How to Stay Financially Responsible While Renting With a Roommate

by PATRICIA HolmesPersonal Finance

Getting a roommate isn’t a decision to be taken lightly. While it may seem like the best decision for your wallet, you could actually be harmed financially in the process if your roommates are terrible. You’ll want to avoid some notorious pitfalls along the way if you want to save money and your sanity. Most importantly, you always want to make sure you choose your roommates wisely by doing a roommate background check, and by working together with your housemates to figure out the finances up front to avoid conflict.

How to choose a roommate

In addition to running a background check, getting a credit report is also a good idea. Also, do they have a job and a good temperament? You want to be sure they are someone you can imagine yourself living with. Are they tidy and can you trust them? These are just a few things to ask to make your decision easier. Below are some pieces of advice on financial matters.

How to split rent

The simplest way would be to divide the rent based on square footage, amenities, and the number of people in each bedroom. There are actual rent calculators out there that help you determine who pays what.

According to Forbes, to get an accurate breakdown, you take the square footage of each bedroom, including the closet or en suite bathroom, and divide by the total square footage of the apartment. This gives you the percentage of space each room occupies. Then take each person’s percentage and apply it to the total cost.

However, there’s an even easier method that just takes into consideration the square footage of the bedrooms. You don’t need to consider the total space that includes the common areas of the house because each roommate has equal access to those areas.

Example from My First Apartment:

Total bedroom area = 500 sq.ft.

Monthly rent = $1,000

Room 1: 250 sq. ft. (includes closet and private bath) = 50%  of area, rent $500

Room 2: 150 sq. ft. (includes closet)= 30% of the area, rent $300

Room 3: 100 sq. ft. (includes closet)= 20% 0f the area, rent $200

There are a number of ways to divide up rent, just make sure every roommate agrees upon the method of splitting, and make sure all renters are on the lease.

How to split utilities

Try to get all renters’ names on each account, if possible. If that’s not an option, collect all of the money up front before paying the actual bill. I once had a roommate who promised to pay me the $300 she owed. The outcome is predictable: She kept saying she’d pay, but never did. I didn’t have the money to cover the entire bill, it went to collections, and I was stuck with the whole thing. Come to find out, she had quite the history of delinquent accounts. Had I dug further into her past (and ran a background check), I’d have known this.

Basic utilities like water and electricity should be split equally. Is it really worth nickle and diming who uses the most? However, if a roommate is being frivolous with utility usage, such as leaving lights on or running the air conditioner all day and night, that warrants a conversation.

Other types of services or utilities could be negotiable, such as cable. Everyone should pay cash to the person whose name is on the bill and that person makes one payment on behalf of the group.

“When I lived with five other roommates under one roof, the best way of keeping track of who owed what was to create a chart each month and keep it on the fridge,” according to an article in Money Crashers. “It listed everyone’s name along with columns for rent and utility costs. As people paid, their names were crossed off. Everyone knew who had paid and who still owed – a great way of keeping everyone motivated to pay on time.”

Everyone needs to be on the same page before slapping up a chart on the fridge, though; no one wants to be caught off guard.

How to buy groceries

It’s probably easiest to each buy your own groceries and keep the food separately. If you all go to the store together, buy your own food and then split the other costs. You could split costs on staples such as milk, toilet paper, bread, butter, cleaning supplies, etc. and design a budget on how much you will each spend a month on these items. The key will be to communicate up front so there are no misunderstandings.

Just don’t eat your roommate’s food without asking. A lot of arguments can be prevented if you just show respect to your roommates and talk about groceries up front.

Use Rent Calculating Tools

Math isn’t everyone’s forte, so try using an online calculator. Some to try include, RoomieCalc.com, SplitWise.com, and Spliddit.com. Even if the space isn’t divided equally, tools can help manage everyone’s finances.

Living with a roommate (or multiple roommates) can be enjoyable, and a good way to save money, especially if you’re not financially in a position to invest in buying your own home. Just be prepared to resolve inevitable conflicts and divvy up necessary expenses, and your living arrangements will be that that much better.

Save money on your first small business brick and mortar location

by PATRICIA HolmesBusiness

Starting a small business? Real estate will be one of your biggest expenses. Unless you’re committed to doing nothing but ecommerce, there’s no escaping the difficulty of finding just the right location at a price you can afford. Particularly if you’re planning on starting something like a coffee shop, a type of business highly dependent on accessibility, your location is the difference between success and failure.

Getting started

First, you’ve got to determine where the money for your new location is going to come from. Just like The Lenders Network connects homebuyers to lenders, the SBA page on loans and grants is a tool for connecting entrepreneurs to a lender. But loans come at a price. You’ll have to pay the mortgage on your loan, so when all is said and done, you’ll pay more than the actual value of the real estate.

To avoid costly mortgage rates, start with crowdfunding. Indiegogo only charges 4% if you meet your goal, a much smaller amount than you’ll end up paying with a mortgage. Kickstarter allows you to crowdfund the creation of a product–if it takes a brick and mortar location to create that product, acquiring one is part of your campaign. Rockethub bills itself as “The leading global community for entrepreneurs”, with the “Elequity” funding hub as a starting point to guide you through the funding process. Peerbackers also specializes in entrepreneurial and small business funding, with its Crowdfunding Academy there to help educate you on how best to go about crowdfunding your business.

Maximizing your space for sustainability

Once you’ve procured funding to get going, choosing the right location is your next step. In terms of saving money, it pays to think about sustainability.

Have you looked into sustainable commercial real estate? Green buildings can save you up to 20% on utilities alone. If the building isn’t up to sustainability standards, according to Marylhurst University there are income tax credits, rebates, grants, and property tax abatements  “for everything from solar installation projects to interior energy retrofits of commercial buildings”.

If property values on sustainable buildings in your area are too high, the smart route is to identify a building in a good location that hasn’t been updated. Then, determine the price of green renovations and add it to the cost of the building. Next, research the federal, state, and local incentives for installing things like solar panels, double-pane windows, and high quality insulation. Subtract the estimated dollar amount of incentive kickbacks from your first figure, which was the cost of the lease combined with the cost of green renovations. Finally, compare that number with the price of buildings that are already updated for sustainability.

In the long run, you’ll only save money from updated, eco-friendly real estate, because you’ll save on utilities and repairs. You can also use your investment in sustainability as part of your branding, with environmental stewardship as a cornerstone of your business.

Incentives and practical considerations

Incentives don’t just come from modernizing a space for sustainability. Have you ever considered relocating to a different city? In terms of finding the absolute best location for your small business, there are cities such as Chicago that offer grants, loans, fee waivers, tax reductions and land-write downs in exchange for job creation. Do your research on areas where your product is needed, look into state and city incentives, and then consult with the local Small Business Development Center. If you’re willing to relocate beyond the US, consider global hotspots for entrepreneurship, such as Berlin, Tel-Aviv, and London.

Quickbooks points out, “The cheapest choice isn’t always the right choice.” Look for an area with plenty of traffic from your target customers. Be aware of how much competition there is in the area, too. The more competition, the less visibility you’ll have. However, if you find a key price point on which you can undercut competitors, and you have a unique brand, take the risky location with a reasonable price.

When it comes to relocating, some states have lower minimum wage than others. Research minimum wage along with the economic environment of prospective states, and plan accordingly.

In some states, you’ll have multiple power companies to choose from. Find the one with the best rates and be aware of whether they have additional charges during peak hours of use. Large spaces cost more to heat and cool. Don’t get a bigger space than you need. Reserve about 80% of the space for retail, and use low cost rental space for any additional storage, distribution, and offices.

As far as janitorial and maintenance costs, DIY is the cheapest. Another option is to use an app such as TaskRabbit, which connects you to inexpensive and reliable freelance janitors and maintenance personnel.

You’ll need liability insurance in case anyone gets hurt in your store, so use a broker to look hard for the insurance provider with the best rates.

Ultimately, the smart decision on your first location is finding the balance between price and location. A great location with lots of traffic will pay for itself. But if you don’t have a ton of funds at the outset, and don’t want to rack up lots of debt, look for the space with a decent price in a decent area, and work hard at marketing and branding to make customers come to you.

Save Money During The Big Move

by PATRICIA HolmesUncategorized

Moving across the country costs quite a bit of money and time, but there are a few tips and tricks you can follow to save yourself some money. Whether you’re able to loop your neighbors into helping, save yourself from a few hidden costs, or are able to relax and spend less, it’s up to you to make the most of your budget.

Do It Yourself

You can save money moving if you don’t have many possessions, a large automobile, and several muscled friends. Moving yourself across the country typically costs anywhere from $4,000 to $7,000, depending on how far you’re going and how much stuff you have. You can cut corners by going to local grocers and liquor stores to get free boxes, staying with relatives and friends as you drive, and moving during an off-season, when gas and hotels are more economically priced.

Moving by yourself doesn’t have to be expensive, if you plan it well, get help, and aren’t moving a lot of stuff or people.The real secret is to get rid of things you don’t need. Many items can be given to thrift stores or food banks as a tax deductible donation, which can even further reduce the cost of your move.

Save On Hidden Costs (Be Prepared)

Moving in maintenance, being improperly insured, utility connection fees, and replacing something that you left thousands of miles away will all bite a chunk out of your budget. While moving, you should call your insurance company and update your auto insurance. In some states you have 30 days and the change might just be an address update, but in other states, you may have to up your coverage or get a different provider.

Once you move in, turning on the utilities, replacing items you left behind, and small maintenance projects (like putting on seasonal windows or replacing the locks) will drain the rest of your move in budget. You should arrange some of this before you arrive, or at least call and check out prices/deposits that might be required. Nothing kills a budget like an unplanned bill.

Relax. It’s Best To Leave The Hard Stuff With Someone Else

It can be more economical to hire someone to move for you. With a moving company, an interstate move averages $5,630. That can save you time, stress, and money. You can have more time to spend making friends with your new neighbors and exploring your town, and your valuables will be insured with professional movers.

If you’re looking to save money, stress, and time by hiring a professional mover, consider moving during an off-season, being flexible with your dates, and talking to several moving companies. Shopping around for a moving company will help you get the best move for the lowest price.

As You Move, Consider Your Commuting Costs

by PATRICIA HolmesPersonal Finance

When planning a move, the number of considerations you need to make can feel overwhelming. Renting or purchasing, monthly costs, utilities, roommates, furnishings, even neighbors – all of these play a role.

But the old rule of realtors remains the most important: Location, location, location. It’s more than just a nice view or a neighborhood with the best cafes or organic co-ops, though – location will determine how you commute, and that has huge implications.

The average American commutes for an hour every day, but there’s much more to it than that. Since most Americans get to work in their cars – alone, usually – you need to think about the cost of the car, gas, insurance and repairs. It takes time to earn all that money.

Finding a job where you can telecommute is easily the most cost-efficient, since you can live in a cheap area and not pay a cent to get to work. Failing that, it’s important to do the math – does the cost of your car outweigh the cost of living close to your job?

It might well end up being economical to sell the car, ditch the associated insurance and maintenance costs, and pay more for a smaller place that gives you more time and, in the end, more available cash.

One Minute Money Show: #SpendingProblems

by PATRICIA HolmesUncategorized

This month’s One Minute Money Show is all about how to get rid of spending problems once and for all! If you’ve ever gone on a crazy spending spree, and felt like you couldn’t hold on to your paycheck, this show is for you.

Show Notes

Step 1:  Recognize the problem.

You have to recognize the problem in order to fix it! If you spend more than you make, struggle to afford bills, and don’t have financial priorities, these are red flags.

Step 2: Figure out where your money is going.

If you’re not sure what your spending habits are, keep track. Keep receipts, check online banking statements, or carry a notebook for the next two – four weeks.

Then ask:  Do you spend more than you make? Does the majority of your paycheck go to non-essentials, i.e. dinners out, entertainment, subscriptions/memberships, junk foods, etc.? 

Over-spending on non-essentials may be hurting your financial health.

Step 3:  Make adjustments

The experts recommend the 50/20/30 breakdown.

Can you account for your spending in these three categories? I recommend writing this out to help visualize where all of your spending fits in. If your budget is in the positive, GREAT! If you need to make adjustments so that everything fits, try trimming some of the “extras.” Tip:  The best places to cut are in fixed costs or flexible spending. Cutting in the financial goals category will hurt you in the long run.

50% Fixed Costs – The expenses that don’t change much from month to month, like rent, mortgage, utilities, car payment, gym memberships, Netflix, other subscriptions.

20% Financial Goals – This part of your budget helps you secure a solid financial foundation, for example, paying down credit card debt, or other debt, saving for retirement and building an emergency fund.

30% Flexible Spending – These are day-to-day expenses that can vary from month to month, like eating out, groceries, shopping, hobbies, entertainment, or gas. You can add any miscellaneous expenses in this part of your budget, just be aware that it must account for only 30% of your budget.

Step 4:  Account for all spending in your budget

Make sure all of your spending is accounted for in your budget! Doing this will ensure that you don’t dip into other important parts of your budget.

Take care,