Finances can quickly make things turn sour between you and your roommates if you don’t have a plan in place. Check out these helpful tips on how to divvy up the expenses.
Renting with a roommate often makes sense, both socially and financially. But, while having a roommate can offer good company and help with expenses, it can also be equally stressful to rely on somebody else to pay their share of the bills.
Here’s a few practical rules to help effectively manage your shared expenses:
1. Establish ground rules from the get-go:
In many instances, roommate conflict boils down to a mismatch of expectations.
For this reason, establishing a set of agreeable home rules from the onset is essential in helping to avoid any unwanted conflict with your roommate.
Prior to moving in and signing the lease agreement, it’s important to have an open and honest discussion with your roommate. Doing so will give you both the chance to lay out your expectations, discuss any financial concerns you may have and suss out if this would be a suitable living arrangement for the both of you.
2. Get a separate lease if possible:
In many instances, verbal agreements about financial matters can be easily misinterpreted. Even if your roommate happens to be your best friend, a small misunderstanding can easily sour a friendship.
For this reason, it is advisable for you and your roommate to consider signing individual lease agreements – provided your landlord allows it. Doing so will ensure that you are only held responsible for your portion of the rent and will reduce the risk of being scammed by a deadbeat roommate.
Should your roommate choose to move out or skip on paying their share of the bills, a separate lease agreement will hold your roommate accountable and will prevent you from landing in hot water.
Alternatively, if you are signing a joint-lease and you’re worried that your roommate might not keep to his word, then consider having your roommate appoint a guarantor to sign the lease alongside him or her.
A guarantor can be a close friend or a family member who is willing to vouch for your roommate’s financial credibility and take on the legal responsibility to ensure the rent gets paid. In the event of your roommate not keeping up with his share of rental payments, this option will serve as a form of protection for both you and the landlord, as the guarantor will be held liable for payment.
It is important to also have a clear record of any additional agreements made between you and your roommate which aren’t stipulated in your lease agreement. This can be done by creating a separate written roommate agreement, which is a great way to avoid financial conflict and also allows you to hold a roommate accountable should a misunderstanding occur.
In your written agreement, be sure to outline the following:
- Who will be responsible for which bills and expenses?
- Any special rules around shared and non-shared items?
- What should happen if a roommate decides to move out?
- how the rental property will be shared?
- how the security deposit will be handled?
3. Protect your security deposit:
Most landlords require an upfront security deposit before the tenant is allowed to move in so It is important to decide how this will be accounted for.
The lease agreement will dictate how the deposit is paid. If there are individual leases, each tenant will pay their share separately. In the case of a joint lease, the deposit is split between tenants. If one or more roommate’s names are not on the lease, the separate roommate agreement should include all details about the deposit.
Be sure to include the following information like:
- The required amount each tenant is expected to pay
- Under which terms and conditions will the deposit be returned
- How will any roommate changes affect the deposit?
- Under which circumstances will deductions be made from the security deposit
- Any other special arrangements agreed upon between you and your landlord.
4. Calculate and track your shared rental expenses:
To effectively manage and keep track of your household finances, it’s important to have an accurate estimate of the expenses you both will share. Consider creating an expense tracking spreadsheet of all the bills you and your roommate will need to account for each month.
Aside from rental and utility fees, be sure to include other household expenses that you are likely to share, like cleaning supplies, laundromat and internet services.
In your spreadsheet, keep a separate column to track any individual household expenses you or your roommate may have. Doing this will allow you to fairly divide all costs, keep track of how much you’re spending and effectively settle your accounts each month.
5. Establish an agreement on how to split expenses:
There is never one correct way of splitting expenses in any shared household. Some roommates may prefer to split expenses equally down the middle, while others might prefer to divvy up expenses according to usage.
To determine which would be most appropriate, it’s important for you and your roommate to agree on what constitutes as a shared expense.
While it might make sense to consider a 50/50 split for rent, utilities and shared items like toilet paper and cleaning supplies - doing the same for other living expenses like food, on the other hand, might not be such a good idea.
In the case of a roommate working from home and utilizing a higher percentage of the internet or electricity, it might beneficial to divide expenses proportionately and have that person pay a higher percentage of those service bills.
Whichever way you decide to divvy up the household expenses, the most important thing to ensure is that all members of the household agree and are comfortable with the arrangement.
6. Determine a suitable payment method:
When it comes to making the actual payment, there are many ways to ensure all household bills are paid on time. Consider having one person in charge of paying all the bills.
Alternatively, should you both prefer to shoulder the responsibility, then consider splitting the number of bills that need to be paid equally between you and your roommate. For this method to be successful, it is important to ensure that the full amount of money required for each bill is paid directly to the roommate in charge and in a timeous manner.
Another suitable payment method is to have a joint savings account for the household. By having a joint account in place, you and your roommate can easily deposit your portion of money into the joint account and have each of your household bills automatically debited from the account each month. This method is a great way to ensure that all household expenses get paid on time and it is also a safer, hassle-free way of making payments.
7. Buy your furniture separately:
While it may seem like a great idea for you and your roomie to split the cost of furniture, it’s important to consider how these items will be shared in the future, should either of you decide to go your separate ways.
Ideally, the best way to divvy up the cost of furniture is for each roommate to purchase individual items rather than splitting the costs down the middle. Decide what pieces of furniture are required for the apartment and come to an agreement on who will be responsible for purchasing each of those items.
While household items such as couches, coffee tables and pots and pans tend to be equally utilised by both roommates, it is still advisable to purchase these items individually. Doing so will help to avoid any issues on ‘who owns what’ when you move out.
8. Avoid sharing grocery costs:
Splitting the cost of food with your roommate can be tricky, especially if you both have different eating habits or dietary requirements.
Should you and your roomie share a few staple pantry items like milk, bread, butter, food seasoning and cooking oil, combining budgets to split the expense can be a cost-effective decision. For other foods, however, like your favourite cereal, soda or preferred protein, it’s advisable for you and your roommate to check out at separate counters. Buying your groceries separately will not only let you keep track of what you’re buying and how much you’re spending, but it will also eliminate the chances of your favourite snacks going missing.
In the instance where you and your roommate may decide to have a shared meal together, consider contributing equally towards the cost of the ingredients to avoid any spending discrepancies.
9. Remember the bottom line:
While having a roommate should be more fun than fuss, there are bound to be several occasions when rules will be broken.
The key to avoiding unnecessary roommate drama is to always face these situations head on, to prevent issues from blowing out of proportion. If something is bothering you, it’s important to say so immediately to prevent problems from festering.
Speaking about your issues as they arise in an honest, polite manner and trying to offer helpful solutions will contribute towards a healthy living situation and prevent unnecessary squabbles.
