How to successfully manage money with roommates

While some of us may actually like living with roommates, many do so out of sheer necessity. For many young 20-somethings still trying to figure out this thing called life, having a roommate is the only way to afford living on your own. Living expenses can add up and splitting the cost with a roommate or two can help lessen the load tremendously. However, it doesn’t come without challenges.

My first experience living with roommates was during college. I had moved off campus and rented a big house with 5 other people. While it was fun, it was definitely difficult at times with the mix of personalities. One thing that was always a sore subject was money. Who paid for what and how much exactly? Managing money with roommates can be challenging, especially if you have differing financial mindsets. Here are 5 tips to help you successfully manage money with roommates:

Make sure you are all financially compatible

It is difficult to find good roommates. And sometimes you don’t have much of a choice if you’re in a rush to find someone. But make sure you pick a good roommate if you can. Ask questions. What is their employment situation for instance? Can they afford XYZ bills? How much rent can they afford? You should be financially compatible in an ideal situation. You don’t want to be the one stuck paying the bills and vice versa.

Set expectations early on

Sit down with all your roommates and set expectations as soon as you move in or even beforehand. Have an open discussion about your household expenses. What will be shared expenses? Will you be splitting all bills equally? It’s important to cover all the basis (or at least try to) and get this talk out of the way right from the start. You don’t want unexpected financial issues to create an awkward living situation.

Create a household budget

Just like your personal budget, it’s a good idea to set a household budget. Estimate utility bills as well as monthly expenses. Consider everything from electricity to toilet paper. Also leave a little extra room for any surprises that might arise. Everyone should have a clear picture of how much they are expected to contribute monthly.

Designate a “Money Manager”

Especially if there are more than two people living in the space, it’s a good idea to designate a “money manager” or someone who is responsible for managing the finances. It’s helpful to have a point person who will pay the bills and keep track of the budget. This is added responsibility so consider giving this person a small discount on expenses to reward them.

Be open and honest with each other

Lastly, the most important thing to remember is to be open and honest with each other. Keep communication open. It can be uncomfortable to talk about finances with roommates but it must be done. Otherwise, you’ll find yourself living in a negative environment.

Source: Businessday