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Recession is a Great Opportunity to Establish Long Term Bartering Agreements

By: Steve Johnson

8/3/2009 - 14 Comments

Last week my wife negotiated a long term bartering agreement between our family and another family for an exchange of goods that have equal value so that no money will be exchanged.

Bartering is growing in popularity as the recession deepens with the increase in prices and taxes and cash is harder to come by. 

What I mean by long term bartering agreements is to create an agreement between two people to exchange goods on a continuous basis.  For example, you could agree to exchange two dozen chicken eggs for one gallon of milk every week for several years.

Bartering is usually an exchange of goods for a single transaction. But if you are going to need the goods again and again, then creating a long term bartering agreement eliminates the need to renegotiate every time you are in need of the goods and it allows you to establish a distribution place as part of the agreement.

For example, if you agreed to exchange eggs for milk, part of the agreement could include where the exchange would take place each week.  Both parties benefit from the agreed value and place of exchange, because these two things are the most important to any means of exchange to determine predictable prices and supply of goods.

Clothes For Flowers

Our long term bartering agreement is to exchange clothes for our one year old child in exchange for garden flowers.  The family that we are trading with has a two year old girl, which always has clothes that no longer fit and they are in need to flowers around their house.  We have tons of flowers around our house that we could easily give away and we are constantly in need of clothes for our one year old. 

The idea is that this exchange of clothes for flowers could go on for several years.

Other Options

Instead of bartering, we could have sold our flowers and the other family could have hosted a garage sale each year to sell their clothes.  The money could then be used to purchase new flowers and new clothes.  Another option is just to give away the clothes and flowers to avoid the work of selling them, which we have done many times. 

Both families have done the garage sale thing before and realize just how much work is involved for the new dollars you end up with, not to mention the cleanup and getting rid of everything that doesn't sell.

Still another option is to get another job or work more hours to increase each families income to purchase these goods that we need. (not my recommendation)

How much money will we save?

It’s hard to say how much money we will save, but I’m going to give it a try.  I would guess this agreement could be worth much more that most people think - probably several thousand dollars per year.

Assuming we exchange 10 boxes of clothes for 10 boxes of flowers per year, 1 box of clothes or 1 boxes of flowers is probably worth about $100. If we had to purchase these goods from a store, we would also need to pay sales tax of 7.375%.  And if we had to purchase these goods from money earned as income, we would need to pay income of 25% (not counting SS, Medicaid, )

Item

 

Price

10 boxes

 

$1000

Sale tax

 

$73

Income tax

 

$250

Time to shop

 

Priceless

Total

 

$1323

The knowledge that we exchange is also a benefit that is difficult to quantify.  For example, hiring a professional landscaper to help you pick out which flowers grow good in this area and how to organize them is very expensive.  Just as talking for retailers about what clothes are in style and look good together for a two year old takes time.

How much of your budget can be bartered?

The next question that I have to give more thought to is how much of our family budget could be replaced with long term bartering agreements like this one?  If we could find ten barter agreements like this one, we could save $13k per year. Now we are talking about a lot of money.

The mortgage, utility bills and health care are about the only expensed that we could not barter.  Although it would be nice to find a family doctor that would take a box of flowers in exchange for a yearly checkup – but that would be free market medicine which the government does not allow and that is another subject.

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