Sharing Expenses with your Flatmates by Ed Shin, Editor

Tuesday, 13th January 2009

Finance can be a very touchy subject and as such it is always good to approach it with your flatmate at the earliest possible opportunity and have a clear understanding of each one’s financial responsibilities.

 

Some of the areas that you would want to discuss with your flatmate include:

(i) the percentage of rent that each one needs to contribute

(ii) when and how to pay for the rent

(iii) payment of utilities bills and council tax (should these not be included in the rent)

(iv) the amount of cash reserve for emergency (optional)

 

Decide on percentage of rent share

Consider factors like facilities and amenities that are being provided, the extent or amount of maintenance you’d need to look into and also the duration of your stay.  You would also need to take these factors into account if you are the house or flat landlord. It’s always advisable to have a written agreement in place in flat share or house share arrangements that clearly states the amount of rent you’re required to pay along with the other terms as necessary.

 

If you’ve rented just a room without availing other amenities like cleaning, food, etc, you could work out a deal with smaller percentage. Sharing facilities and amenities would likely hike the percentage of rent. For example, in a 2 bedroom flat/house with furnishing, private bath, phone facility, TV, closet, washer/dryer, Internet and cable.  If you’re sharing only a room and bath, you may want to negotiate a lower proportion of the rent.

 

As a side note, if you’ve decided to rent a place together with a friend, assuming your amenities are at least fairly similar, it may work out better to share the rent 50-50 to avoid niggling hassles.

Payment mode

Now that you’ve decided on how to split the rent and bills and other expenses, how do you pay for it? Obviously, most rents these days are paid by direct debit (automatic withdrawals from your bank account), but it’s still common to pay by cash or even cheque. Monthly bills are a little more difficult, particularly as the amounts usually vary from month-to-month (every 3 months these days for most utilities). The easiest way is to make sure someone has set-up the relevant direct debits (usually the most responsible person in the house!) & that the difference is paid by other sharers at the end of a pre-agreed period; usually monthly or quarterly.

 

Try to maintain an accounts book and record every expense and transaction that happens related to the flat or house you’re sharing. It need not be something very fancy. It could be just a notebook with detailed entries. That away you avoid the petty squabbles!

 

Be prepared for these kinds of eventualities though - disputes over money issues are more common than you think. Just remember that when these situations come up, it is always best to talk it out and arrive at an understanding. Consult the accounts book and payment receipts. Sort it out amicably and work on how best to prevent such situations from occurring in future.

Paying for bills and maintenance

Once you’ve settled on the rent share, turn your attention to budgeting for household expenses like food, utility bills, and maintenance.  Again consult each other and work out a solution that’s suitable for everyone. You may decide to split the bills evenly or proportionately or even itemized for some expenses like phone bills. Create a budget once you have a fair idea of how much the regular or mandatory expenses are each month.  (It can take two or three billing cycles to get the pattern of expenses familiarised.)

Some bills like water, electricity, gas, cleaning can be split evenly while some like telephone and internet bills can be paid as per usage by each flatmate.

Again, it’s preferable to maintain an accounts book to track expenses. It can be a pain but at the very least come to an agreement right from the start on how bills should be split and how they would be paid. This will help avoid conflict later on.

Unexpected or emergency expense

When you’re sharing flats or houses, you should always keep a little bit of cash in reserve in case something comes up. This ensures that you’re not caught off guard and able to meet emergencies head-on, especially if costs exceed your deposit. Broken furniture, repairing or replacing appliances are some of the things we’re talking about.

 

Decide on how much cash reserve to set aside each month. You could decide on a certain percentage of the total rent to be contributed by all of you (in case you’re sharing the flat/house with more than one person). Or, set it to a fixed amount on a weekly or monthly basis. And if you’ve built up a substantial cash reserve with no emergency, you could splurge on a party sometime.

 

In case you don’t build a cash reserve, there are obviously other short-term measures to handle emergencies, such as using credit cards or borrowing from family and friends. But be sure of how you plan to repay it. Discuss with your flatmates on how best to finance what is needed and how to split the cost when the emergency has been taken care of.