What if you could get what you wanted or needed without paying money? Sounds wonderful, right?
Long before the introduction of currency, people relied on bartering to get what they needed. Bartering is trading goods or services without exchanging money and it can be great for your budget.
Learn from the pros
Kids are great at bartering. Not having as much experience with money as grown-ups, bartering comes naturally for kids.
What happens after an evening of trick-or-treating? All the kids dump out their loot, start organizing it, and then start trading for what they want. No money is exchanged, but somehow the kids work things out, each one personally deciding the value of each different candy.
(Personally, I like to keep Smarties and Dum-dums on hand because my kids easily trade their chocolate for those. A true win-win situation!)
Barter to stretch your budget
Bartering is a really great way to be able to do more with the money you have. It might take some creativity to figure out exactly what you can barter with and for. They sky’s the limit! When done well, everyone comes out of a barter deal better off. It’s a win-win situation.
But what can I barter with?
I bet some of you are thinking, “This all sounds fine and dandy, but I don’t have anything to offer. I don’t have anything to barter with.”
If you start thinking creatively, you might surprise yourself.
Here are some ideas to get the juices flowing:
- Help at home
- child care
- yard work
- lawn mowing
- Special skills and trades
- music lessons
- art lessons
- automotive work
- legal work
- computer work
- Physical items
- baked goods
- custom sewing
- garden produce
- items you sell through direct marketing
Some real-life examples
My mom has been a piano teacher as long as I can remember. She has taught hundreds of students over the past three or four decades. She is passionate about teaching children and wants all children with the desire to learn piano to have the opportunity. She has done many barters over the years so that parents, who otherwise would not be able to afford piano lessons, can have lessons for their children.
My mom had a lady who would bring dinner to my parents twice a week in exchange for piano lessons for her children. Another lady would clean house for my mom as a trade for her daughter’s piano lessons.
* * *
While my husband was in law school, a couple of friends convinced me to teach them guitar lessons. It was a fun excuse to get out my guitar and play more often. It was also fun to get together with friends and it was a nice way to make some extra money.
One of my guitar students had a hairdressing studio conveniently located in her basement. I didn’t get my hair cut very often, but when I did, I bartered guitar lessons for a haircut.
* * *
In his private law practice, my husband does legal work for small businesses. Some of these businesses provide services that we use. You’ve may have noticed on our income reports that we aren’t currently paying a monthly internet bill. Instead of paying cash for the legal work my husband did for our internet service provider, they are paying him in internet service.
My husband has also done legal work for our mechanic. When it is convenient (we both have bills due to one another), we trade services of equal value.
What about taxes?
You might be thinking, “Sweet! If my clients “pay” me with products or services, then I won’t have to pay taxes on that income!”
The products or services you receive in a barter are considered income and should be reported on your income taxes each year using the fair market value of the product or service.
Now I’m not a tax advisor, so you’ll want to want to check with one to get all the details for your own situation, but I’m happy to share my understanding and what we do.
With our internet service from above, we report on our taxes the extra “income” from the service that was provided in the barter. Normally our internet costs $70 per month. On our taxes we report $840 of income to account for receiving our internet as a barter trade.
While barter income is weighted equally with other income, don’t let that discourage you from bartering. That’s like being upset that you got a raise because you’ll have to pay more taxes. Even if you’re at a higher tax bracket, you always keep much more than you give away. Don’t be afraid of earning extra income or having barter income to report.
So how would bartering benefit me?
So if I can’t get out of taxes by bartering, why would I do it? Wouldn’t it be just the same as paying cash?
Well, yes, but….
If you are trading $20 of piano lessons for $20 of house cleaning, it would be the same as cash. But the key is the transaction requires no cash. It may be the same value as cash, but you don’t have to pull $20 out of your pocket to pay for your daughter’s piano lesson. That is $20 that you didn’t have before paying for $20 of music lessons that you otherwise couldn’t afford.
By offering a barter, you are creating “money” that you didn’t have before. It’s like you just got a side job cleaning that pays you $20 per hour.
How do I initiate a barter?
First, think about what it is that you want but don’t have money for. Maybe you want piano lessons for your kids or you want to make some improvements on your house. Maybe someone needs braces, but the cost is keeping you from making an orthodontia appointment.
Then, think of what you can offer that could appeal to the person offering that service. You might have to first seek out a piano teacher or contractor or orthodontist if you don’t already have one in mind. Is there something in particular that he or she could use? What could you do that would help them out?
Now, approach the person and just ask!
“I’m really interested in signing my daughter up for piano lessons, but it’s not really in our budget right now. Would you consider a barter? I could ______ or _______.”
The worst thing the could happen is that the person says no. You’ve got nothing to lose.
My husband worked with another attorney who had clients pay him in lots of creative ways. One client built raised garden beds at the attorney’s home. Another had a pool cleaning service and cleaned his pool for two years. A third provided dental work for his children rather than cash for his fees.
In many cases, these situations became barters after the fact. When the client received the attorney bill and couldn’t pay, they approached him and asked if they could offer other goods or services to pay down their bill.
While after-the-fact bartering won’t work with your credit card bill, it’s worth a shot if you have other bills directly with contractors or small businesses. You can alleviate the stress on your family’s budget and have the satisfaction of meeting your obligations.
How about you?
- Have you ever bartered? If so, what have you given/received?
- How did the situation arise? Who suggested the barter idea? How was it brought up?