sharing economy

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It wasn’t until I had children that I really started to think about the products and food I was buying and consuming. 

I wanted to know what I was putting on my babies’ skin and in their bodies. I wanted to know what type of material their tiny little clothes were made from and was contained in their diaper cream and baby shampoo. 

Honestly, this process was illuminating and a bit concerning at times. While I assumed the powers that be are looking out for us in terms of the quality and standards around products and food, I was surprised by some of the ingredients that are considered okay.

Similarly, while it’s nice to think that every company supports adequate working conditions, fair pay, and environmental practices – when I started to do some research I found that this is not always the case.

For me, having children was the catalyst that pushed me towards becoming a more conscious consumer. I really started to think about what I was buying, where it was coming from, and the values of the company I was supporting. And I’m not alone in this. More and more people are moving away from blind consumerism and towards a more deliberate and informed way of consuming. 

Read on to find out what conscious consumerism is, why it’s important, and how you can begin to implement conscious consumer practices into your day-to-day life.  

What’s Ahead:

What is conscious consumerism?

Conscious consumerism is the practice of becoming more aware of your purchase decisions. 

A conscious consumer thinks before swiping a credit card or emptying their Amazon shopping cart. A conscious consumer considers how their spending is affecting society at large with a social, environmental, political, or economic lens.

Simply put, conscious consumerism is about aligning your values with your purchases.  

Why does conscious consumerism matter?

While our individual decisions and behaviors can feel insignificant in the grand scheme of things, just remember that all change starts with the individual. If you want to see more companies thriving that value their employees and the environment, then you need to start supporting these organizations.

Here are a few reasons why conscious consumerism matters at an individual and societal level. 

It promotes change

Conscious consumerism matters because you vote with your wallets on a daily basis. When you buy a product from a company that doesn’t provide fair treatment or fair compensation to their employees or companies that don’t support important social movements, you are supporting those values. Values that you may not agree with. 

If we want companies to change their ways and do better, then we need to put pressure on them. If we continue to buy products from companies that we don’t believe in, then there is no reason for them to change.

And people are voting. In a survey by Empower of 1,000 Americans, 60% of respondents said that they had stopped spending money at companies based on their social beliefs – this was for reasons like not agreeing with their approach to COVID-19 precautions or not agreeing with their political point of view. 

It promotes awareness

Conscious consumerism also promotes awareness. Rather than making blind purchases from companies you know nothing about, the process of becoming a conscious consumer encourages you to dig deeper, to explore your values, and to find companies and products that match them. 

It’s good for you, and others

Conscious consumerism also matters because it’s good for you. As an example, think about buying local, organic food as opposed to unhealthy, processed food. 

Organic food is a conscious choice and a healthier choice. It’s also better for the environment. The same is true when it comes to the clothing you wear or the products that you put on your body. The local, sustainable, ethical products are usually better for you, the employees producing the products, and the environment. 

Can just anyone be a conscious consumer?

The answer to this is a little bit more complicated than you might think. 

In theory, yes. Anyone can become a conscious consumer. All of us can think about what we value and then use the internet to research companies or products that align with these values.  

In practice, it can be more difficult.

Ethically sourced, sustainable products are expensive. The reason fast fashion and fast food are so popular is because they’re affordable. The reason so many celebrities preach the value of “organic this,” and “sustainable that,” is because they can afford to purchase quality items. 

While many people want to eat only organic, locally sourced, and sustainable food, it’s not always a reality because of cost.

It also takes time, effort, and energy to research companies and products that align with your views. People who are consumed with working multiple jobs in order to put food on the table for their family don’t have the luxury of researching each and every purchase.  

Assuming most of us value fair pay, positive social change, and sustainable products, we also value efficiency and convenience. There’s a bit of a tug-of-war between our desire to purchase the products we believe in and the ease and affordability of things like fast fashion. 

How do you implement conscious consumerism ideals and practices in your own life?

While becoming a conscious consumer takes time and effort, there are varying levels of engagement. It’s not an all or nothing deal. You don’t have to be an extremist. You can take baby steps when entering into this practice. 

Here are a few ways you can begin to implement conscious consumerism into your own life. 

Assess your values

First, take some time to think about your values. What matters to you? Are you concerned with the state of the environment and the effects of global warming? Do you want to see the end of child labor? What social movements do you believe in? What kind of clothes do you want to wear? What kind of products do you want to put on your body? What kind of companies do you want to support?

How do you want to vote with your money? Not everyone will be motivated by the same things, and that’s okay. 

Look for Certified B Corporations

If you want to be a more conscious consumer, but you don’t have the time to research every company and product on the market, one thing you can do is look for certified B Corporations. 

Certified B Corporations are businesses that have met standards on social and environmental criteria as outlined by the B Lab. Certified B Corporations are concerned with more than just their bottom line. They care about things like the treatment of their employees and their environmental impact. 

Buy used

One simple way to practice conscious consumerism is to buy used products. By shopping at thrift stores you’re preventing items from ending up in the landfill. 

With online marketplaces like Poshmark and Letgo, it’s never been easier to buy and sell used items.

Buy local

Look to buy local products. When you purchase products locally from small business owners, you have a better chance of getting to know where your food and products are coming from. You’re also putting money into the hands of small business owners as opposed to enormous corporations.

Buying local also means the product doesn’t have to travel as far to get from the producer to you, the consumer. Less travel is better for the environment. 

Minimize consumption

Do you really need another shirt, another hat, a new iPhone, or another pair of shoes? I mean, really? 

Conscious consumerism isn’t just about deciding what companies you want to buy from, it’s also a question of whether you need to buy more. 

Part of being a conscious consumer is evaluating the impact of your purchases. Buying more for the sake of having more, often results in more waste. So, part of being a conscious consumer is knowing when to minimize your consumption. 

Use a water bottle

This is a super simple way to practice conscious consumerism. If you don’t want to add to the insane amount of plastic water bottles in our landfills and oceans then start using a reusable water bottle. It might seem small but it all adds up. Similarly, start using reusable coffee cups, straws, and food containers. 

Become a socially responsible investor

Traditional investing is all about the bottom line. Where you invest is based on what is going to yield the highest value. Socially Responsible Investing (SRI) still aims at making you money but it also takes environmental, social, and governance (ESG) issues into account. 

And, you don’t need to sacrifice returns to invest with a conscience. A study in the Economist reported that sustainable funds outperformed the broader market during a market downturn. 

  • Betterment offers socially responsible investing opportunities.* Betterment believes that you don’t have to choose between value-based investing and working towards your financial goals. They offer SRI portfolios that can help you to invest in your goals while staying true to your values.
  • Empower also offers SRI investing opportunities. They can help you to invest in companies that are managing their environmental, social, and governance issues and they make it easy to add these options to your portfolio. Empower will work with you to determine what investments align with your values whether you are looking for companies that value fair treatment of their employees or companies that care about environmental issues like carbon emissions.

*Higher bond allocation in your portfolio decreases the percentage attributable to socially responsible ETFs.

Research companies before you make a purchase

If you have the time to put into researching companies and products before making a purchase then by all means – do it. It’s all about awareness. The more you know about a company or product, the more confident you can feel that you are supporting a worthy company or removing your business from a corporation that doesn’t deserve it. 

Of course, it can be a challenge to find reliable information, and even when you do locate the details of a product, it can be difficult to interpret (I’m thinking of all the ingredients I can’t even pronounce when it comes to food or beauty products). 

If you want help identifying the environmental or ethical qualities of a company there are a number of different apps you can use such as Agreeable & Co or TradeMade.

What does the future of conscious consumerism look like?

If 2020 has taught us anything, it’s that we can’t predict the future. However, we can make some educated guesses as to where the future of consumerism is headed. 

Minimalism and the sharing economy

Over the past decades, we’ve seen a rise in trends like minimalism, tiny houses, and the sharing economy. 

Plant-based diets

There’s also been a trend towards reduced meat consumption with a rise of vegetarianism and veganism. Think about it, there were no Beyond Burger or Impossible Burgers twenty years ago. 

Socially responsible investing

The investing world is anticipating a similar trend. A 2020 article by CNBC suggests that socially and environmentally conscious investing options will be “the next mega-trend in equities.” 

The article quotes Peter Garnry, Head of Equity Strategy at Saxo Bank who says,

“We believe that these green stocks could, over time, become some of the world’s most valuable companies – even eclipsing the current technology monopolies as regulation accelerates during the coming decade.” 

Increased awareness and action

According to a white paper by Empower, more Americans are becoming more actively involved in regards to where their money is being invested as opposed to leaving it up to a financial advisor. 

This is especially true when it comes to the younger generations. In a survey of over 1,000 Americans, 55% of Millennials respondents reported that they chose the companies they wanted to invest in compared to 39% of Baby Boomers. 

Summary

The first step to becoming a conscious consumer is simply understanding what conscious consumerism is. It’s about understanding what you value and looking for opportunities to support the companies that you truly believe in. This is opposed to shopping blind and making purchases solely based on convenience and price. 

While it’s important to acknowledge that not everyone has the resources to be the consummate conscious consumer, we can all do our part. There are simple strategies like using a reusable water bottle or buying used products. So, if you’re ready to be a more conscious consumer then pick one small strategy and start today! 

(Personal Capital is now Empower)
Empower Personal Wealth, LLC (“EPW”) compensates Webpals Systems S. C LTD for new leads. Webpals Systems S. C LTD is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.

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Source: moneyunder30.com

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Your Guide to the Sharing Economy – MintLife Blog

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peer-to-peer lending). 

Looking for a quick definition? Keep the one below in mind.

Sharing economy definition

The sharing economy is a peer-to-peer lending system, often facilitated by online platforms, that allows individuals or small companies to share goods and services with one another.

To better understand the sharing economy, it’s helpful to see how it fits into the bigger picture of novel industries that are disrupting traditional ones. 

Sharing economy vs on-demand economy

The on-demand economy is a name for the new suite of services most people have available with their phone. “On-demand” refers to the fact that, with just a few taps, swipes, and a credit card, there are many goods and services immediately available to consumers. 

For instance, let’s say you need groceries delivered — there’s an app for that. A fleet of gig-working delivery drivers (more on that next) is ready on demand to bring you the bread, almond milk, and kale that you need ASAP. 

How does this differ from the sharing economy? When investors, economists, and consumers talk about the sharing economy, they are referring more specifically to services that facilitate sharing goods. It might not even be on-demand; for instance, if you’re part of a group of people who share power tools, you might not have access to the bandsaw you need until the person who has it now is done in 3 days. 

The sharing economy and the on-demand economy have a lot in common, though, as they both allow peers to collaborate through the use of a third-party app. That brings us to another buzzword you might be hearing a lot about these days. 

Sharing economy vs gig economy

The gig economy focuses more on the workers’ side, rather than the consumer. For instance, both sharing economy services (like Airbnb) and on-demand economy services (like TaskRabbit), and even services that fall into both categories (like Uber), can be considered forms of gig economy work. 

The gig economy consists of workers who operate on short-term contracts, performing jobs through an app-based service. When investors and economists talk about the gig economy, they’re usually talking about the transition in many sectors toward this sort of short-contract-based work. 

The quintessential example is a service like Uber or Lyft. Rather than a full-time, wage-based job like taxi driver, many people are instead working part-time, contract-based, often precarious positions as ride-share drivers. That’s the gig economy in action. 

Examples of the sharing economy

We’ve already discussed a few types of sharing economy services, but what are a few more familiar examples? The answer is that there’s no set definition or criteria for what makes a service a part of the sharing economy. That said, there are a few examples that you’re probably familiar with:

  • Ride-share: Services like Uber and Lyft are great examples of the sharing economy — a driver shares their car (and time) with a consumer, who gets a lower-cost ride out of the arrangement. 
  • Car-share: Some services also allow you to share your car with peers, not by driving them, but by allowing them to rent it. 
  • Tool-share: Power tools are expensive. Luckily, the sharing economy makes it easy to see who has a tool you can borrow, and pay a small amount to rent it for a day or two while you complete a project. 
  • Clothing sharing: There are sharing sites for expensive designer clothes that you probably won’t wear more than once. Pay for a subscription, then rent for a few days. 
  • Crowd-funding: Have a new business idea or product concept? You can use services online that allow you to crowd-fund the startup costs. 
  • Peer-to-peer lending: Rather than going through a large financial institution or sketchy loan shop when you need cash, peer-to-peer lending allows consumers to seek financing from other individuals who have a little surplus cash they’d like to grow. 

As mentioned before, there’s no hard-and-fast definition or criteria — pretty much any service that allows people to help each other out can be considered a part of the sharing economy. 

Sharing economy apps

We’ve mentioned that the sharing economy is mostly facilitated by app-based services — but what are these apps? Chances are, you’ve probably already got a lot of them on your phone. Here are a few common sharing economy companies, and what they’re built for:

  • Ride-sharing and taxi alternatives: Uber, Lyft

This is definitely not a complete list. Chances are, if you need some item or service, but don’t want to purchase it yourself, there’s a sharing economy solution out there for you. A simple Google search of “[What you need]” + “sharing app” will likely bring you tons of interesting options to consider. 

Pros and cons of sharing economy

Like anything, the sharing economy comes with plenty of pros and cons to consider. Before going all-in on using sharing apps, let’s take a look at some of the benefits and downsides that come along with the sharing economy.

Pros

  • Sharing services can help you save money
  • Sharing apps give you access to things you might not otherwise have (like power tools or a small loan)
  • They’re often on-demand, too (though not alway), so you can get what you need quickly
  • They allow owners of assets to make a small, steady stream of passive income
  • They’re popular. According to PWC, about 19% of people have participated in the sharing economy, and that number is expected to grow. 

Cons

  • They might be riskier than a traditional business because you’re renting items (like a car) from an individual rather than a company
  • While they might allow for a new income stream, some sharing economy jobs (like rideshare drivers) might not allow you to make a full living
  • Some app companies might inflate prices or take a large commission in order to increase their own profits — be sure to do your research on an app before using it as either a buyer or seller

Overall, for most people, deciding whether using the sharing economy makes sense will be an individual process. For some people, making money with side hustle apps might be a great way to spend some time and earn a little cash. For others, it might not make as much sense. 

If you have a vacation home you don’t use often, it could totally make sense to rent it out to travelers who need a place to stay. Others might not want the hassle associated with cleaning the home and preparing it for the next guests — ultimately, it’s up to you whether participating in the sharing economy makes sense. 

Sharing economy: the takeaways 

The sharing economy is a great way for peers to connect and share goods and services they have access to with people who are looking for access at a bargain price. It can include anything from sharing cars and power tools to peer-to-peer lending and crowdfunding. 

Here’s what to remember:

  • The sharing economy uses apps to allow individuals to connect with each other, sharing their goods and services.
  • It’s closely related to the on-demand economy and gig economy; in fact, there’s tons of overlap when it comes to the apps used in each. 
  • You can use the sharing economy to access things like car rentals, fashionable clothes, power tools, personal loans, and seed money for your ingenious ideas. 
  • Apps like Uber, Vrbo, DailyLook, and Prosper are all popular sharing economy options. 
  • There are pros and cons
    • Pros: Usually inexpensive, a great way to find extra income, and convenient
    • Cons: You have to trust peer lenders and borrowers, and some companies pay workers less than other options, or charge fees that make lending not worthwhile

What options can the sharing economy open up for you? Research the ways that you can start using sharing apps today, and start saving (or making!) money. 

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If you’ve been renting out your own house or condo via Airbnb, or a similar service like HomeAway or FlipKey, you might have more difficulty securing a mortgage.

This is one of many unintended consequences related to the so-called “Sharing Economy,” whereby individuals turn their homes and cars (and whatever else) into profit drivers.

The same hoopla arose when Uber and Lyft first got started, with insurance companies often balking at drivers who used personal insurance policies to conduct what is seen by some as commercial driving.

With companies like Airbnb, “hosts” are able to rent out their properties whenever they like, whether it’s just when they’re out of town, seasonally, or full-time. It’s supposedly a great way to make some extra cash when you aren’t using your home.

However, the issue that seems to be befuddling mortgage lenders is the occupancy of such a property.

Is It Still Owner-Occupied If It’s Listed on Airbnb or Elsewhere?

You see, mortgage lenders ask how you’ll use your property when extending mortgage financing. After all, they’ve got a huge ownership interest in your home when you take out a massive loan on it.

If it’s simply your primary residence, you are entitled to the most flexible financing options and the lowest interest rates because defaults are lowest on owner-occupied properties.

However, if it’s a second home (which doesn’t allow rentals of any kind) or an investment property, the mortgage financing options become a lot more limited, and the interest rates significantly higher.

This is to account for risk, as history tells us default rates are higher on non-owner occupied properties.

Cumulative losses tied to certain loans issued before the most recent housing crisis were around 14% on owner-occupied homes, and closer to 20% on investment properties. This disparity allows lenders to charge a higher interest rate on the latter property type.

But are Airbnb rentals tied to owner-occupied homes actually investment properties, or something else entirely?

This is what mortgage lenders are reportedly grappling with, seeing that a short-term rental falls somewhere in the middle. Can you really call it an investment property if it’s only rented out two weeks of the year?

Apparently some mortgage lenders don’t have a problem with it, but other major banks do. And you can’t really blame them given the added risk associated with housing complete strangers.

I’ve actually heard of tenants (who don’t own the properties) renting out their rentals on Airbnb and similar websites, unbeknownst to their landlords.

Essentially, renters are making a buck by subleasing their properties on a short-term basis when they go out of town.

Using Airbnb to Pay the Mortgage Down

Ironically enough, I stumbled upon a page on the Airbnb website that was advertising a $200 cash bonus for certain hosts that could be used to “help pay down your mortgage.”

Most folks know you can use rental income to offset a monthly mortgage payment if it’s an investment property, and the same is true with short-term Airbnb rental proceeds.

If the property is a rental property and you treat it as such, renting it out via sites like Airbnb shouldn’t matter, though it may be difficult to establish a firm monthly rental income figure unless it’s very consistent.

But it seems lenders aren’t too keen on including this income when qualifying borrowers for a refinance on an owner-occupied property. That’s where it gets murky.

How often is the property in question being rented? Is it once in a blue moon, once a week, seasonally, etc.? Lenders need to know these details to adequately assess the risk of the underlying loan. Otherwise occupancy type wouldn’t matter.

But it does matter, a lot. In fact, it’s one of the biggest drivers of both LTV limits and interest rates, and occupancy type leads to a slew of other restrictions.

So you might want to think twice before showing your lender how much your primary residence is raking in thanks to a short-term rental.

It could actually end up costing you in the form of a higher interest rate or an outright loan denial.

(photo: Connie Ma)

Source: thetruthaboutmortgage.com

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Save more, spend smarter, and make your money go further

In the last decade, the idea of sharing — and monetizing — the things you’re not using has gained traction at lightning speed, and that’s thanks in large part to technology. It seems like everyone has some sort of side-hustle these days. Have an empty guest room? Airbnb can help you rent it out. Got a car and a few extra hours on the weekend? Uber and Lyft are happy to match you up with a rider.  

When you combine this rise in new money-making opportunities with the fact that the average car spends 95 percent of its life sitting in a parking spot, it’s not surprising that app-based marketplaces like Getaround and Turo have cropped up to offer car owners a new way to make a few dollars on the side. These services are referred to as peer-to-peer (P2P) car-sharing, and they’re posing some serious competition to the traditional car rental model.  

If you’re looking to take full advantage of the sharing economy by listing your car on a rental marketplace, there are a few things you should think about first. 

How Do I Choose a Marketplace? 

Some P2P apps advertise that listing your car could earn you up to $10,000 a year. Others say you can make $1,000 per month. So how do you decide which marketplace you should list your car in, and how do you sign up? 

First, you’ll need to figure out which services operate in your area — currently, the biggest P2P marketplaces are concentrated in major urban centers. Then, simply go online and enter your vehicle details and personal info to get an estimated hourly rental rate for your vehicle.  

Rates vary depending on the age, make and model of your car, so check around to see who will pay you the most for renting out your ride. Keep in mind that some services also adjust rates on a daily basis (similar to a rental car agency), so the amount you make may depend on when your vehicle is available. 

Finally, you should consider how much insurance each provider offers to protect your vehicle in case a renter has an accident — which brings us to our next point.  

How Does Insurance Work? 

Most of the well-known P2P car rental marketplaces include varying levels of insurance to protect your car and your liability when your car is rented out. Before you list your car on one of these services, do your research to find out which one provides the best coverage.   

Keep in mind that your personal car insurance policy will not provide any coverage while your car is being rented out. That means they won’t pay for any injuries or damage the renters cause, whether to your car or anyone else. What’s more, if your car is parked and waiting for a renter to pick it up, your personal coverage may not cover you if someone hits it, or if it’s stolen.  

Even more importantly, before you go all in on P2P marketplace rentals, you should check with your current insurer to see whether doing so will affect your existing policy. They may have concerns that the extra wear and tear on your car could increase your accident risk, or that your P2P insurance may not provide sufficient coverage and you may seek coverage from them. There are many factors that could affect your level of risk, so checking with your insurer before listing your car is a must.  

Who Pays for Gas? 

This one’s actually a little less complicated. If you aren’t driving, you shouldn’t be paying for gas. Typically, the renter is responsible for returning the car to you at the same fuel level they drove away with. But pro tip: If you fill it up to the top before they rent, it’s a little easier to tell if they did their part.  

Before someone rents your car, be sure to take a photo of your fuel gauge. That way, if they return your car without replacing your gas, you’ll be able to file a dispute with the sharing service, who will typically charge the renter a fee for the gas (and the inconvenience). 

Can I Control Who I Rent to? 

As the owner, who you rent your car to is your choice. The most popular apps will allow the renter to put in a request for a date, time and duration that they’d like to rent your car. Then it’s up to you whether you’d like to rent to them or not. You don’t have to rent to anyone you don’t want to.  

The moral of the story is, if you have a car that spends most of its time sitting in your garage or parked in front of your office, putting it to work for you could help you make a little extra income on the side … and who doesn’t like that? Just make sure to do some research beforehand so you’re not met with any surprises.  

Eric Madia is Vice President of Product Design at Esurance, where he is responsible for designing the company’s personal lines products. Eric has 23 years of experience in the industry. He writes on all things car insurance, including what to know before signing up for a car-sharing service. Learn more about auo insurance from Esurance at Esurance.com. 

 

This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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