Flat Sharing – Budgeting Tips for Renters

With property values soaring throughout the country, a growing number of people are postponing buying their own home and are choosing to rent instead. But the rental market itself has become fairly volatile, and the cost of a rented flat in a desirable location is also on the rise. This has led to a growing trend in flat sharing, with young (and not so young) adults choosing to cut costs by sharing expenses with a roommate. But flat sharing has its own budgeting issues, and it is just as easy to become financially overwhelmed sharing a flat as it is handling all of the costs on your own. That’s why it is so important to have a clearly defined flat sharing budget in place before you sign any rental agreements.

The Importance of a Flat Sharing Budget

Sharing a flat is a good way to reduce your living expenses, but it is not without its hazards. As flat mates, you are relying on each other to be financially responsible enough to meet all of your shared responsibilities. Should either one of you falter, both will suffer the consequences. Late payments on rent or utilities will not only result in loss of services or eviction, but will lead to a black mark on both of your credit scores; and failing to pay council tax could lead to legal ramifications. For a flat sharing scenario to work, each party must understand their financial responsibilities as well as their financial limits.

What to Include in Your Shared Budget

Working out a flat sharing budget isn’t much different than any other housing budget. Where things get tricky is determining how much each party will contribute, and who will be in charge of paying the bills. But before we come to that, let’s look at a basic list of the items that should be included on your shared household budget.

  • Rent
  • Service Charges – Some properties require a monthly or annual service charge for upkeep and maintenance
  • Council Tax – Typically paid monthly, you can estimate your council tax via the government website.
  • Gas and Electric – Can be paid monthly or quarterly, or by a pre-payment meter. Your landlord should be able to provide a rough estimate for a working budget.
  • Water – Typically paid monthly. Again, your landlord should be able to give you a working estimate.
  • TV Licence – Paid monthly, quarterly, or annually. In some instances your TV licence may be included in the cost of your rent or in the monthly service charges.
  • Contents Insurance – This might be considered optional, depending on your rental agreement and whether or not you qualify for cover.

While these are the bare basics of a working budget, you should also include any optional expenses that both flat mates have agreed on. These include, but are not limited to, broadband costs, TV subscriptions and shared phone lines.

Sharing the Bills

With a working budget in front of you, sit down with your flat mate at the beginning of your shared tenancy and work out how you will share expenses and who will be in charge of making sure all of the bills are paid on time. Make a list of your shared expenses, and estimate the monthly, quarterly, or annual totals. Finally, decide how much each of you will contribute, dividing the total costs fairly so no one is carrying more than their fair share of the financial burden. It often helps to create a detailed spreadsheet illustrating what each tenant has to pay into the collective pot to cover all shared expenses. This will help eliminate any confusion, and will allow both tenants to see what they owe and when they are expected to pay their share.

Paying the Collective Bills

When it comes to paying your collective bills, there are two options. The first is to elect one of you to be the primary bill payer, who will be responsible for collecting monies due and paying all the bills out of their personal account. For most household bills direct debit helps to ensure that everything is paid on time. That being said, it is important for everyone to contribute their share in a timely manner (three to four days before funds are transferred, to ensure that there are no delays in payments or penalties for insufficient funds.

Another option is to set up a joint bank account for all shared household expenses, with each tenant paying into the account as needed. Again, you can use direct debit to ensure that all bills are paid on time. However, you must be sure that you know and trust the people with whom you are sharing the account.

Flat sharing isn’t just for students any more, and with property values rising many young professionals are finding it a viable alternative to the high cost of housing. While the Labour Party has recently called for a cap on rent increases, that will do little to mitigate the already high cost of rental flats in major city centres and their outlying districts. For many people flat sharing is the best option in a crowded, and expensive, housing market. But for a flat sharing scenario to be truly successful, flat mates must work together to create an effective budget that protects and benefits all parties.