Personal Expenses

Short version:
It is good to spend barter credits on personal expenses.

Long version:
I’ve run into a couple of traders who have set up rules for themselves that keep them from ever fully realizing their best possible return on barter.  These people are generally conservative in nature and in their zeal to make sure they don’t “waste” their credits on frivolity, have decided that they will never spend barter credits on personal expenses.  For some this is just an out-cropping of self-discipline gone wrong, but others actually believe that there is a legitimate business reason to avoid personal spending on barter.

When you accept payment in cash in your business, you take some portion of that cash and spend it on personal expenses.  Realize it or not, it is something every profitable business does.  Obviously you will have some book-keeping problems if you start paying for personal expenses directly out of your business account which is why most folks draw cash out of their business in the form of payroll, owners-draw, dividends, etc.  These funds are pulled out of your business, you are appropriately taxed on the funds as personal income, then you spend the money on personal expenses.  Barter is no different!  You can pay yourself in barter credits rather than cash, then turn around and spend those barter credits on personal expenses.  There is nothing to it!  It doesn’t matter if you are a sole proprietorship, llc, or some type of corporation.

The advantage in spending barter credits on personal expenses is that it opens up more opportunities to spend barter credits wisely.  It totally baffles me that a business owner would sit on thousands of dollars of barter credits, yet still pay cash for dental work or carpet cleaning in their home.    By paying yourself (in part) in barter credits that you use for personal expenses, you free up cash in your business that can be used EITHER for cash business expenses that you can’t trade for, OR EVEN BETTER, cash profit payouts to yourself.  Either way you win.

A final passing thought:  Just because I’m saying it’s good to spend barter credits on personal expenses doesn’t mean that I’m indicating to spend frivolously.  All the normal rules of wise purchasing still apply.  I’m just saying there is nothing inherently bad about using barter credits for personal expenses.

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