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. In many cases you’ll have signed an agreement that holds all of you responsible together and individually, for certain costs.
Why it’s vital to pay your bills on time
Did you know?
If you’re named on any bill, you’re 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 applies even if the bill wasn’t only in your name and you paid your share.
If you don’t pay your bills, you might also find that vital services – such as your heating or your phone line, are cut off.
If you fail to pay some bills, such as Council Tax or your TV license, it could lead to a court summons.
Typical bills you will need to budget for
- Council Tax ( England, Scotland & Wales - usually paid monthly)
- 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
- Contents insurance (paid monthly or annually)
- Digital TV or satellite TV subscriptions (paid monthly)
- Broadband bill (paid monthly or quarterly)
- Landline phone bill (plus any connection charges – can be paid quarterly or monthly)
Work out how to share your bills
At the start of a shared tenancy, it’s a good idea to sit down with your housemates to work out a fair system for sharing the cost of your bills and ensure they’re always paid on time.
- Write down a list of the shared bills you’ll each need to contribute to and estimate how much they will be every month. Your landlord might be able to help you with the estimates.
- Add up the total cost of these bills and work out a method for dividing it so that each housemate pays their fair share.
It might be helpful to draw up a spreadsheet showing exactly what each person needs to pay into the ‘pot’ to cover the monthly/quarterly bills.
Then everyone can see how it has all been worked out.
The cheapest, most simple way to pay your household bills, is by Direct Debit.
You’ll also have peace of mind that the bills will always be paid on time, provided there’s sufficient money in the bill payer’s account when payments are due.
Alternatively, you could decide that one of you should collect the cash from the other flatmates each month, and pay all the bills at a bank or post office.
However, this relies on everyone being organised and could result in late payments - so pay by direct debit if you can.
Whichever method you choose, make sure everyone understands their obligations, and how to pay.
Your options if paying by Direct Debit
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.
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.
Make sure that standing orders are set up to transfer funds to the bill payer’s account a few days in advance of the Direct Debit date, to avoid problems if there are unforeseen delays with the transfers.
Before opening a joint account
Be aware that you’re financially linked to the credit rating of anyone with whom you hold a joint account.
It’s best to take this approach with people that you know well and trust.
When you move out, be sure to close this account. In the meantime, make sure you all use it responsibly.
Prioritise your bills if you start to struggle
After your rent, always pay your Council Tax (rates in Northern Ireland) and TV licence first.
If unpaid, these have more immediate legal consequences, whereas the others result only in the loss of services.
If you’re worried about not being able to pay your bills it’s important to talk to your landlord or suppliers right away.