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Saturday, May 26, 2007

Using frequent flyer miles to go to Hawaii

We're about to go to Hawaii, and my wife carefully researched our tickets so we could use our frequent flyer miles to get there. She found that we couldn't get flights to Honolulu, but Kona and Maui had lots of choices. We decided to fly out of Kona since we are going to the Big Island and Maui this time (we went to Oahu last time). Also, she was able to use a promotion, so we got the tickets for SF to Kona for 35K miles versus the typical 70K. This saved us a cool two grand for the two round-trip tickets, and we also have nearly enough miles for another trip! Since we're going on our in-law trip to China next Spring, we'll run up some more miles and we'll have enough for another Hawaii trip if they run this promotion again...

Tuesday, May 01, 2007

On emergency funds, and our allocations

Several personal finance bloggers, such as Lazy Man and Sun, have been blogging about emergency funds lately. Lazy Man basically runs without an emergency fund, preferring to use a HELOC; his argument for this unconventional strategy is that he doesn't want to hurt his returns by having a largish pool of cash earning lowish interest.

I'm a bit older than many PF bloggers, and have come to realize that the desired size of one's emergency fund can actually change over time. I ran with a small fund when I was young (obviously, I didn't have much savings yet, and could live very cheaply). Later, after more responsibilities, I increased the fund to its present - rather large - level of 1 year of living expenses assuming zero income. I'm now considering reducing it since our investments now generate nearly enough income by themselves to cover our living expenses, so our e-fund would actually cover several years of expenses. We'll still keep a larger e-fund than some, since we carry maximum deductibles on insurance and use insurance purely for wealth preservation as opposed to cash-flow preservation, but it probably _is_ too big at the moment.

Our e-fund is in two parking places. The short-term piece in a credit union savings account that pays as much interest as the internet banks and has a nearby branch. The bulk of it is in I-bonds, which are nearly mature and which pay 4.22% at the moment, but have paid up to 6.5% at various times, and aren't subject to state tax.

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