It’s always challenging living with other people. We all have different personalities and quirks, and sometimes, conflicting preferences on how to manage a household.
If you’ve decided to take the plunge and move in with friends or family members, you may be faced with the question of how to manage household finances. We find out what you should consider.
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The pros and cons of sharing expenses
According to Sheila-Ann Robey, financial adviser at Lifeguards, an affiliate of Liberty, it can be worthwhile sharing household expenses instead of carrying the load on your own.
“However, the downfall of this is when these finances are mismanaged and bills are left unpaid as a result,” says Robey.
“Another issue that may arise is if one flatmate fails to contribute as much as the others, which may cause tensions and resentment,” she adds.
How to budget with flatmates
Robey points out that the best way to budget for joint household expenses is, firstly, to determine what those expenses are. This can include groceries, rent, and utilities.
Secondly, she says that the flatmates need to talk openly about what each can afford to contribute. Finally, they need to decide how to allocate the funds.
“A household kitty works far better in sharing expenses than rotating payment turns, as this may not be affordable for individual flatmates,” says Robey.
“It can help to seek advice from a professional financial advisor who can guide the household on budgeting tools and spending habits,” she adds.
Once a budget and a kitty is established, Robey suggests that the most financially astute flatmate manage the funds and payments and provide monthly feedback to the other flatmates. “This approach is the most sustainable in creating a happy and tension free household,” says Robey.
Ramona Singh, administration director and registered debt counsellor at Infinite Life, agrees that a single person could oversee the apartment’s expenditure.
“A specific date of payment should be agreed by all parties and a nominated individual should be responsible to make these. Alternatively, each party should agree which creditor will be paid by whom and by when,” says Singh.
Although it is very cumbersome, she insists that a written agreement should be in place between all parties to ensure there’s no confusion about each person’s responsibility.
According to Eloise Boezak, head of customer experience at African Bank, there are many different instruments you can make use of when budgeting.
“For example, when setting out your apartment’s budget you can use a joint spreadsheet or one of the apps that allow groups to view expenses and current outstanding costs,” says Boezak.
Bank accounts as budgeting tools
Boezak points out that a household bank account can be used to view funds and expense transactions. “At African Bank, for example, we offer the MyWORLD account,” says Boezak. “This offers transactional and savings accounts which can be used to monitor group expenses.
“The account is specifically equipped to facilitate a group of friends or family saving towards a shared goal, with easy access to the account,” Boezak further explains.
Ultimately, Boezak says, flatmates should remember that open communication is always the best way to manage money in a group, so it’s best to plan to do that as often as possible.
Make sure you’re not struggling with debt before you enter into sharing expenses with others.