In a difficult economy, people often make changes they may have never considered before: buying generic, shopping at discount stores, foregoing vacations ... and bartering. That's right – bartering is back in style.

Bartering Basics
Bartering is based on a simple concept: two individuals negotiate to determine the relative value of their goods and services and offer them to one another in an even exchange. It is the oldest form of commerce, dating to before hard currency even existed, and the current recession is revitalizing the concept of bartering. (Learn more about how bartering evolved into the modern economy, read From Barter To Banknotes.)

While our grandparent or great-grandparents' generation bartered with the limited goods they had on hand (i.e. produce, livestock), or services they could personally render (i.e. carpentry, tailoring, etc.) to someone they personally knew, today most Americans have access to a nearly unlimited source of potential bartering partners courtesy of the internet. Craisglist executives have noted that the bartering posts on their website have more than doubled since the beginning of the recession.

How to Barter
So how can you get started on successfully bartering? Here are some tips:

Identify your resources. What items do you have that you could easily part with? Use a critical eye to go through your home, and don't forget possessions you may have in storage or that another family member or friend is currently using. If you'd rather offer services honest assess what you could do for someone that they would otherwise be willing to pay a professional to do. It doesn't have to be something that you currently do for a living – it could be a skill like organizing, or a hobby like photography. In some cases you may even be able to barter your time as free labor. (To learn more about saving money, read Five Ways To Save Without Trying.)

Put a price tag on it. Successful bartering has to result in both people feeling that they got a good trade. That can only happen if you know how to realistically value what you're bringing to the table. If you have an item you'd like to trade away, get an accurate appraisal for it. Remember, you can't expect retail prices – barterers are looking for a bargain. Consider using the "selling" section on eBay to find out what online buyers have paid for similar items.

If you're trying to put a price tag on a service, call around for local estimates from professionals to see how competitively you can price your abilities. Remember to be honest about your skills and to factor in costs associated with the exchange; for example, shipping (for goods) or materials (for trading a skill).

Identify your needs. This is the time to get specific. No one's going to want to trade services or goods if you don't have a clear idea of what you need. Write down exactly what you are looking for in a barter exchange. In addition to specific items you may need, here is a list of potential services that you could barter for:

  • Babysitting/daycare
  • Car repair work
  • Lawn care, landscaping
  • Computer repair
  • Small home improvement projects
  • Plumbing
  • Moving assistance
  • Tax preparation
  • Financial planning
  • Orthodontist work
  • Medical care
  • Lodging

Search for bartering partners. After you know what you have to offer, and exactly what you need/want in a barter situation, it's time to look for swapping partners. If you don't have a specific person or business in mind, the best place to start is probably word of mouth. Let your friends, colleagues and social network about your specific need and what you want in a barter situation. Get word out to your friends on Facebook, LinkedIn and "tweet" about it on Twitter.

While you're online, check for swap markets and online auctions that have a bartering component like Craigslist.com (check under "For Sale" for the Bartering category), Swapace.com, SwapThing.com, Barterquest.com, U-Exchange.com, Trashbank.com and Ourswaps.com. Check for local bartering clubs as well; your local Chamber of Commerce may be able to provide you with information on such clubs in your area.

Some businesses that may not do direct bartering with customers may swap goods or services through membership-based trading exchanges like ITEX or International Monetary Systems (IMS). By joining a trading network (which often charge fees), members are allowed to trade with other members for barter "dollars." Each transaction is charged a minimal fee; the Exchange not only helps facilitate the swap but they also handle the tax aspects of bartering, such as issuing 1099-B forms to participating members. You may be able to find a nearby exchange through the International Reciprocal Trade Association (IRTA) Membership Directory. Before you sign up and pay for a membership, however, make sure that members offer the types of goods and services you need. You don't want to be stuck in a situation with barter money or credit that you can't use.

Make the deal. After you've found a barter partner, it makes good financial sense to get the agreement in writing. Make sure you detail what services or goods will be involved, the date of the exchange (or work to be done), and any recourse if either party doesn't make good on their part of the deal. If you're working through a membership-based bartering association they will likely provide all the structure, and paperwork, you need to ensure that the deal goes through.

Don't forget the IRS. It's important that you also understand the potential tax implications of your arrangement because the IRS considers bartering income as taxable. It's worth consulting your tax professional before making any significant bartering commitments. Learn more about IRS rules related to bartering.

Bartering does have its limitations. Many bigger (i.e. chain) businesses won't entertain the idea and even smaller organizations may limit the amount of goods or services they will be willing to barter for (i.e. they may not agree to a 100% barter arrangement and instead require that you make at least partial payment). But in an economic crunch it can be a great way to get the goods and services you need without having to pull money out of your pocket.

For more tips on saving, read Save Without Sacrifice and Five Money-Saving Shopping Tips.

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