The sharing economy has been adopted in the U. S. concerning diverse aspects shifting the way people deal with their finances. Whether it is Transport Network Companies such as Uber, Bolt or Airbnb for home renting services, this is revolutionizing how people earn incomes and how people spend their incomes.
As you will discover in this blog post, this phenomenon is currently reshaping our personal finances, view of the economic landscape and the set of opportunities and threats that either awaits us or is already present in our financial lives. Check to know more:
The rise of collaborative consumption
Sharing economy, as commonly referred to, means an economic model where the sharing of assets and resources is the mainstream, and generally it is accentuated through internet based platforms. This has received a lot of attention of late, especially due to the evolving technology in information technology and increased use of smart mobile devices.
Companies such as Uber, Airbnb and TaskRabbit have set the tone for the kind of consumption and income generation in the contemporary society. Collaborative consumption therefore comes across to many as a means through which they can earn extra income by paying a little time.
People can use the resources they already own, cars, or houses, and make some money out of them to become financially stable. Moreover, the characteristic of free-schedule related to the gig work means that one can attend to other responsibilities.
The fact that this model can be accessed easily of that it does not require a lot of entry barriers is an added bonus in today’s world. But as there are advantages, there are also consequences that have to be taken into account by users along with product developers.
Income diversification
On the context of the sharing economy, the influence on personal finance perhaps the most impact is the opportunity to earn. Employment can be characterized as full-time and permanent employment, where an employee uses most of their time under one employer and usually has only one source of income.
Some risks related to uncertainties are buffered by engaging in gig work because the individual can have several sources of income. It is very advantageous during periods of economic difficulties or when one is job hunting for instance. Nonetheless, alongside relative earnings security, flexibility, and autonomy, it’s important to underline that the additional earnings RECE are allowed to obtain are not constant and can be irregular.
Again, while rising from the ranks of paid work, income from the sharing economy is unpredictable from one week to another in any given month. Usually, for those people who concentrate on such kind of employment, budget planning is somehow complicated.
In essence, by careful financial planning, the risks are kept low and the gains enjoyed are as high as they can be. It is for these reasons that people should try to find as many economic activities as they can by engaging in other businesses apart from the one that they mainly engage in, since the later can be cut off at any one time due to some reasons.
Reduction in ownership costs
The other important effect relates to a decrease of the ownership costs. Through engaging in the sharing economy, people can avoid acquiring most of the assets in a full sense of the word. For example, the appearance of such services as ride-sharing, considerably decreases the need for individuals’ own cars and eliminates associated expenses for car maintenance, insurance, and loss of value over time.
This can provide a significant amount of money for other purposes, for example, to save or invest. The same way, through home-sharing services, homeowners are able to pay their mortgages or rents by renting out extra rooms or houses.
This can be very useful in making dwelling affordable and enable people to reside in regions they could otherwise be unable to afford. Whereas, eliminating ownership costs helps to significantly reduce one’s financial obligations, but it also means that people need to take on new risks and responsibilities for rentals and customer relations among them.
Challenges of the sharing economy
The sharing economy has its qualities that provide numerous opportunities on the financial level; however, this type of economy also possesses certain disadvantages that can affect one’s plans and economic financial goals. Another striking problem is the absence of conventional employment privileges.
Secondly, income volatility is another a unique concern that needs intervention. As highlighted above, wages that are earned from gig work may be irregular and therefore may not be easy for a worker to plan and or budget. This unpredictability can have financial consequences and can create less of financial stability.
Finally, regulatory changes are other threats, and market saturation is another threat to Internet firms. While the government increases its attempts to regulate the sharing economy, the changes could affect profitability and sustainability of gig work. In the same respect, competition within these platforms decreases earning prospects to lower levels.