How I use mental accounting for world travel

Ramit Sethi

Have you ever been out with a group on a Friday night, gotten to the front of the line at a club, and found out there’s a cover charge?

You know what happens, right?

The guys go, “Ugh…how much?” and start fishing out their wallets.

And the women roll their eyes, and say, “We are NOT paying a cover!” and start checking their phones for the next spot.

And the night is ruined.

There is a reason women hate paying cover charges at clubs — and it’s called “mental accounting.”

Today, I want to share a few interesting examples of how you can use this principle. Best of all, since it’s a psychological technique, 99% of financial “experts” miss it…yet you will master it.

Using Mental Accounting For World Travel

I have a lot of frequent-flier miles and, as you know, I’m fanatical about using the right accounts (like my favorite credit card) to earn significant amounts of points.

Interestingly, some people ask me this question: “How much are points worth?”

What they’re really asking for is a point value, something like “Each Starwood point is worth 2 cents.”

That is the mathematically correct answer. But it’s actually more nuanced than that.

Now that I have a sizeable amount of frequent-flier points, I’ve noticed that I’m traveling more than ever before. It’s like these points are burning a hole in my pocket — which is EXACTLY what I want.

In fact, I knew that cash is worth more than Starwood points…but I intentionally chose to earn more points. Why? Because I want to travel more, and I knew that due to mental accounting, having a large number of points would force me to travel more.

This is a subtle psychological technique missed by many.

Using psychology against yourself can be one of the most powerful methods of behavioral change.

In fact, here’s an email I got from a friend last week showing you just how I’m putting this into play:


I really do want to come to Asia in September. I’m thinking of flying in and out of Hong Kong on 8/31 and 9/17. I’d like to spend a few days in Hong Kong and visit Shanghai, Beijing, etc.

Lisa — Are those dates okay with you? Could I crash with you while in Hong Kong? Are you interested in doing weekend trips to other places in China?


Ramit — Do you want to meet me for any part of this trip?



“i am potentially in — let me know your dates. let the drinking begin”

The beauty is once you have a sub-account for special items — like travel — you will use it. This is psychology at work.

This is why I set up sub-savings account for myself, forcing myself to clarify the largest purchases I’ll make in the next few years….and automatically save for them.

This is also why I set up a “Spend to Save” account, where I force myself to spend money on things that will eventually save/earn me more.

The point? You can use psychology to shape, harness, and funnel your spending into ways you want to spend. Travel? Taking people out to coffee? Going out on dates?

All possible, using intentional mental accounting.

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  1. Rob

    I get what you’re going for here, but it also sounds dangerously close to the idea of “aspirational purchases” – it’s not too far from “I rack up travel rewards so I feel obligated to travel” to “I’m going to buy fancy running shoes so I feel obligated to run” or “I need to spend tons of money on the best pots and pans so I’ll cook more”. There are people with the mindset to make that work, but for a lot of people what starts out with good intentions will end up being wasted money (or reward points) and the same old habits unless it’s part of a more comprehensive plan to change.

  2. BIGSeth

    Maybe the worst post in a while. Concept is sound but examples (club and email) do not clarify or support thesis.

  3. ab

    Yeah I don’t how the “women don’t want to pay cover charges” point fits in. Cover charges blow.

  4. Dab

    I’ve read this three times and still don’t get the answer to the title question; are you implying most men have already budgeted for this put most women need to wake up and stop being so stuck up?

  5. Karen

    I get that you delight in gross generalizations, especially in your line of work, but it just tells me that you haven’t figured out the true common denominator. When you default to sex or race to explain something, it’s alienating . . . and you’re wrong.

  6. Chris

    Don’t get this point of this post.

  7. sunny

    I swear you’ve posted this exact content before, and it was as useless then as it is now.

    • Luke G.

      I thought I had deja vu…glad I’m not the only one that noticed this repost. Slow week? Are you testing us to see if we’re paying attention? 😉

  8. Jason

    Ramit is again pointing to behavioral change techniques you can use to accomplish goes that go beyond “trying harder.” He wants to travel, so he set up a China Trip fund and purposefully uses his miles credit cards instead of a cash back card. He’s reinforcing his goals with actions that get him closer to achieving them.

  9. uma

    Ramit, seriously! Edit this post and explain why women hate paying cover charges.

    This post explains very nicely how you use airline points to force yourself to travel, but doesn’t deliver on what you promised in your tweet!

  10. Chris

    I’m a typical Ramit-hater, but this one totally resonated with me. Ramit, I set up my sub-ING accounts after learning about them here a year or two ago. I used to LOATHE getting my car fixed, even though I knew I’d have to pay for it eventually. I have a 14-year-old car that still runs strong, and I’m too cheap to buy another. Last week, it broke down. Two years ago, I would have gotten physically ill when getting a call from my mechanic saying I needed an $800 repair. This time, I looked at my “car repairs and maintenance” sub-account, saw I had the cash set aside, and told him to go ahead with only mild indigestion. Without the sub-account, the money would have been in my main savings account anyway, so either way I have the money. However, having the account there reminds me “Look, you planned for this. You knew it would happen. This is just the law of averages catching up with you. Smart planning!”

  11. Chris L

    women hate paying cover charges because most are smart enough to know that THEY are what the club is offering to its male clientele – a dance floor filled with women.

    • Olivia

      I agree with Chris’s answer to “why women hate paying cover charges”. Also agree that this post was poorly done. Not like you.

    • unami

      How did you get that from what he wrote?

      Also – you are correct, that’s what clubs offer to men, but what do they offer to women? Men who are willing to pay for their drinks. It’s not like the women are there to work.

  12. E&B

    I don’t understand why if you want to travel, you need to force yourself to travel.

  13. Nick

    Ramit, this isn’t like you. It hurts my brain to read this.

    Are you getting at the idea that not all money is equal in our minds?

    That is, if I get a wind-fall of a $1000 that I wasn’t expecting, my brain will start rationalising purchases that I wouldn’t otherwise make because I now have “free” money with which to buy the stuff. Rather than adding the $1000 to my bank account and using it to bring me closer to my financial goals.

    Is that sort of it?

  14. JMW

    Sorry Ramit, I like you usually but this seems like a lazy post to me. As BIGSeth says “Concept is sound but examples (club and email) do not clarify or support thesis.”

  15. rosa

    Ramit, are you having a stroke? You’re not making any sense here. I hope you’re just having an off post.

    Agreed that women don’t pay cover charges b/c they are what the men are paying to see.

  16. Stephen

    Not your best, Ramit. Didn’t fully explain the concept or how it applies to the introduction.

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  19. migratetouk

    LOL at women who say “We are NOT paying a cover!” Women… clever species indeed.