Economics of Shared Living: Estimated Savings From Having Roommates

If you’re looking to reduce expenses, why not start with your most expensive category – usually housing. While it can be a lifestyle change, one of the most effective ways to save money is to share a household with others, as it also can reduce your costs in other areas like utilities. In this article The “N” Factor and Retirement Planning, columnist Scott Burns focuses on the financial impact of having kids but also shares a interesting way to estimate how the size of a household affects how much it spends overall:

Here’s the algorithm: The cost of living for a household is the square root of the number of people in the household. So if you are single, your cost of living is the square root of 1 or… 1.

But if you are recently married, your cost of living is the square root of 2, or 1.414. Yes, two can’t live for the price of one. But they can live for only 42 percent more than the price of one. Economists call this “economies of shared living.”

Expanding on this, if you have 3 people then the √3 is 1.73 (73% increase over a single person). But if we are talking about adults and not kids, then it is probably more helpful to simply focus on the effect of each person’s share.

If you’re single and live by yourself, your total cost of living may be $2,000 per month. This includes things like food, transportation, and utilities.

  • Get one roommate, and your cost of living is now 1.414/2 = 71% of living alone, or $1,420 per month.
  • Get two roommates, and your cost of living is now 1.73/3 = 58% of living alone, or $1,160 per month.
  • Get three roommates, and your cost of living is now 2/4 = 50% of living alone, or $1,000 per month.

Quick Check
Using Rentometer, I found the median rent levels for a one, two, and three bedroom rental in my area. (Yes, they are really high overall for the US.) This should provide a quick check for this rule, even though we are just looking at housing. It turns out to be pretty close:

One bedrooms: $1050/month – $1050 per person
Two bedrooms: $1600/month – $800 per person, or 76% of living alone
Three bedrooms: $2175/month – $725, or 69% of living alone

According to the √N Rule, the biggest relative benefit comes when you stop living alone, at a savings of nearly 30%. While it is easy to dismiss communal living, I think it is important to realize that is an option, even if you choose not to go that way. In many cultures even having multiple families living under one roof is common.

Burns also extended this concept a bit in showing us how a retiree can survive on $15,000 a year. Of course, the same idea can also apply to non-retirees. “Cooperation is a wonderful but generally overlooked substitute for money.”


  1. That’s a really interesting statistic, Thanks!

  2. Interesting to see this put to a math formula, but around 40% was what I eyeballed on my own for what a spouse would “cost” in additional expenses so I think this article is on the mark. As a single guy nearing retirement, how any spouse-to-be effects the assets/expenses becomes a factor, especially if they haven’t been as aggressive in savings! It becomes an interesting factor is dating decisions because it can effect the lifestyle I am targetting…..

    As a side note, I also noticed that my company’s retiree health plan says it will only cover a spouse IF I was married to them BEFORE I retired, so if I don’t get married before I retire, there is another expense to add in! Talk about dating pressure 🙂

  3. If the Mrs. wasn’t so opposed to it, i’d totally get a roommate (or two even). I really enjoyed living with others! besides the awesome cost benefits you mention, it’s just nice having others around to chat with, hang out, meet new people, learn new stuff, etc.

    I guess the Mrs. “counts” as a roommate though, so that’ll have to do 🙂

  4. Jessica says:

    Thanks for the information! I am about to start my last year of graduate school after which I will be living on my own for the first time. I have been throwing around the pros and cons of living with a roommate, but never knew that the decrease in expenses would be so great! I think that I will rethink the roommate idea more seriously.

  5. totally hear you, sexy budget guy.

    my name’s the only one on the mortgage, and I’d love to get someone else in here to help pay it down a bit, but my boyfriend’s not too keen on that idea. He does pay half, which is great, but I’d like to be paying even less if possible, especially on utilities!

  6. Christopher says:

    Studio apartments are often as cheap as half of the rent in a 2-bedroom, but most people don’t consider them an option. I’ve actually seen a lot of studios that are more spacious than 1-bedrooms, and even lived in a 1-bedroom which was basically a studio with some silly french doors put up to make a sleeping area.

  7. the savings on utilities and mortgage payments is awesome, but having a roomate limits your freedom, and there is no price on doing whatever you want whenever you want.

  8. SavingDiva says:

    I’m moving to a new location…but I don’t know if I could even find a roommate….

  9. notailgate says:

    Carefully consider the downside risks.

    If you own the house, a paying roommate becomes a tenant with specific rights under landlord-tenant laws of most jurisdictions.

    If the roommate co-signs a lease of course you are liable for the difference or must scramble around for a replacement if the roommate can’t pay.

    It’s hard to keep emotional boundaries. Consider how you would feel if the roommate became ill, disabled, got fired, etc., and lost their income. You feel sorry for them — would you be able to kick them out for nonpayment? If you had spent the past couple of years chatting, hanging out, and the like?

    All things considered – once beyond a certain age, the risks of splitting rent/mortgage with someone who isn’t a spouse or formal legal partner, exceed the benefits, IMO.

    Most peoples’ jobs and lives are stressful enough. Roommate problems can be severely stressful in and of themselves and destroy the potential for your home to be a sanctuary.

    Trust me on this one, I’ve been there.

  10. Being able to walk around your apartment in your underpants (or naked)…. priceless…

  11. I have done the roommate thing, since buying a house, and struggling with the new expenses. I have had a couple of good roommates, and three very bad roommates. If I were ever in a financial pinch again, I would consider it, but with my finances in a good place, I am not willing to take the risk again.

  12. It’s funny because me and my girlfriend just finished (2 days ago) going over our budget and we came to the conclusion that it’s only costing us about 35-45% more to share living expenses since moving in together. I guess your formula is pretty accurate. I thought it would be more like 75%.

  13. I attribute living with a roommate for the first 4.5 years in the workforce as a major factor in my ability to save and grow my net worth. Having a roommates significantly cuts down all those after tax expenses (rent, utilities, etc).

  14. ChrisMart says:

    Think of 10 ways to reduce the living costs you estimated in. For example, you could reduce rental costs by having roommates

  15. Currently I have a roommate that works nights, I work days. So it is actually great since there is usually always someone in the house (security) and he is there during the day if I get any packages delivered!

  16. Yes, in the Bay Area roommates are often the only way you can afford rent.

    Anyway, as an older adult I am not a big fan. But I would certainly go back to roommates if I had to.

    I had roommates in college and rented a very large home in a nice home in a nice area for about $300-$400/month. (Rent went up $25 monthly, every 2 years).

    In comparison, a studio apartment on the bad side of town was an easy $1k monthly.

    Likewise, it is quite common for adult professionals to rent houses together. It can make such an expensive area rather affordable. Living alone is a luxury with a very high price.

    I also don’t see why college is s’posed to cost a million dollars. With this kind of stuff it was actually rather affordable. I have too many friends who thought they had to pay $12k/year to live on campus in crappy dorms. I cut my room and board in half, easily, and had much more space to myself. At least I had my own room!

  17. I am with notailgate, getting roommates is something that needs very serious thought before doing. Besides that some of them may cost you you more than you’ll save, there are quite a bit emotional and every day things that may go wrong with that

  18. acoward says:

    The other added benefit is that you can rent nicer homes because your total rent is higher. I rented for 4 years with roommates. First a little apartment with one roommate. Later with 2 roommates I rented first a house with a pool and a hot tub and after that a waterfront house.
    I paid less then half of what I would have paid as a single renter in a tiny and cramped apartment in an ugly complex.


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