Saving money nowadays is one way to secure your future. If you learn how to save, you can get the extra money that can finance your investments. These investments can help you earn extra income that will help fund your retirement or any purchase that you would like to make in the future. Having adequate savings will also allow you to feel secure despite emergency situations that can ruin your current budget.
We are all aware of the many benefits of saving. However, this does not mean everyone does it. Because of the high cost of living and the continuing inflation, a lot of consumers are having a hard time saving their money. We cannot dispute the fact that we need to save – no matter how hard it is. Thankfully, there are a lot of strategies to save money and we will be discussing one of them.
One of the ways that you can save is by living with a roommate. This will benefit you in so many ways – not just financially. But even if we only concentrate on the financial benefits, you might find it encouraging to go looking for a roommate.
According to an article published on USNews.com, you can get a lot of savings if you get a roommate. For instance, if you live in Chicago, your approximate expenses for a 1 bedroom is $1,607. If you will live in a 2 bedroom home with a roommate, you will only spend $902 a month – that translates to 43.87% of savings. That $705 savings will go a long way in helping you pay off debt, or save up for a purchase in the future. The $705 a month, when you save it can add up to $8,460 a year.
Of course, living with a roommate involves a couple of sacrifices too. Sometimes, you end up with the wrong roommate and you have to deal with the stress of living with someone you do not like. While there is a certain risk, it all boils down to how much saving money is important to you.
4 ways you can save money with your roommates
According to a study done and published on Zillow.com, there is an increasing number of Americans who are moving in with a roommate – at least, this was true in 2012. 1 out of 3 Americans live in a household where two or more adults (not married or in a relationship) are together under one roof. The reason for the rise in doubled-up households is revealed to be caused by the rise in rental rates. In fact, the article used the terms “increasingly unaffordable.” The average household is said to spend up to 30% of their monthly income just on rent. If you will get a roommate, you can slash that percentage to 15% – freeing a lot of money for you to invest in your financial future.
While having a roommate can help you in saving money, you have to consider the possibility that you may not have the same principles when it comes to finances. This can turn out to be a problem if you are not financially compatible with your roommate. Saving may not comes as easy as you thought it would.
To help you jive financially with your roommate, here are 4 things that you can do.
Talk about your financial expectation upfront.
As soon as you meet and after finalizing your decision to share a house, you need to sit down and talk about your financial expectations. It helps to be as thorough as possible. Discuss who will pay for what. If you will share bills, how much should you split the costs? In case someone starts a subscription that the other does not want, who will be financially responsible for it? Remember that if your roommate wants to get a cable connection and you do not, it might still be your problem in case that roommate fails to pay for it. You may decide to split the cost of your electricity bill but what if your roommate uses a lot more electricity than you? How will you deal with that? You need to lay out all the cards on the table so you can reach an understanding and thus head off possible disagreements when it comes to bills and payments.
Set a budget.
To avoid having one person overuse a utility and thus raise your bill, it helps to set a budget. You can discuss limits to every spending category that you will pay for. That way, you can both be in agreement about your monthly consumption. It will help in saving money because you can keep yourselves from overspending. Do not just concentrate on the utility bills. You should also think about the things you use at home like the toilet paper, detergent, etc. That way, you can be clear about your respective contributions.
Assign someone to manage your money.
You can choose to handle the bills together but it might be more efficient if only one of you will pool in the finances and pay off the bills. That way, nobody will forget payments just because they thought “it was your turn to pay the bills.” You can opt to give a discount to the one who will manage the money so they will be motivated to take on the extra job. This person will not only be in charge of paying the bills, they will also monitor the budget to make sure nobody is consuming too much. Just remember that although there is only one person managing the money, everyone in the house should be involved in making decisions about the household budget. That is only to be fair to everyone.
Pledge to be honest about the household finances.
This is not really something that will help you save directly but it can keep you from mistakes that could waste your money. It is better to be honest with each other so you and your roommate will not encounter problems that could compromise your ability to pay for your joint expenses. For instance, if you are having troubles at work and you are in danger of losing your job, discuss this with your roommate. That way, you can both prepare for the possibility that you will be living with only one income for a while.
These 4 tips will help you financially jive with your roommate even if you have different beliefs and methods in handling your household finances. The difference is not what will drive you apart. You just need to learn how to respect each other’s preferences so you can live harmoniously.
How roommates can make or break your financial targets
While a roommate can help with saving money, you need to realize that they can lead you the other way too. If you have the wrong roommate, you might be better off alone. Here are three things that can possibly happen if you share a house with someone else.
They can help you build up your savings or they can lead you to overspend.
This will depend on whether your roommate is a saver or a spender. They can either influence you to save more of your money or they can lure you into spending in the same way that they are. The only way that you are succeed here is to keep yourself from being influenced by your roommate the wrong way. Even if you live with a spender, if you let them know of your saving money goals, you may be able to get them to hide their purchases from you. They will also stop themselves from asking you to join them on shopping sprees just so you will not be tempted to spend too.
They can share with you the expenses or they can be a headache if they miss payments.
One of the best things about having a roommate is you can share with them the burden of your household expenses. You do not have to rely on one income for all your household expenses. From the rent to the water and electric bill, you can benefit from a lower monthly expense because someone is sharing it with you. While this benefit is great, it can turn on you in case you land a roommate that does not pay on time. If they miss out on payments, you may end up shouldering everything and you will have a hard time asking them to pay you back. This is a struggle that you could face if you have a financially irresponsible roommate. Talk to the person you are sharing your house with and resolve to improve your finances together. If they will not change, then it may be time to look for a new roommate.
They can support your financial goals or they can distract you from reaching them.
Lastly, your roommate can make or break your financial goals. Take for instance our example about saving money. If your roommate is supportive, they will help you reach your goals even if they are spenders. They will not ask you to join them in activities that can tempt you to spend. If they are insensitive to your financial goals, they might try to force you to buy something that is unnecessary. You need to look for a roommate that can complement your financial behavior so you can balance each other out. More importantly, you should both be supportive of each other’s goals.
In some cities, living with a roommate is usually something that people have to go through. An article from NYTimes.com revealed that having a roommate is like a rite of passage in the city of New York. This is because of the high cost of living in the city. People tend to share space so that they can save money before they go through life milestones like getting married or having kids.
Make sure that if you intend to live with a roommate, you choose one that can help you reach your goals – like for instance, saving money for your future.