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Managing Money With Roommates – 9 Do’s & Don’ts

With Americans waiting later to get married, many young adults live with roommates to reduce their housing costs.

But living with other adults isn’t easy. They can be dirty, loud, or simply abrasive. And, of course, they don’t necessarily have any financial literacy. They may never have the rent on time or continuously argue over shared expenses. It makes for a miserable living environment.

If you want smooth financial sailing with your housemates, follow these simple dos and don’ts.

Roommate Money Management Dos

No matter the personal dynamics between you and your roommates, make sure you all understand and adhere to some simple ground rules. If you can’t have these conversations with your housemates — and agree on these rules — you shouldn’t be living together anyway.

1. Do Establish Financial Rules & Expectations Before Moving In

Before you even sign a lease, sit down with your roommates for a money pow-wow.

Among other roommate screening questions, get clear about each other’s personal finances. Ask questions such as:

  • What’s your monthly income?
  • Is it consistent every month, or does it fluctuate? By how much?
  • How secure is your job? How long have you worked there?
  • How much do you have set aside for an emergency fund?
  • What’s your credit score? Is it high enough for us to be approved collectively when we submit a rental application?
  • Do you have student loans, credit card balances, or other debts that impact your ability to afford the rent and utilities?
  • Which household expenses do you expect to share?

You can’t afford financial privacy when you share housing expenses. You need to make sure your housemates can actually afford the rent.

If your roommate loses their job or their income dips and they don’t have an emergency fund, you could get stuck with the rent and utility bills.

See the “joint and several liability” clause in your lease agreement. The short version: Each roommate is responsible for the rent in its entirety, and the landlord can hold all roommates liable for any rent shortfall.

In other words, the landlord doesn’t see your rent in terms of each roommate’s “portion.” It’s simply a bill you must pay, and you’re all on the hook for all of it.

2. Do Put One Roommate In Charge of Paying Shared Bills

Nominate a responsible roommate to pay the rent and utility bills in full each month. Everyone else must pay that person their share of the rent before the due date.

Stick with electronic payments such as PayPal or Venmo, if possible, to create a clear paper trail. It’s all too easy to dispute whether a cash payment was made, what exactly that cash was for, or how much cash changed hands. You can also try apps such as Splitwise.

Sign a simple one-page agreement among your housemates. Everyone agrees on the shared monthly bills, when you must pay them each month, and who collects the money and pays the bill.

Most important of all, establish consequences for any roommate who fails to pay their share. The first offense could result in that person taking on all household chores until they pay in full. The second offense could mean ejection from the house at the end of the month. Set your own rules, and enforce them if you want your housemates to take them seriously.

Finally, if one late payer causes the rent or bill to be late, they become entirely responsible for the late fee. The other roommates should not shoulder that expense if they paid in their money on time.

You can create a shared checking account, but nominating one person to assume bill-paying responsibility creates stronger accountability. Besides, the simpler you can keep your finances, the better.

3. Do Buy Furniture Separately

Keep it simple. If you buy the couch, you get to take it with you when you move out.

Understand that shared furniture may take some wear and tear or even abuse. Don’t buy anything so nice you’d be heartbroken if your housemate spilled wine on it.

Discuss upfront with your roommates who plans to buy the various pieces of furniture needed for the apartment. Consider buying used furniture to save money and heartache. It’s a lot easier to accept a broken spring on a cheap secondhand couch than a brand-new piece of designer furniture.

4. Do Create & Publicly Post a Shared Expenses Chart

If sharing expenses get confusing, keep track of who owes what by creating a chart each month and keeping it on the fridge. List everyone’s name along with columns for rent and utility costs.

As people pay for the month, cross their names off the list. Everyone knows who has paid and who still owes, which motivates everyone to pay on time.

Discuss this as part of the pre-move-in financial conversation. If you do it without warning, your roommates might feel attacked, which won’t solve your problems.

5. Do Check Out at the Grocery Store Separately

There’s nothing wrong with shopping for groceries together. But that doesn’t mean you should check out together and split the grocery bill down the middle.

Buy the groceries you plan to eat for yourself. If you plan to make a shared meal together, assign everyone a different portion of the meal to make, like any other potluck. When it comes time to cook, everyone who wants to eat has something to contribute.

Alternatively, have each roommate cook communal meals on a rotating schedule. All the ingredients are the chef’s responsibility to avoid confusion. Just be prepared to find some differences in cooking quality depending on your housemates’ skill levels.

For communal items like toilet paper and cleaning supplies, collect money beforehand and check out for these items separately. Put the change in a shared till for these expenses or split it as a refund. Try to buy in bulk so you don’t have to hassle with communal expenses often.

6. Do Keep Records of All Shared Bills

Keep a folder (digital or paper) with all shared household bills in it. In most cases, this only includes utilities. You need a record of past monthly bills in case one roommate challenges or questions them after the fact.

Collecting money from your housemates and paying each bill on time is a thankless job — and one that can haunt you if your housemates question you later about the actual bill costs and payments.

Roommate Money Management Don’ts

To make for a happy household, watch out for these common pitfalls.

1. Don’t Split the Cost of Furniture

It might sound like a good idea for everyone to split the cost of a living room set. It’s not.

You and your roommates will move out one day, and you can’t cut the couch in half. If you do split the cost, be prepared to leave it behind, trash it, or sell it on Craigslist.

To keep contributions fair, discuss who plans to buy what furniture ahead of time, and make sure everyone contributes beyond their bedroom. For example, you could divide up furnishing responsibilities by room. One roommate could buy the dining room furniture and another the living room furniture.

This way, you each pitch in and have clear possessions to take with you when you move.

2. Don’t Leave Passive-Aggressive Notes

I’ve seen toxic roommate relationships where one person loves leaving notes to nag or yell at the others or avoid having a hard in-person conversation:

  • “Dishes in the sink need to be cleaned (smiley face)!”
  • “Don’t leave leftovers in the fridge for more than 3 days (winky face)!”
  • “I’ll be late on the utility bill this month (frowny face).”

Puke face.

Part of being an adult is learning how to solve problems openly and directly, even in awkward conversations.

If you have a problem, need help, or just want to see a change in the house, talk about it in person with all roommates present. Odds are that your roommates are happy to help as long as you’re understanding, polite, and direct.

3. Don’t Pay Bills Until Everyone Contributes

Never pay the rent or utility bills until all housemates have paid their portion. Otherwise, it doesn’t force the issue. They can keep skating forever and leave you in the miserable position of debt collector.

If you pay the rent and collect from your roommates, make it clear that you need their shares in advance or you’re going to have to look for new roommates. Keep a record of all payment confirmations and receipts to prove the bill was paid.

Remember, if one roommate causes a bill to become late, that roommate becomes responsible for the entire late fee. Write it into your roommate contract.

Final Word

While living with roommates isn’t always easy, it’s certainly cheaper.

As a younger man, having a housemate helped me boost my savings rate. Later, when I bought my first home, I brought in a housemate as a form of house hacking to cover the bulk of my mortgage payment.

Plan ahead, communicate directly and openly, and housemates can not only help you save money but also become lifelong friends. Get it wrong, and your home can become a nightmare, leaving you grasping any excuse to avoid spending time there.

G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.

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