Getting the Most Out of Living Together: 5 Tips for Managing Money With Roommates

Living with a roommate — whether you choose to do so with a friend, family member, romantic partner or stranger — can be an exciting prospect. Unfortunately, roommate scenarios aren’t always perfect, especially if financial disagreements arise. To sidestep these challenges, let’s look at ways you can go about managing roommate finances to make your experience a positive one.

The U.S. Census Bureau reported that more than 81 million adults aged 18 and older lived in shared households in 2019. There’s a lot to consider before signing a lease and living with another person.

You’ll want to make sure that you’re financially compatible. You can start by asking your prospective roommate questions like the following:

These types of questions can open the lines of communication between you and your roommate and help you feel confident that you’re a good match for one another.

Before moving in together, it’s important to determine how to set up finances with a roommate. Will one of you pay the rent while the other pays the utilities, internet, etc.? Or will you divide all of the bills down the middle every month?

Whether you’re a first-time renter or already have a place and want to take on a roommate, think about how you’ll divide your costs for these items:

• Rent or mortgage
• Utilities (electric/gas)
• Water/trash
• Internet
• Groceries, toiletries, bulbs, kitchen items and other essential needs
• Maintenance costs and HOA fees (if buying)

After deciding how to split your bills, consider writing everything down. Outline your joint monthly bills and other expenses, which roommate is responsible for paying what bills, the amount each roommate will pay and due dates for those bills.

If you’re short on time or prefer using technology to manage your finances, consider free apps, such as Splitwise or Mint, designed to divide expenses, transfer money, share costs and track spending.

According to a 2018 FINRA Foundation’s National Financial Capability Study, 44% of respondents felt that discussing finances with others was stressful, while 53% said that even thinking about finances made them anxious.

While financial discussions aren’t easy, particularly those involving rent payments, they’re typically crucial in helping you and your roommate determine the best ways to manage important expenses.

Remember that leases often contain a “joint and several liability” clause. This clause states that each person signing the lease is responsible for each month's total amount. In other words, if one of you doesn’t pay their portion for one month, the other has to pay the entire rent amount by its due date. So no matter how uncomfortable the discussion might be, it is one you should have.

Many landlords require their tenants to maintain some form of renters insurance coverage.

Renters insurance generally covers liability costs if you’re at fault for property damage or injury to others. It also covers your personal property and living expenses if you’re displaced from your home.

You’ll want to discuss how to manage renters insurance with your roommates or purchase coverage on your own. Here are some questions that can help you decide:

Whether you decide to purchase joint or separate policies, it’s good to note for budgeting purposes that the average cost of renters insurance is about $13 per month when paying a $500 deductible for $100,000 of liability coverage and $20,000 of personal property coverage.

Falling behind on your rent can present a myriad of problems, including expensive late payment fees and the possibility of eviction. Unfortunately, this could occur if your roommate doesn’t pay their portion of the rent on time.

If you find yourself in this situation, consider the following steps for having a healthy and productive conversation with your roommate:

If your roommate continuously fails to pay their portion of the rent, you’ll have to decide how to move forward. You typically can’t evict your roommate, so it’s important to discuss the possibility of them exiting the lease willingly with your landlord’s approval.

As a worst-case scenario, if your roommate won’t leave and won’t pay, you might have to consider taking them to court.

To have the best chance of saving money and living with roommates, you need to pay your bills in full and on time.

Clear communication, organization, budgeting and financial planning between you and your roommates can go a long way in helping you tackle living expenses while saving money in the process — and having a positive experience together.