Messy tenants renting house.
Welcome to our Gen Y money blog, where a recent grad chronicles her real-life journey to becoming a financially independent adult.
Rent eats up the biggest chunk of my paycheque by far. Until recently, I've been able to manage the high cost of living in downtown Toronto and keep a lid on my hydro and Internet bills by living with roommates.
Managing money with roommates isn't difficult when all parties involved are respectful and cooperative. I've been in a couple of great living situations that have been nothing but smooth sailing on the money horizon, regardless of whether or not we were compatible otherwise.
On the other side of the coin, I've also been faced with some deep financial implications as a result of not being able to manage finances well with roommates. I was recently left scrambling to find a replacement roommate due to a roommate announcing an earlier-than-expected departure from our original living agreement. Despite making three offers to prospective replacement roommates, none were able to make the commitment, and I was suddenly faced with the responsibility of covering double the bills.
Fed up with having much of my financial stability in the flaky hands of others, I decided to suck up the costs and find my own place to rent, where all my living expenses could be back in my control, and my control only. Between covering the extra housing costs on my old apartment, paying first and last rent on my new place, and moving costs, I ended up having to front over $4,000 more than planned in my annual budget.
This bad roommate experience raised some questions on my end. What was different about this living situation? Why did it end up the way it did? Could I have avoided it completely?
I've picked out four tips that have made my successful roommate situations work well.
Set clear rules and expectations. When drawing up a roommate agreement, clearly establish how house costs will be divided, when everyone is expected to pay-up, and the consequences if these expectations can't be met. On top of utility and Internet bills, also consider expenses like toilet paper, cleaning supplies, groceries, and so on. Even if you've thoroughly discussed household finances, write your house rules down and make copies available – this will ensure that everyone is on the same page and won't allow for any "misunderstanding" excuses.
Communicate openly. As entertaining as passive aggressive roommate notes can be, it's no way to effectively communicate with the person you live with. Even if you and your roommates are on different schedules, make time for face-to-face conversations so you can check-in and ensure all parties are content with the living situation you've created. It's okay to be flexible and modify your house rules to better fit your living situation, but always be clear and direct.
Buy your own furniture and groceries. In my best roommate arrangements, there was clear ownership of everything in our house. This not only eliminated the question of "who's taking the TV" when someone moved out, but it also encouraged mutual respect – if a house item, be it a blender or a couch, had been offered by a roommate to share with our household, we had a rule in place to treat it as if it was our own. Similarly, keeping groceries on individual bills will allow you to better manage your own personal budget and will keep a lot of grey area out of your home finances.
Track everything. Even in my great roommate situations, I kept record of all my payments to ensure everything was adding up. This practice allowed me to quickly and easily reference incoming and outstanding payments. While my preferred method of managing house money was through Excel spreadsheets, there are a number of apps for splitting and tracking expenses that you can use – find a method that works for your household and stick with it.
Being $4,000 in the hole as a result of a roommate situation gone wrong is not fun – I've had to cut back on my spending and indefinitely postpone my trip to England to make it work. However, I'm thankful that I've had a range of roommate experiences to teach me about both good and poor money management.
Living with others can help keep your money tank topped-up, but I have to admit – I'm glad that I'll be in the driver's seat from here on out.