When the recession hit back in 2008, many people had to reassess their spending habits. Not only did the recession impact those who were laid off or who were facing foreclosures, it took its toll on most everyone. They had their eyes opened to how much things cost and what they really needed and valued in life.
Fast forward to today and many people are still living their life by being conscious of their spending. Sure some of us have gone back to our old spending ways, but there is a huge segment of the population that didn’t and in effect, created an entirely new economy – the sharing economy.
What is the Sharing Economy?
Most of you are probably familiar with some aspects of the sharing community. It basically is a large group of people that instead of buying things, they share them. Why would you share rather than buy?
Think about yourself as a homeowner. You really have no need for a chainsaw, but you just happen to need one today. You could go buy one, use it once and then let it collect dust in the garage. Or you could reach out to your neighbor and borrow his chainsaw. But what if he didn’t have one? Your only option is to go buy it. That is until now. With a sharing economy in place, you don’t just see if your neighbor has a chainsaw, you can see if anyone in your community has a chainsaw. By borrowing the chainsaw, you just saved yourself a few hundred dollars. Borrowing is even cheaper than buying used.
How to Save Money Using the Sharing Economy
As I mentioned above, ever since the recession of 2008, the sharing economy has exploded. As of today, there are over 5,000 sharing companies for you to look into. Before you might have been able to share some tools for around the house, but today, you can share your car, your house, tools, doctor visits and more. Let’s look at a few of the bigger sharing industries.
- Car Sharing
The car sharing industry started with companies renting out cars to those in urban areas who didn’t have one. We highlighted Carsharing Using Zipcar Rental over four years ago. For a few dollars per day, you can borrow a car and drive it around the city. From there, industry evolved into having consumers like you and me renting our cars out to others when we didn’t need them.
Currently, the car sharing industry has exploded into taxi services. Now, everyday people can drive their car and pick up and drop off others who need a ride. Of course, it should come as no surprise that taxi drivers are against this new technology as it cuts into their business.
- House Sharing
Before the sharing economy took off, if you were traveling, your options were basically a hotel (motel or bed and breakfast) or a hostel. But with the emergence of the sharing economy, house sharing is booming. You can rent out your room or your house or apartment for short term visitors (think a few days to a week). All you need to do is go to one of the many online sites and list your rental.
- Tool Sharing
Tool sharing is another area that has grown in popularity. Not only are we talking household tools, but items like lawn mowers and bicycles can also be shared. The possibilities are almost endless.
- Pet Sharing
OK, you aren’t really sharing your pet, but you are able to find an alternative for Sparky other than the kennel. By going online, you can find others that are willing to pet sit your dog or cat for a lower price than the typical kennel.
How to Make Money Using the Sharing Economy
While the idea behind sharing is to save you money by not having to buy some items or sharing the cost of the item, many have spun the sharing economy around and are now using it to make money. I mentioned above about people renting out their cars or driving others around. All you have to do is sign up for the service and you can start to make money. This is a great way to earn an extra income for some people.
Additionally, you could be the one renting out a room or your house for travelers. Again, just sign up online and you can start listing your rental.
How much can you make? As with most things in life, it all depends on how much effort you put into it. I know of a friend that acts as a taxi cab because he doesn’t have a job. In an average month, he is earning around $3,000. I know of another person that rents out a room of theirs and earns about $1,500 a year doing this.
Things To Know Before You Share
Before you go running out to sign up to start earning some money, there are things you need to keep in mind. First off, you have to be open and willing to have others live in your house or drive your car. If you are acting as a taxi, you have to be comfortable putting the miles on your car, knowing that the more wear and tear you put on your car, the more your maintenance costs will increase. Tax Savings Tip: How to Deduct Mileage on Your Personal Car.
But on top of that, you need to understand the consequences of your business. If you are letting others borrow your car or are acting as a taxi, does your car insurance cover you? Understand that if you let a friend borrow your car and they get in an accident, his or her insurance is what will be used as insurance follows the driver, not the car. But with that said, your insurance policy is for personal use. Many insurance companies may deny a claim or drop your coverage if they find out you are using your vehicle for business and not pleasure.
The same idea applies to your homeowner’s policy. While it seems as though there isn’t an issue, you might be surprised that that there is. Your best bet is to talk with your insurance agent before jumping into any of these businesses. While the money sounds good, one accident could easily wipe you out financially.
Lastly, you also have to be aware of taxes. As a business, you will have to pay tax on your income. And before you get the crazy thought of not claiming the income, the companies you work for (the websites you sign up on) treat you as an independent contractor and will send you and the IRS a 1099.
There are many benefits to the sharing economy. On one hand, you can save tons of money by not buying a car or borrowing tools or even getting a low price on an apartment when traveling. On the other hand, you could use the sharing economy to make some extra income to pad your budget or pay down debt faster.
However you choose to use the sharing economy, be smart about it. Do your research before you rent the room from the stranger online and check with your insurance agent before driving others around. The more homework you do, the better the chance you have of a great experience.
Have you signed up for any sharing services? Which companies are your favorites?