Renting with a roommate presents a whole new category of issues (legal, social, emotional, and financial). It requires a major shift in habits, relationships, and attitudes for everyone involved, even if it’s long-time buddies. It is not surprising; therefore, that many roommates are afraid to discuss the dreaded “M” word-“money.”
Money is a highly contentious topic in any relationship, so it’s understandable that roommates have a hard time discussing it. Most roommates do engage in some form of the “rent payment” talk with their potential roommates; however they neglect to have any real serious talks about money issues later. This simple mistake can often have serious financial and legal consequences.
What areas am I talking about? Take a look at the three most contentious areas when it comes to money and roommates.
Splitting the Utilities (or other shared bill):
It is safe to assume that you and your roommate have the rent payments figured out. They are usually spelled out in written agreements; however utilities often are left to the roommates to decide. This leaves a lot of wriggle room that can potentially lead to a lot of problems, especially if the bill is variable (like an electric bill)
- If a roommate gives their contribution to you for the bills, keep a written record of that payment and have them sign it as a record of receipt. This way when you have a disagreement, you have your record of what was paid and when.
- If a roommate pays their own part of the bill, have them provide a copy to you as proof of payment.
- If the bill has a variable range (like an electric bill, which goes up and down depending on season), establish a minimum amount that must paid. This may take a little guesswork and negotiation but is worth the effort. One of the most common arguments roommates have is over the payment of a bill, such of an electric or cell phone bill.
Despite our best efforts, unexpected expenses and changes in income (ranging from plumbing problems that cause major damage to job loss) can happen at any time, especially over the 12 months of a traditional lease. Since you can’t predict the future, the only way you can deal with the chaos is through preparation and communication. The best way to deal any unexpected event is co
- Communicate issues that can immediately or as soon as possible. The earlier you and roommate can work together to find a solution the better. Delaying communication only leads to potentially losing more money as well as your relationship.
- Consider getting renter’s insurance. If your budget can afford it, renter’s insurance is a wise, inexpensive investment that will provide coverage for your property in case of fire, and theft.
- Another option is to create your own kind of “insurance” through an “emergency fund”. Stashing away a couple of bucks in a high-interest checking or savings account for a rainy day may come in handy when the unexpected happens.
Sometimes relationships don’t work out and when they don’t friendships and your money get hurt.
- If you see things are not working out, try all other avenues to resolve the conflict before separation. Moving out has a lot of legal, financial and social complications that many people don’t realize. Taking the time to try to work things out can save a lot of hassle over the alternative.
- If these avenues don’t work, plan the “exit strategy”. The “exit strategy” is easier when the lease is up (return any deposit usually) ; however if a roommate wants to move out before the end of the lease you will need to discuss how this will impact future rent payments, deposit and any unsettled financial matters.
Discussing items like this can be daunting; especially with someone like a trusted friend; yet it needs to happen. You don’t have to discuss all of the above issues at one time, but you need to be aware of them. Countless roommates have ended up in court because they didn’t take the time to address the issues. Taking a few minutes to have a conversation is surely worth the effort.