How to handle cashback bonuses?

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wbadbada
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Joined: Sat Dec 09, 2017 12:49 am

How to handle cashback bonuses?

Post by wbadbada » Mon Feb 19, 2018 2:26 pm

I'm a CC churner and want to apply for a CC to get a $400 cashback bonus. I'm having a dilemma on how to treat this $400.

I'm planning to make a large purchase for a hobby of mine: crash pads for bouldering. At the same time, I want to maximize my Roth IRA or reduce my debt. Thus, I'm conflicted on the different options on how I could use this money:
  • 2 pads for $310 (superior quality, long life). Invest leftover $90 into Roth.
  • 1 $150 pad (average quality, short-medium life). Invest leftover $250 into Roth.
  • Invest entire $400 into Roth. Buy either pad option with take-home pay.
If I didn't have the $400 bonus, I would feel bad about buying the $310 pads and may opt for the $150 pad instead (or 1 superior quality pad rather than 2). Thus, having the $400 bonus makes me feel less guilty to splurge.

My finances: Have a 6 mo EF. I maximize my 401(k), HSA and working on my Roth. I'm confident I'd be able to maximize my Roth without any cashback bonus. I have a student loan of $16k @ 3.4-3.8% and a auto loan $12k @ 2.2%.

How should I handle this?

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tfb
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Re: How to handle cashback bonuses?

Post by tfb » Mon Feb 19, 2018 2:29 pm

wbadbada wrote:
Mon Feb 19, 2018 2:26 pm
If I didn't have the $400 bonus, I would feel bad about buying the $310 pads and may opt for the $150 pad instead (or 1 superior quality pad rather than 2). Thus, having the $400 bonus makes me feel less guilty to splurge.
That's just mental accounting. The $400 bonus is yours regardless which pad you buy. Treat it as any other income.
Harry Sit, taking a break from the forums.

jjface
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Re: How to handle cashback bonuses?

Post by jjface » Mon Feb 19, 2018 2:30 pm

No one here is going to be better at that decision than you. Treat yourself or not up to you.

Either way you are spending money whether from income or the bonus so doesn't matter where it comes from.

Khanmots
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Re: How to handle cashback bonuses?

Post by Khanmots » Mon Feb 19, 2018 2:46 pm

A surprisingly hard lesson to learn is that money is fungible.

In other words, the dollar in your pocket doesn't care where it came from, it spends the same as any other dollar. Trying to spend differently based on the source is purely an exercise in mental gymnastics. Sometimes that's good, sometimes that's bad.

Personally I'm frugal to a fault (putting away something like 40% of my gross) and knowingly delude myself with windfalls that they're somehow different and I can spend them on myself without (or with less) guilt. :beer

chemocean
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Re: How to handle cashback bonuses?

Post by chemocean » Mon Feb 19, 2018 8:41 pm

I dealt with the same issue. From an accounting standpoint in Quicken, either the rebate is non-taxable income and what you purchase with the rebate is spending, OR all transactions concerning the rebate are 'Off the books". After trying both approaches in different years, I have decided to go with the rebate as non-taxable income.
In contrast, when someone gives me a personal gift of cash or cash card in lieu of a physical gift, I rationalize that they would have gotten me the physical gift that I eventually purchased if they know that was what I wanted.

Jack FFR1846
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Re: How to handle cashback bonuses?

Post by Jack FFR1846 » Mon Feb 19, 2018 9:25 pm

Churn more

No, really, that's the answer. Churn more and you won't have to decide.
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mxs
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Re: How to handle cashback bonuses?

Post by mxs » Mon Feb 19, 2018 9:34 pm

The money is tomato tomahto, so it doesn't matter. Bouldering looks fun. When you said crash pad I was picturing the padded pants I used to wear for hockey and skating, not a fall pad. You are the expert on the equipment, so get what you will use and want.

ImUrHuckleberry
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Joined: Sat Apr 15, 2017 7:44 am

Re: How to handle cashback bonuses?

Post by ImUrHuckleberry » Mon Feb 19, 2018 10:11 pm

Whatever you do, don't get the 1 medium quality pad for $150 when you can get 1 high quality long life pad for $155.

veindoc
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Re: How to handle cashback bonuses?

Post by veindoc » Mon Feb 19, 2018 10:31 pm

Jack FFR1846 wrote:
Mon Feb 19, 2018 9:25 pm
Churn more

No, really, that's the answer. Churn more and you won't have to decide.
That’s what I would do. Not sure how many cards you have but chase freedom has a $150 bonus right now after $500 spend for example. Use the windfall for the Roth and the pads- the good ones.

Money is fungible but for so called splurges I feel a bit guilty about I try to offset with windfalls or short term reduction in spending. Skip house cleaner for two months, don’t pay for parking at work during the summer, cut off some membership for 2 months, walk more and limit car usage, eat from pantry for a month, etc.

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