That second point is still the big hang-up for me with the Traditional IRA. One of the reasons I switched was because of the Mad Fientist’s Roth IRA ladder conversion strategy, but I’m worried about how side-hustle income is going to affect that.
Ideally, my side hustle income would grow every year to the point where at some point side hustle income + 4% withdrawals = living expenses so that I don’t have to wait until I hit the usual 25x living expenses before leaving the rat race. The obvious issue is that if I have side hustle income, I have less room to do the Roth Conversion ladder when it comes to taxes. I could still avoid the 10% penalty, but I could see taxes being a problem.
I do like the fact that the Traditional will reduce my taxable income this year so that I can invest more. It’s tricky to get a high savings rate when you’re a modest income earner with a wife and two kids to support. I’ve gotten as far as I have mostly by being rock-solid in the frugality department.
So right now, I think I’ll stick with the traditional. It will keep me from paying taxes on my side hustle income and plus I already have some money in a Roth (both a Roth IRA and I was contributing to a Roth 401k at work for a while).
In terms of travel hacking, I have done it, but not to the optimal extent that it could be done. I mostly use the sign up bonuses for cash back, which isn’t nearly as lucrative as using them for travel.
In 2015 (the only year that I closely tracked results since it was my first year doing it) I made almost $2k ($1,959) in cash back. Most of that was from the sign up bonuses on the cards and a small amount was regular cash back from our spending.
Right now I have a nice stable of everyday use cards built up for different purposes. I have the Chase Freedom and Discover It card which give 5% on categories that rotate quarterly. Discover is basically straight up cash back, Chase can be cash back at a rate of one cent per point, or you can use it to book travel on the Chase website at a rate of 1.25 cents per point, OR you can transfer the points to one of the many partners that Chase has (this is what the pros do and they can get insane deals. I once heard of a guy essentially getting 20 cents per Chase point).
I also have the Amex Blue Cash Everyday Card, which is 3% on Groceries and the Chase AARP card (isn’t AARP for old people? anyway they gave it to me) which is 3% on gas. Finally I have the Chase Freedom Unlimited, which is 1.5% on every purchase (with the super-valuable Chase Ultimate Rewards points).
So basically the way it goes is that when I sign up for a card to get the spending bonus, I do all my spending on that card until I spend enough to get the bonus. Then I use whichever of my everyday cards gives me the best cashback rate. Right now I’m redeeming all of them as often as I can, except the Chase Ultimate Rewards points which I’m going to save for future travel. Once I redeem the sign up bonus of a new card, I’ll cancel the card to avoid paying the annual fee (which is usually waived in the first year)
Anyway, It’s been pretty good for me, but I am by no means even close to doing what lots of other people do. There are plenty of people out there who are getting $3k-$5k (or more) of free travel every year, just by getting the right cards in the right order and redeeming the points in the right way.
My big suggestion is to create a spreadsheet to keep track of things. I don’t keep a super close eye on my results anymore, but I do have a sheet that lists the last four digits of the card, when the annual fee is due (if applicable. I always cancel cards with an annual fee before I ever pay the fee), whether or not I have auto-pay set up (always have autopay set up) and I also make a note of whether a card is in my wallet or not so if I lose my wallet I know which ones I need to cancel.
Anyway, here’s to hoping I can one day roll with the ranks of both the financially independent and the superstar travel hackers.
