Money – Apartment ABC

Moving in with a roommate is a great way to save some money on rent and utility bills. Although roommates are generally expected to help each other out when it comes to rent and the various expenses, you may experience some issues at least once during your co-tenancy regarding money and how you are supposed to split everything fairly so that no one feels overburdened. One of the most common disagreements among roommates is how to split bills in a manner that will leave you and your roommates satisfied. How to split bills with roommates? 1. Establishing the ground rules 2. Determine who is in charge of collecting the bills 3. Dividing the rent fairly 4. Accounting for the amenities 5. The security deposit 6. The utility bills 7. Getting everything in writing 8. Discuss the variables that may arise 9. Take advantage of roommate apps to manage expenses 10. Expenses to keep separate Even before you move in together, the first thing you should do is to discuss the various costs and bills that come with apartment living with a roommate(s). It is important to be upfront about what expenses need to be taken care of and if every roommate can comfortably pay the amount. The next step is to split the bills in a manner that will ensure everyone is happy. There are many reliable roommate apps that you can use to manage the various expenses such as Splitwise and Venmo. Consider a written agreement that details how you plan to split the bills in order to prevent disagreements in the future in addition to serving as a guide for a new roommate that may move in. Renting an apartment is no walk in the park. Other than the rent, you also have to pay a number of bills (electric, water, internet) which can quickly eat into your budget. One of the most convenient ways to alleviate these expenses is by getting a roommate or two. In fact, the more co-tenants/roommates you have, the better the apartment you can afford. However, navigating the conversation about money with a roommate can be a bit tricky. One of the challenges you will face is splitting the utility bills and establishing the amount everyone is expected to pay. Read on to find out how you can go about splitting the bills with roommates in the right way and avoid conflict. Splitting the bills with roommates in the right way 1. Establishing the ground rules When it comes to the expenses that come with living in an apartment, the first step should always be establishing ground rules and guidelines. To do this, have an open and honest conversation with your roommates regarding the bills you are to pay before moving into the unit or sign the lease. Ensure you are straightforward with each other about what needs to be paid. It is also important to determine when and how the bills are going to be collected, as well as how they will be paid and whose name is on the bill. 2. Determine who is in charge of collecting the bills Having different people be in charge of the various bills may seem like a great way to stay organized, but such a system could get messy and cause confusion. Instead, opt to allocate the duty of making payments on the bills to one person. The responsibilities of the chosen person will include reminding everyone of the amount they owe and collecting the money/checks in good time. This system makes the organization of payments much easier, especially if you have several roommates. 3. Dividing the rent fairly Your roommate may have a larger bedroom that contains an ensuite bathroom while your room is barely big enough for a single bed. In such a scenario, paying the same amount for rent may not be entirely fair. When there is a large difference in living space, it may only be fair that each individual’s portion of the monthly rent should reflect the perks or downsides of the room that they occupy. To be more precise when it comes to splitting the rent bill, making the rent directly proportional to the size of the private space of each roommate may be the way to go. This will involve calculating the square footage of each bedroom and dividing it by the total size of all the bedrooms, and then multiplying whatever you get by the total amount of rent due each month. For example, if you live with a roommate in a two-bedroom rental unit that costs $3,000 per month where one bedroom is 190 square feet, and another bedroom that measures 230 square feet, then whoever gets the bigger room will have to pay 55% of the total rent, while the other roommate will only pay 45% of the rent. 4. Accounting for the amenities Calculating the amount to be paid by each roommate according to the square footage is relatively easy, but if you want to go a step further and take amenities in the various bedrooms into consideration, it is easier to use general rules of thumb to determine the differences. For a bedroom that comes with an ensuite bathroom, add a small fee of 2%. Therefore, for a $3,000 apartment, this would be an additional $60 per month. When it comes to walk-in closets, simply calculate the total square footage of each bedroom, making sure to include closet space, and then divide whatever you get by the total square footage of all the bedrooms. Other features that you may want to take into account when it comes to each private space include a fireplace, a view, and exposed brick. For these details, simply add 1%. If the rental unit costs $3,000 per month, this would be $30. 5. The security deposit The simplest option when it comes to managing the security deposit is for each roommate to chip in the same amount before or during the lease signing. When the time comes to move out of the unit, this amount should then be redistributed equally. However, this strategy may get complicated especially if the landlord decides to withhold a portion of the security deposit due to the damages inflicted to the unit by one roommate, or if one person moves out and the other individual still in the unit finds a new roommate. If your roommate is at fault for causing damage to the unit, then you have every right to ask them to reimburse your portion of the deducted amount from the security deposit. 6. The utility bills When it comes to the utility bills, consider splitting it equally among each other. This is usually the easiest option since it is not easy to distinguish the portion of utilities used by each roommate. However, some households prefer to split the cost of utilities based on the income of each roommate. In this case, the roommate that earns more money is expected to contribute slightly more than the rest towards the bills. Another option is for the roommate with the larger room to cover some of the utility bills such as the cable, electric, and internet bills. This way, they pay a bit more for the perks that come with having a nicer bedroom. 7. Getting everything in writing Once you come to an agreement on how you are going to split the bills, make sure that one of you puts this arrangement in writing. A written and signed contract is ideal, but a simple email can also do the trick. Having a written agreement is essential in preventing any confusion in the future, as well as in acting as a guide in case a new roommate moves into the unit. 8. Discuss the variables that may arise It is important to take into consideration any scenarios that may potentially arise when splitting bills with roommates. For instance, what if one of your roommates goes on a prolonged vacation and decides to sublet their room? It is important to discuss scenarios like this and come to an agreement on what to do in case they arise. 9. Take advantage of roommate apps to manage expenses There are many apps available today that roommates come in handy to aid you and your roommate(s) manage the various bills that come with living in a rental unit. Some of the apps you can use include: Splitwise - This is a free app that is available for both iPhone and Android and is ideal for situations where you are constantly sharing expenses. It is free and can work for a variety of things, including rent and bills. Splitwise works by allowing you to input the aggregate of a number of bills and divide them up either by percentages or equally so that you can request the resulting amount from your roommate. Using Splitwise allows you to reimburse each other all at once instead of broken down payments. In addition to this, the app sends reminder emails to prompt you to make payments so you won't have to keep asking your roommates for their portions. You and your roommates can decide how often to settle the expenses. Since you can’t make payments on the app, you will need to use cash transferring tools such as Paypal. https://youtu.be/Rt0xtO3vcaw Venmo - Venmo is another great option you can use when you have a roommate or two that is free to use. Venmo works by letting you pay or charge your friends as easily as you would text them. For example, if you covered the full electric bill and you want your roommate to reimburse you, simply charge them for their share of the bill on the app and they will receive a reminder that notifies them to pay you. You can connect your bank account to Venmo, allowing you to easily transfer cash. Homeslice - HomeSlice is an app that tracks and splits bills by creating a network for you and your roommates, along with tracking supplies and the chores to be taken care of in the apartment. To use HomeSlice, you will be required to provide the due dates for all the bills and then it will remind every occupant of the apartment when they need to pay up. Just like Splitwise, you cannot execute in-app payments so you will need a reliable cash transfer tool. IOU - This is a debt manager app that helps you to keep track of all the debts to your roommates. IOU provides you with the option to upload expenses and share them equally among each other, as well as send email reminders so that everyone pays on time. You can also add recurring IOUs for bills to be paid on a monthly basis in addition to creating a payment plan so that your roommate can pay whatever he/she owes in small increments over a period of time. SettleUp - This is another convenient app that allows you to keep track of the expenses you share with your roommates. It clearly shows how much is supposed to be paid by each individual in addition to minimizing the transactions to be made. All the expenses to be paid are backed up and synced so that all the roommates who are included in the group can see them. Zently - Zently is useful in helping you manage household expenses in order to ensure all the bills are paid in a timely manner. It does this by keeping track of utilities, rent, and groceries, allowing you to share the cost among your roommates. You have the option to custom split if one roommate has a bigger debt. Zently also allows you to connect a debit or credit card directly to the app to settle up balances you may have at the end of every month. 10. Expenses to keep separate While you can save a lot of money when you share expenses with your roommates, there are some items you will want to buy separately: Furniture and other household items - It may seem easier to share the cost of buying a new couch with a roommate, but when the time comes to move out, you will have a hard time deciding who gets it. You will also want to buy TVs, appliances, electronics, and utensils individually so that you have no issues over ownership when you move out. Grocery shopping - It is easier to shop on your own or use two separate carts when you go grocery shopping with your roommates especially if you have different eating habits. Final Thoughts Sharing a rental unit with a roommate isn’t always easy, but it has its perks. It allows you to save up on some money and live in a nicer apartment than you would have if you lived alone. However, it is important to split the rent, utilities and any other bills you may have in a fair manner so that you and your roommates remain civil. All you have to do is come up with a written agreement to reinforce your arrangement or simply use the many apps available to split the bills among you.