How do you react to a shock to your travel budget? How should you?

Yesterday my scheduled flight out from my ancestral homeland was overbooked — very overbooked. They asked for 6 volunteers, and ended up taking 5 of them, each of whom received $1,300 in Delta voluntary denied boarding compensation. I was one of the lucky inconvenienced (my partner was volunteer #6, and had to actually fly home, the poor thing), and the proud owner of $1,300 in Delta travel.

Then I realized that I had a problem. I already manufacture enough miles and points to pay for my planned hotels and air travel. In fact, once my next statement closes and my HHonors points post, I'll have all 5 of my remaining planned vacations this calendar year fully booked.

Moreover, Delta transportation vouchers are non-transferrable: the recipient has to be one of the passengers on the reservation — although excess funds can be used to pay for additional passengers on the same reservation.

Air transportation vouchers are worth (much) less than cash

This is a corollary of my argument that statement credits are worth (much) less than cash: for me, $1,300 in airfare is worth a maximum of $700, since that's the cash value of the 70,000 US Bank Flexpoints I would otherwise redeem for a reservation costing between $1,200 and $1,400, and as little as $350 or so, which is roughly what I paid out of pocket for those Flexpoints.

But does that mean I should take my $1,300 in bump compensation by redeeming 70,000 Flexpoints for $700 in cash?

Thinking about travel budget shocks

With a nod to economics, we can describe what happened yesterday as a positive "shock" to my travel budget. If my miles and points balances, travel needs, and manufactured spend strategy were previously in equilibrium, they are now by definition out of equilibrium: I've now accidentally purchased more (deeply-discounted) travel than I have a current plan for using. Since I try to never earn miles and points speculatively, this disequilibrium requires action.

But what action? Here are four ways I could respond to this travel budget shock.

Monetization

No, I don't mean selling the transportation voucher — it can only be used for reservations where I'm one of the passengers. I have in mind the following logic:

• I just received $1,300 in airfare.
• I planned to redeem 70,000 Flexpoints for my next $1,300 in airfare.
• Instead I'll use the transportation voucher and redeem my Flexpoints for $700 in cash.

It's true that my Flexpoints are worth more than $700 when redeemed for airfare, but that's begging the question: the whole point is that $1,300 in airfare is worth less than $1,300.

Why do you think the airlines are so eager to give it away?

Travel more

I have a strategy for earning all the miles and points I need for the travel I already have planned, but now that I have $1,300 in Delta funny money, I can travel more than I expected. There's always somewhere to go, after all!

The simplest way to do this is to not alter my planned earning and redemption at all: if all my trips are already optimized between revenue fares (paid for with cheap Ultimate Rewards points and Flexpoints) and award trips, then I can convert my Delta transportation voucher directly into airfare for new trips.

A more nuanced (read: time-consuming) approach would be to re-optimize all my refundable and not-yet-booked air reservations. For example, a $450 ticket that I might have planned to reluctantly redeem 30,000 Flexpoints against can now be paid for with my transportation voucher, while I can redeem those Flexpoints for a new trip costing up to $600.

Likewise, a $250 flight against which I might have redeemed 20,000 Ultimate Rewards points can now be paid for with Delta funny money, and I can start looking around for a high-value Hyatt redemption where I can stretch those same Ultimate Rewards points.

Convert to leisure

My current manufactured spend strategy met my current needs before the travel budget shock, but now it exceeds those needs by $1,300. Sounds like it's time for a vacation! For the next 70,000 Flexpoints I had planned to earn, now I get to hit the alarm clock and go back to sleep.

Just kidding. I don't have an alarm clock.

But for those of you who do, if your goal is to earn the miles and points you need to meet your travel needs, a large positive travel budget shock like this is a godsend. Spend the time you would have spent at the grocery store, gas station, or hunting down promising Kiva loans with your kids. They probably won't appreciate it, but you will.

Switch to cash

Everyone has their "best" cash back option. Maybe it's 5% cash back with a US Bank Cash+ Visa card or a "new" "old" Blue Cash card. Maybe it's 2.625% cash back with a Bank of America Travel Rewards card. Maybe it's 2.105% cash back with a Barclaycard Arrival+ MasterCard. Maybe it's 2%+ with a Fidelity Investment Rewards American Express (or Visa, or MasterCard). Maybe it's a Citi Double Cash (although that's a stretch).

If you don't want to slow down your manufactured spend, and you don't want to monetize the points you've already earned, this is your hybrid option: start earning the most cash back possible with the cards you already have, instead of earning the points you had intended to redeem for your travel.

After all, everyone wants money. That's why they call it money.

What about negative travel budget shocks?

The impetus for this post was a huge positive travel budget shock. But there are other kinds of shocks: you could lose access to a merchant that previously allowed you to manufacture spend; you could suddenly learn of an unanticipated trip you have to take; Delta could stop publishing award charts and your miles could suddenly be worthless for the trips you planned to take.

You don't need to plan for every eventuality, but you should plan for some eventualities.

Conclusion

Don't for a second think that this post is meant to say that you need to treat every "win" as an excuse to lose sleep worrying over how to deal with it. The first thing you need to do is celebrate (I know I did).

But when you're done celebrating, you may want to spend a minute or two figuring out how you're going to work your win, big or small, into your overall miles and points strategy.