Siblings first, roommates second?
Getting a roommate could make the cost of housing much more affordable. Not only can you split the cost of rent, but you can also share utility costs for added savings. As a general rule of thumb, it’s best to keep your housing costs, whether you own a home or rent one, to 30% of your pay or less.
The problem, though, is that if your roommate doesn't live up to their end of the bargain, you could end up getting stuck having to cover your rent yourself. That could not only be a stressful thing, but put you in a position where you fall behind on other bills. It's particularly tricky if your roommate is someone you're close to.
In such a case, it would be best to have a frank and open conversation. If your roommate is unemployed or in the midst of a financial crisis and you can afford to cover their share of the rent temporarily, it could be easier to do that and wait to get repaid than to go through the process of finding a new roommate or moving out. But it’s important to protect yourself. If you can only afford to cover the rent alone for three months before tapping your savings to an uncomfortable degree, speak up and set that expectation.
It’s a good thing to try to salvage a relationship with a person you care about. But you also need to make sure you’re protecting your own financial future at the same time. You need to be maintaining an emergency fund, paying down any expensive debt and saving a portion of your income for retirement. If your brother is making these things difficult in the long term, it's time for some drastic changes.
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Learn MoreHow to avoid getting taken advantage by a roommate
To avoid such a situation, before you agree to live with a roommate, dig into their financial history. It's not unreasonable to ask for a copy of their credit report and score so you can look out for any red flags. And it's also perfectly reasonable to get a reference from a former housemate or landlord of theirs.
Of course, things are a bit different if you'll be living with a sibling or friend you know well. In that case, be honest with yourself. If they have a history of floundering financially, then you may not want to put yourself in a position where you're reliant on them for rent.
If you do decide to rent a home with a sibling, friend, or someone else you know, set ground rules. Your best bet is to have both of your names on the lease so you're equally liable for your monthly rent. But beyond that, draft a separate agreement that spells out the terms of your living arrangement.
That roommate agreement should state how the rent will be split and how utilities will be covered. It's not a bad idea to also have it include a breakdown of who will tackle which household responsibilities so there's no confusion.
If your roommate doesn’t live up to their end of the bargain, you may, depending on your agreement, have the right to sue them for unpaid rent or have them move out and get a new roommate. Or, you may be able to break your lease with your landlord’s permission and move out yourself. But that’s generally not a route you want to take if you’re bunking with a sibling or friend.
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