7 Tips for Managing Money with Your Roommate
Living with a roommate certainly has its perks, such as having someone to split the bills with. But like with any relationship, financial conflicts, if not handled proactively, can make your life miserable.
Whether you’ve been living with your roomie for some time or are about to move in with a new one, use these expert tips to get on the same page about money and prevent a conflict-filled countdown to the lease’s end.
- Have the money talk immediately
As soon as possible, discuss who’s responsible for which expenses and how they’ll be paid. Will you split all costs 50/50? Who will put down the deposits on utilities and make sure those bills are paid? How will you reimburse each other, and how quickly?
Determine what are joint expenses, agree on those few things, and everything else becomes an individual decision, with individual responsibility. Joint expenses usually include rent, utilities and possibly renters insurance. It helps to be clear about how you’ll handle other expenses — from liquor to toiletries . It sounds a bit petty to label everything, but ….this avoids conflicts.
Keep in mind that expenses that may seem crucial to one roommate, such as patio furniture or houseplants, may seem unnecessary to the other. So don’t count on splitting all costs until you discuss what you’re each willing to spend money on.
- Decide how bills will be paid
Will you each handle specific bills, or will one person pay everything and get reimbursed? It may be wise to designate one person as the “chief financial officer” who will be responsible for paying the joint bills. If you go that route, agree how the person paying the bills will be repaid.
Roommates may want to consider having a joint account just for paying bills. There are also tools that help make it easier to share some bills. For example, you and your roommate can split your rent payments by using Renthwoo so one person isn’t always on the hook for it all.
- Think carefully about groceries
Meltdowns can occur between roommates over something as seemingly minor as who drank the last drop of milk. Food can be a major point of conflict, so take the time to discuss how you will buy and consume groceries. Will you split food costs equally, leaving anything in the fridge and pantry as fair game? Or will you buy food individually and make each other’s food off limits? Or perhaps you’ll split and share staples, but the person who finishes it has to buy it next time. Create a plan, and stray from it at your own peril.
- Discuss the end of the lease now
As you cover all of these initial decisions, you may also want to think about the end of the lease. I’d recommend setting guidelines as to what happens when the roommate relationship ends, as far as advance notifications, final bills and subletting, A roommate relationship may come to an end, but that doesn’t mean a friendship has to!
If you aren’t sure how long you’ll want to live together, consider designating a time frame, say after six months, to check in and talk about the future.
- Put it all in writing
Once you’ve arrived on the same page about money matters, it’s wise to create and sign a roommate agreement. That way, in the future, if something comes up, you’ll have a document you can refer to. I think in general laying out the rules will help avoid not only financial conflicts but conflicts in general. It’s ideal if you can have this agreement created and signed before you sign the formal lease.
- Track your expenses
Keeping tabs of your joint expenses helps prevent conversations that end with, “You owe me the money”. Start tracking your joint expenses from day one. You can use an Excel spreadsheet or a Google sheet, or mobile apps like Splitwise to track and split costs.
- Keep the conversation going
Creating the roommate agreement shouldn’t be the last time you discuss important financial matters. The dialogue about money needs to be ongoing. To keep conflict at bay, don’t avoid talking about finances. Continue to check in with each other, discuss problems early on and refer to your roommate agreement to help settle conflicts. It’s a part of growing up!
Aside from keeping peace in the household, managing your finances is also crucial if you’re saving up to buy a place of your own.