Spending Successfully – Types of Purchases

As I continue to develop my barter strategy I’m beginning to see my purchases fall into a handful of categories.  Where your barter purchases fall into these categories in a large part determines how successful your barter effort is over all.  Additionally, I think looking at these categories can help traders find more trades that help their bottom line.  In my opinion trade purchases fall into three categories:  Cash Replacement, Value Added, and Luxury Purchases.

Cash Replacement Purchases
These are the absolute best kind of trade.  This is when you trade for something that you would have bought for cash.  Personal examples of things that I trade for in this category include food, dentistry, automotive repair, etc. .  These trades represent a direct conversion from barter dollars to real dollars assuming that you purchase these goods/services at comparable prices to cash prices.  If you are looking to get the absolute most out of barter, dig through your checkbook and credit card statements looking for things that you can switch over to barter.

Added Value Purchases
This one is the hardest one to grasp of the three categories and I’m only now realizing the value of this group.  Purchases in this group are items that you would not have purchased for cash, but they still represent significant real value to you because they free your time for family or cash generating work.  Of all things of course time is one of the most limited and I’ve met few productive people who aren’t interested in freeing up more time.  Examples of these types of trades would be hiring a landscaper, book-keeper or even a house-keeper.  I like doing my own yard-work and I would never hire someone for cash to do it for me.  That being said, I am willing to hire someone on barter that will do a better job than I do and it will free up time for me to work or play.  The same thing applies to book-keeping.  My wife enjoys doing our books, and was very resistant to the idea of hiring a book-keeper.  She was more open to bartering for one and now that we’ve made this switch she is extremely happy with it and uses that time very efficiently in other areas of her life.  Although this kind of a trade does not generate a direct conversion of barter dollars to real dollars, it has a very real positive effect on your business and personal life and is a good area to spend barter credits.

Luxury Purchases
This is the one to be careful with.  They are purchases that are totally for fun that you would not have made for cash.  Certainly I would be the last person to tell you that you shouldn’t spend barter credits on yourself for fun (check on the barter vacation I bragged about), however I know that some people go over-board in this area.  My only comment on this area is that you don’t want to make so many luxury purchases that you don’t have credits available for making the other two types of purchases described above.

It’s worth mentioning that some folks are so against luxury purchases that they don’t believe you should make any personal purchases at all.  This is totally incorrect in my opinion and I will write more on this topic later.  For now suffice it to say that you should make as many “cash replacement” trades  as possible regardless if these purchases are business or personal.

So….take a look at how you conduct your trades and see where your purchases fall into these categories and start making some changes as you see fit.

2 thoughts on “Spending Successfully – Types of Purchases

  1. Since trade is all “additional” & created income – spending on luxury items is fantastic! The way I see it, if I find $100 on the street, I’m probably more likely to take my wife out to dinner. Same is true on trade! I bought my wife a $2200 platinum ring, 100% IMS barter!

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  2. Paul- I only wish barter dollars were as free as money found on the street. Of course you are correct that barter sales are “new money” on top of your normal cash sales. It’s also true that most of your overhead is a “sunk” cost that you don’t have to attribute as part of your costs associated with a barter sale. That being said, there is still a “cost of goods sold” expense associated with the sale. Additionally, any non-salaried labor expenses are also attributed to your barter sale. Lastly of course you’ve got your barter commission that you need to pay. Bottom line is that with few exceptions barter credits are NOT free. Thanks for the post though. I think I’ll write an article about “normal” profit margin vs. “barter” profit margin. Good stuff!

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