a higher quality in people’s minds. Whether or not it’s actually true is up for debate. What is definitely true is that it’ll cost more compared to foreign-sourced manufacturers. I recently bought a barbell, and the unit made with American steel is $85 dearer than the Chinese-made equivalent from another company. The decision was easy.

Coming out of the high inflationary period of the pandemic, I am always looking for the best deals on anything. And doesn’t everybody? Who has the money to boycott Amazon (because big bad Bezos)? If a particular item is the cheapest on Amazon, I am buying it there. I do not have the income to support an artisan soap business at a farmer’s market. If you do, please go ahead.

I will live life as cheaply as possible, because everything else has gone up in price. Tariffs - if they come to full fruition - is only going to make it worse.

Splitting it four ways

Word on the street is DoorDash is partnering with Klarna to offer split payments. So now you can pay for that $30 (in total) delivery burrito in four easy monthly payments. Wonderful. I can finally afford to use DoorDash! Peasants who actually drive to the restaurants to pickup their own food: I cannot be you.

It’s hilarious to me that in response to high inflation, instead of abstaining from things that’s gotten too expensive, people are seeking methods to lower the initial cost! Can you really afford that couch if you have to split it over four months? I would argue no, though I understand the pressure. Even couches from famously inexpensive retailer IKEA are getting up there in price.

A used couch with curious provenance on Facebook marketplace it is.

Maybe our university can attract more students if it also partners with Klarna: tuition payments over many months. Oh wait, those already exists. it’s called student loans.

How another person spends their money (or borrows money to spend) is their business. These are consenting adults consenting to a purchase agreement. You cannot be victim of capitalism if you choose to participate. Of course we can’t not participate, but the bare minimum to subsist is not overwhelming. I get it, though: eating rice, beans, and chicken breast for every single meal is torturous.

So get that sushi takeout delivered via DoorDash! You deserve it. And by splitting it four ways using Klarna, you can afford it, too.

True cost of buying

If the economy is in the dumps, you know how they can spur spending? Give a tax holiday. Perhaps I’m the only one who thinks about this component? The sales tax is highly salient for me when it comes to big ticket purchases.

Remember in the early days of Amazon they did not charge sales tax? Those were the lucrative times. You can buy a television by the thousands of dollars and save hundreds on tax. Now I think we’re suppose to report that come tax time, but honestly, who the heck did that? Besides, doesn’t sales tax go to the state and city?

Never mind! As an employee of a state (at least until Elon Musk’s DOGE gets around to state public workers), I’m a big fan of the sales tax.

Look at buying a new car. The (let’s just say) $30,000 sticker price is not inclusive of the addition thousands in taxes the buyer must pay. Obviously it’s obscured by the mechanism of spreading it over multiple years in payments. (That’s how they get you!) I tend to look at it holistically: do I want to pay additional thousands to not even for the car itself?

What scares me from a mortgage (not that I can afford a house around here) is the amortization table. The amount of interests alone over a 30 year term is freaking outrageous. It seems more prudent to me to keep renting until I am able to pay a majority portion of a house in cash. Keep that money in investments in the meantime and let those interests come to me, instead of the bank.

The true cost of buying something significant is super important to consider.