Managing Money 3 Ways Roommates Can Share Living Costs Equitably

by Ellen Sheng | March 06, 2023

Being under one roof with other people isn't just about agreeing on paint colors or how to arrange the living room furniture.

It also means finding equitable ways to share expenses that all can agree on. And, just as there are all types of living arrangements, there's also a variety of financial approaches that offer a sense that everyone is contributing fairly to the upkeep of the household. The common theme to maintaining a happy home? An open conversation.

Judith Lu, founder of Blue Zone Wealth Advisors, tells her clients to have a transparent and honest conversation before entering into any living situation. "Lay out ground rules, like a prenup, so you don't have to fight about it later," Lu says.

Nesting with your significant other? Sharing a place with friends? Living at home with family members? Take a tip from a range of roommates who found smart ways to broach the who-pays-what subject and fairly divvy up the expenses.

The proportional method

When New York City-based David Kowarsky and his girlfriend moved in together, he was earning roughly 40% more than her. Given the difference, they agreed to split major expenses according to income. For example, when it came to writing their $2,400 rent check, he paid $1,400 while she contributed $1,000.

Their budgeting approach is known as the proportional method, which takes into account different income levels. The question of how to split expenses equitably came up before the two moved in together. Moving in together meant that Kowarsky's girlfriend, in graduate school at the time, would pass on the affordable graduate housing offered as part of her program. Kowarsky wanted to make living together an "easy decision," he says, and given the differing income levels, they both felt this proportional method was fair.

Illustration depicting “The Proportional Method” which is popular among couples with varying incomes where the higher-earning partner covers more of certain expenses. There is lightbulb that represents utilities, a modern high-rise that represents rent paid and a reusable grocery tote that represents money spent on food. For the hypothetical couples, utilities and housing are split on a 40%/60% ratio, while grocery expenses are shared by the couple taking turns making dinner.

"It was relatively informal, but not too far from the proportional split," Kowarsky says. As for other shared expenses, they both pitched in about $200 a month toward utilities and household items. If there was any left over in the fund, they would use it together, such as for an at-home date night. When the couple bought bigger ticket items such as furniture, Kowarsky purchased the higher priced item while his girlfriend bought a piece more in line with her budget.

To help manage shared expenses, Lu suggests pooling money in a shared bank account. Everyone can still retain their own bank account, but a shared account helps to keep things transparent and minimizes potential conflict about who paid what.

Lu points out that when things are going well, there is no conflict, but she says, "if there's a fight, someone might say 'I make it possible for us to live here' or 'I paid for the cable bill.' Or maybe someone owes utilities or groceries." To that end, Lu advises that clear rules and transparency about the budget can help make bill-related conversations more straightforward and less emotionally charged.

The multiple split method

Another way to split expenses is to vary costs depending on use. Just as a bigger hotel room commands a higher price, a roommate with a larger room or an ensuite bathroom might pay more, hence the multiple split method.

When Vandana Apte moved in with three friends in New York after college, the four split the rent evenly, even though the bedrooms differed in size. When two of the friends moved out, Apte and the remaining roommate decided to adjust how rent was split based on the room size. They turned to a multiple split method, which in their case was more of a 27/25/24/24 split.

With total rent at $3,240, the person with the biggest room, and the most natural light, now pays $860 a month, the second largest room with windows is $810, and the two smaller basement rooms are $785 each. Apte and her roommate thought this split was "more fair" and they were transparent with new roommates about how the total rent would be divided.

Illustration depicting “The Multiple Split Method” which is popular among roommates, where common expenses are divided based on use. There is lightbulb that represents utilities, a townhouse that represents rent paid and a grocery delivery service that represents money spent on food. Hypothetical roommate split costs based on who uses more electricity and who has the bigger bedroom with amenities. Groceries are paid for individually.

Marilyn Wechter, a psychotherapist and financial therapist in St. Louis, MO, says this arrangement is fair so long as the terms are clear and agreed upon first, noting that typically, whoever holds the lease gets to set the rules. "The important thing is to be really clear. Set what the expectation is," Wechter says.

Other expenses were split evenly because "the size of the room has no bearing on how much electricity, gas or WiFi we each use," Apte explains. And, with four roommates, keeping the place clean is a priority for all. To save on hiring a cleaning person, they set up a monthly deep cleaning session during which everyone pitches in. "We all help clean pretty evenly" regardless of what someone is putting toward expenses, Apte says.

As for keeping track of who-paid-what (especially with multiple roommates) Lu suggests using expense-splitting apps to stay on top of expenses. Automating payments can also help ease the burden of someone needing to be in charge of monitoring monthly bills or rent.

The grab bag method

As the name suggests, the grab bag method adjusts to suit the circumstances.

Christian Garduno of Littleton, CO, lowered his monthly rent by moving out of his one-bedroom apartment and moving in with his father to share expenses. The arrangement was beneficial for both of them. Garduno's lease was up and he wanted to save up for his next move. Turns out that his father was also looking to cut back on expenses.

Illustration depicting “The Grab Bag Method” which is popular among young professions living in their childhood homes who kick in for some household expenses. There is lightbulb that represents utilities, a house that represents rent paid and a brown grocery bag that represents money spent on food. A hypothetical father and son split the costs in different ways depending on who uses more Wi-Fi, how many household tasks the son does and who buys the groceries and who does the cooking.

When the two first started talking about how to share costs, his father suggested a 50/50 split. But Garduno knocked off $80 a month by offering to help his dad with certain tasks. As part of the agreement, Garduno washes his father's car and spends time helping him with budgeting and improving his credit score.

When tasks get thrown into the cost sharing calculation, things can get tricky. For instance, adult children who move in with elderly parents to act as caregivers may not be thinking about money, but the issue will come up. Wechler advises that all parties define expectations clearly and make it a point to check in as needs or tasks shift. "It can't just be 'I'll do a little work' in exchange for paying less," she says. Sit down and define a concrete number for what "paying less" means along with the details of any contributions of time and labor.

Talking it out

There are many ways to split the shared costs, but there's only one way to make it fair: By talking about it ahead of time and coming to an agreement. By the same token, if one or more roommates' financial situation happens to change, that may call for a reassessment of the cost-splitting approach the household has adopted. 

Discussing money can be difficult, but Wechler advises acknowledging that right off the bat. "You can say, 'this is really awkward for me but I want to try to put things on the table,'" she says. Then, stay focused on what you want to talk about, and if the conversation starts veering into other areas, like feelings, try steering it back toward the financial details.

Keeping the lines of communication open will make for a happier budget — and a happier home life, too.

Budgeting Relationships
Ellen Sheng

learns about managing her finances by interviewing experts. Her stories have appeared in The Wall Street Journal, Forbes, Fast Company and Marie Claire.

The content reflects the view of the author of the article and does not necessarily reflect the views of Citi or its employees, and we do not guarantee the accuracy or completeness of the information presented in the article.