A cup of coffee for a few cents is always better than one for a few dollars. With coffee, you know how to recognize a decent value because you frequent different shops and when you find exceptional value, you buy it. Using points and miles for award tickets is not all tricks, magic and abstract thought. You can calculate the value you are getting for your miles every time you use them in the form of "cents per mile". Knowing just how great (or poor) of a value you received for your hard work is half the battle...
You should always strive for better than the one cent per mile when redeeming miles, which is what even your airline, hotel, credit card company believes your miles are worth. You will notice the practice of being offered one cent per mile in just about everything you do, with the exception of award tickets. Your airline will offer you $300 off a ticket for 30,000 miles, your credit card will offer you $100 statement credit for 10,000 points, you get the gist. If you are using miles at all correctly, you are getting a bad value if you take any of these propositions. Strive for better.
To calculate cents per mile for award tickets, I take the price of my ticket in miles divided by the price in actual money (what it would have cost), minus any costs associated with booking using miles. If I book a ticket for 100,000 miles, which would have cost $10,000 dollars purchased outright, with taxes and fees of $250, I am getting just short of ten cents per mile (100,000/$10,000-$250 (taxes and fees), an extraordinary value. If I had redeemed those miles for money off of a ticket or a statement credit, they would have only been worth $1000. Yet in this example, I stretched them to cover a $10,000 ticket. Miles needed are not fixed on actual cost of a ticket, don't forget that. In general, the more taxes and fees you pay on a ticket, the less cents per mile you are getting. When you cannot avoid high taxes or fees on awards, like that of British Airways, Virgin Atlantic and others, booking in a premium cabin is often the only way to unlock exceptional value. If you booked an economy ticket for 40,000 miles and $450 in taxes and fees round trip, which would have cost $800 out of pocket, you are getting less than one cent per mile, less than the airline would even offer, which I never recommend. Save your miles until you can unlock a higher cents per mile. If you managed to go from 40,000 to 60,000 and could snag a business class ticket, which would cost $2,500, even with the same taxes and fees of $450, you are still getting over three cents per mile. In this example, I would say $2,500 minus $450 (taxes and fees), which means the 60,000 miles I am using are covering $2,050 worth of travel. At that point it's the simple equation of 60,000/$2,050. Much more than one cent per mile. Same page?
For paid tickets you can always calculate how much you are paying per mile by taking the actual mileage earned from the price of the ticket. Rather than going through another long winded example (which hopefully you get the gist of by now) you can use THIS tool to plug in your flights, their cost and see your cents per mile. The lower the better. It's always nice to know just how good of a deal or how badly you've been ripped off!
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