You remember talking as a teenager about how great it would be to move out of your parents’ house.
Getting an apartment with friends or heading off to a college dorm – any place where you’d have some freedom and ability to make your own decisions.
Leaving the “nest” usually means moving in with others because it’s much more cost-effective than living alone.
And while those first years living together can be anywhere from terrific to downright terrible, after a few years many people want a place of their own.
But finding housing you can afford solo, usually isn’t an option until you land a “real” job. Even then, the increased expenses you’ll have living alone make you wonder if the savings from living with roommates is worth it.
Let’s take a look at some critical things to consider when you’re thinking about getting your own place compared to the money you save by living with others.
Can You Afford To Live Alone?
When you’ve been living on “beans and rice” for years, a job paying thousands of dollars each month can make you feel rich.
You can’t imagine not being able to live on your own with this salary – whether it means renting your own apartment or buying your first condo or house.
But your salary isn’t the same as your take-home pay. Make sure you plan and base a budget on what you’ll bring home each month – not by dividing your salary by 12.
If you’ve haven’t carefully tracked your expenses, you may not know if you can really afford to live alone.
Making the mistake of relying on “guesstimates” could leave you in a position where you sign a lease for a place you can’t pay for or a mortgage on a home you can’t truly afford by yourself.
But also consider how you’ll do the following:
- Pay off all of your unsecured (consumer) debt
- Save up at least a small emergency fund ($1000 up to 3-6 months of expenses)
- Start to invest (to take advantage of compounding interest)
- If you’re buying a home, budgeting for major house expenses
But don’t rule out getting your own place after reading that.
You may make enough money or be able to cut costs, so the savings from living with roommates isn’t worth it to you. And there may be plenty of other good reasons to quit living with others too.
If you haven’t given them a try, tools like Zillow’s Rent Affordability Calculator can also be helpful as you try to figure out if the savings from living with roommates is worth it.
How Living with Roommates Helps You Save
You’re probably focusing on the most significant expenses when you review how roommates help you spend less.
When you share housing with others, you split the rent. Or if you own your home – you collect rent from roommates. Some call this house hacking, and it can be a great way to save money.
The first heating bill during a frigid winter can be a shocker when you have to pay for it yourself.
Even paying the full internet bill might frustrate you after splitting the cost for years. Roommates cut the cost of utilities in half (or more).
Depending on your situation, you might also split the cost of groceries and household supplies, along with the furnishings for shared spaces.
The savings on your major expenses from living with roommates is nothing to ignore, as long as you control your spending and use the savings to further your financial goals.
Also, don’t forget the additional personal benefits of living with others too. Roommates are built-in companions if you get along and have similar interests and schedules.
Roommates Could Increase Your Spending
If someone lives with you and helps pay the bills, it might not make sense they could negatively impact your finances. But there are plenty of ways roommates might cause you to spend more than usual.
As mentioned above, roommates can be built-in companions if you enjoy each other’s personalities.
If you have similar interests and schedules, you may find yourself engaging in activities together that cost money. So, be sure to set a spending limit on your dining out and entertainment and stick to it.
On the other hand, if your relationship with the person you live with is tense, you may prefer to be away from home to avoid confrontation.
The money you spend sitting in a coffee shop, walking the mall, or going out with friends rather than inviting them to your place can all add up. And that doesn’t include any stress-related costs you may be dealing with either.
Walking into your home and finding lights on, a fan running, and the AC cranked up when no one is there is frustrating because you split the utilities.
You might even end up ordering out after opening up the refrigerator and discovering your roommate and a friend finished off all the leftovers from a meal you made the night before.
While it might not seem like a big deal to some, it can add up over the months you spend living together.
The lack of freedom you have when you live with others may have you itching to travel more than you usually would too.
A weekend away here and there might give you a break you need. But those trips can wipe out the savings from living with a roommate also.
Important Questions to Ask Yourself
You’ve looked at how your salary, budget, and expenses can help you determine if living with roommates is worth the savings.
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You also understand that while you might save a significant amount by living with others, you can also spend more than you planned too.
So, what should you do?
Before making a decision, here are some other important questions to consider:
1. What kind of living situation would be best for you personally?
- Without considering your finances, would it be best for you to live alone?
- If you are an extrovert, will you go stir crazy living alone?
- If you spend all day at work interacting with others, do you prefer peace and quiet at home?
Your personality, emotional well-being, and your lifestyle matter too when it comes to deciding whether the savings from living together are worth it.
2. How much debt do you have?
If you’ve taken on a lot of debt, deciding to get your own place might not be the best move. Unless it’s not healthy for you to live with others.
Personal finance is about more than just numbers.
You might decide roommates are worth it until a loan is paid off, you get a raise, or until you reach another financial goal.
Setting a realistic timeline might make it easier to say no to living solo for now.
3. What are your housing options?
- Are there smaller, more affordable places available?
- Would you consider living in a studio outside of your preferred neighborhood if you could live alone?
- Would it add to your commuting costs?
Be sure you consider the impact of not just your housing but how it impacts other parts of your life.
4. Could a part-time job or freelancing make up the difference?
If having a roommate saves you $400 – $500 a month, can you make that up with a side-gig? Without adding too much stress to your life?
Only you can determine if working more is a good option.
5. How comfortable are you living with strangers?
- If you’re moving to a new city, are you excited by the idea of meeting new people? Even to live with?
- Are you overwhelmed by the thought of starting life in a new place and sharing housing with someone new too?
An option to consider is living alone until you have time to meet some new friends. Or until you get comfortable with the area.
That might buy you the time to find a new roommate you’d be satisfied with.
6. How much time do you spend at home?
If you spend a good part of your week at work and weekends doing activities or visiting friends and family, does it make sense to pay for your own place?
Think hard about the amount of time you’d spend interacting with a roommate. The inconvenience or hassle of living together might be worth the savings if you aren’t home that often.
7. What kind of roommate are you?
If you admit you aren’t the easiest to get along with or if you like to entertain often, having your own space might be the best thing.
A Little Reflection Goes a Long Way
When you reach the point financially where you can afford to live alone, it can certainly be tempting to do it. It’s also the right decision for many people.
But your personal preference and your financial goals may support a decision to stick it out with a roommate for a period.
Weigh the pros and cons of both living situations and look at options you may not have considered.
Starting a small business and doing contract or freelance work from home for extra money or putting off buying a new (or new-to-you) car for a year or two could make living alone a reality if your budget is tight.
If you decide to wait for a place of your own, don’t avoid tough conversations with roommates about what you expect from each other.
You’ve lived with people before. And even if they are uncomfortable discussions, conversing about what you each want and need from a roommate will help prevent problems.
It will also be easier to address issues as they arise.
The savings from living with roommates might be worth it. But you’ll need to decide for yourself. Use the information above for guidance.
Vicki and Amy are authors of Estate Planning 101 – a Crash Course in Planning for the Unexpected -coming soon from Adams Media.