For many people, especially those starting out on their own for the first time, living with someone else makes fiscal sense. Not only can you split costs, you can also use the money you’re saving to prepare for your future.
However, before you sign a lease with someone, consider the pros and cons of living with a roommate and decide if this type of housing situation is right for you.
The Financial Pros of Roommates
Living with roommates comes with many financial benefits. In some cases, the savings can be worth not having an entire home or apartment to yourself.
You Can Afford a Better Space
When you live alone, you must take your income and expenses into account before deciding on a housing situation. Unfortunately, you may not be able to afford housing in the area you want or get a place with as much space. With a roommate, however, you can share costs and possibly afford more of what you’re looking for.
Talk to potential roommates ahead of time to understand their monthly housing allowance. Compare their contributions to yours to decide if you can afford the type of living arrangements you’re looking for. Instead of a studio apartment, for instance, you may be able to find a two-bedroom with more living space.
You Can Split All Costs
Another benefit of living with a roommate is that you generally split not only the rent, but all housing-related costs, including:
Splitting costs can lift a huge financial weight from your shoulders. With your newfound savings, you can allocate more money toward other expenses, such as your education, a dream vacation, or retirement savings.
You Can Pay Off Debts
If you’ve just graduated from college or are starting out on your own, you may have some debt to pay off, such as student loans. On a tight budget, it may be hard to manage your bills.
When you spend less on your living arrangements, you can use the savings to pay off debt.
You Can Build an Emergency Fund
Do you have an emergency fund to cover unexpected expenses, such as car repairs, medical bills, or loss of a job? If not, you’re not alone. A national survey revealed four in 10 adults would have trouble paying for an emergency expense, while 12% wouldn’t be able to cover it at all.
Even if you don’t have debt, living with roommates allows you to reduce housing costs and allocate more money toward your savings. With an emergency fund at the ready, you won’t have to resort to borrowing or using credit cards to pay off bills.
The Financial Cons of Roommates
In many cases, having a roommate means saving money. Unfortunately, if you get stuck with the wrong person, it could end up costing you.
They May Miss Payments
When you sign a lease with a roommate, you may be held independently responsible for missed payments and damages. Therefore, if you have a roommate who forgets to pay their rent, you’re responsible for covering their half — otherwise, you may face eviction.
Not every roommate is financially responsible. If you sign a one-year agreement, and the other party refuses to pay up, you could be looking at hundreds — if not thousands — in extra costs. Even breaking the lease to get out of the arrangement could cost extra money, along with a forgone security deposit.
They May Cause Damages
When you live in a rental, the leasing agency may expect normal wear and tear, such as peeling paint, faded carpet, loose grout around tiles, partially clogged sinks, etc. to occur during your stay. However, if more serious issues occur during your tenancy, you may have to pay upon move-out.
Even if you’re neat and orderly, your roommate may not be. You’ll want to make sure you’re both on the same page about caring for the apartment, including how pets (if either of you bring one) will be trained and cleaned up after.
They May Use More Than Half
When you live with a roommate, you typically split costs down the middle. However, your living partner may not follow this arrangement when it comes to using items. It’s important to talk about potential issues before you sign a lease and move in together to prevent potential bad situations from occurring.
For example, if you split groceries, you may come home from work to find an empty fridge. If you have limited data through your Internet provider, your roommate might hit the monthly cap before you can log on.
They May Break the Lease
Most lease terms last one year. If your roommate decides to break this contract, you might have to continue paying rent until the landlord can find another tenant. Plus, you may have to forfeit your security deposit, which is often the cost of one month’s rent.
Instead of breaking the lease, you may decide to continue living in the rental and look for a new roommate. In this scenario, you’ll have to notify the leasing agency, as it’s often against the rules to move in unauthorized parties. In most cases, the landlord will be accommodating to alter the arrangement to prevent the hassle of finding a new tenant.
Living With Roommates — What You Need to Know
Living with roommates comes with both pros and cons. While you can save money, the wrong housing partner can easily cost you.
To prevent costly errors down the road, always talk to prospective roommates before you sign a lease to ensure your priorities are aligned.
Are you considering living on your own? Visit our WalletWorks page to get more financial tips to help you prepare.