Budgeting and sharing costs when renting
When you’re renting a property with other people or have shared housing costs, it’s vital to know what your monthly outgoings will be and work out a system for paying shared bills. If you don’t, you could find yourself in serious financial trouble – even if you’ve paid your share of the bill. In many cases you will have signed an agreement that holds you responsible together for certain costs.
Why it’s vital that you pay your bills on time
Did you know?
If you are named on any bill, you are responsible for ensuring it is paid in full, regardless of whether or not it was you who ran up the costs.
It’s important to be organised about money when sharing a property. If you miss a payment or don’t pay your bills on time, you can get a bad credit rating, which will make it difficult for you to borrow money in the future – for example to get a personal loan to buy a car or a mortgage to buy a house. This is the case even if the bill wasn’t solely in your name and you paid your share.
If you don’t pay your bills, you may also find that vital services – such as your heating or your phone line – are cut off. And if you fail to pay some bills, such as Council Tax or your TV licence, it could lead to a court summons.
Typical bills you will need to budget for
- Council Tax (paid monthly, England, Scotland, Wales)
- Rates bill (Northern Ireland)
- Gas and electricity bills (paid either by a pre-payment meter, monthly by Direct Debit or quarterly)
- Water bills (usually paid monthly)
- Service charges (in some properties – paid monthly or annually)
- TV licence (monthly, quarterly or annually)
- Landline phone bill (plus any connection charges – can be paid quarterly or monthly)
- Contents insurance (paid monthly or annually)
- Digital TV or satellite TV subscriptions (paid monthly)
- Broadband bill (paid monthly or quarterly)
Work out how to share your bills
It’s a good idea to sit down with your housemates at the beginning of a shared tenancy and work out a fair system for sharing the cost of your bills and ensuring they are always paid on time.
- Write down a list of the shared bills you will each need to contribute to, and estimate what those bills will come to every month. Your landlord may be able to help you with the estimates.
- Add up the total cost of these bills and work out a method for dividing your costs so that each housemate pays their fair share.
It may be helpful to draw up a spreadsheet showing exactly what each person needs to pay into the ‘pot’ to cover the monthly/quarterly bills, so that everyone can see how it has all been worked out.
The cheapest and most hassle-free way to pay household bills such as gas, electricity and Council Tax is by Direct Debit. You’ll also have peace of mind that the bills will always be paid on time – provided there is sufficient money in the bill payer’s account when the payments are due.
Alternatively you could decide that one of you should collect the cash from the others each month and pay all the bills at a bank or post office. However this relies on everyone being very organised and could result in late payments – so go the Direct Debit route if you can.
Whichever method you go for, make sure everyone is clear about their obligations, and how to pay.
Your options if paying by Direct Debit
Nominate one person to be the designated bill payer who will pay all the bills from their personal account. Everyone then sets up a standing order to pay their share into the nominated bill payer’s account each month. If using this method, make sure that the standing orders are set up to transfer funds to the bill payer’s account a few days in advance of the Direct Debit date – this will avoid problems if there are unforeseen delays with the transfers.
Set up a joint current account just for paying the household bills that each housemate pays their share into – and set up your Direct Debits from there. Only consider this option with close and trusted friends – see below.
Before opening a joint account
Be aware that you are linked financially to the credit rating of anyone with whom you hold a joint account. So it’s best to take this approach only with people you know well and trust. When you move out, be sure to close this account down, and in the meantime, make sure you all use it responsibly.
Prioritising your bills if you start to struggle
Aside from your rent, always prioritise paying Council Tax (rates in Northern Ireland) and your TV licence over other bills, if you have to. These have more immediate legal consequences if not paid, whereas others may result in the loss of services.
If you’re worried about being able to meet you bills it’s important to talk to you landlord or suppliers right away. Follow the links below to check what you can afford or to find out what to do if you start struggling with bills.