Making Money Move(s)
TL;DR use Braid.co if you can
We’ve already gone over how to manage finances in a coliving house in the long but beautiful post here.
But how do you actually move the $ around? In a coliving house, there might be thousands of dollars passing from residents to a landlord (or a bank, if you’re paying off a mortgage) each month. Too often, we see people just paying expenses willy-nilly and then planning to settle up some day. This can lead to heartbreak and damage to credit scores, not necessarily in that order.
In this post we’ll get into the most common ways we’ve seen houses move money around, and the pros and cons of each.
The TL;DR of this post is that Braid is probably the way you should be managing your house finances (and no we are in no way sponsored by Braid). Unfortunately, it’s only available to people with US bank accounts at present, so we’ll go over a few common alternatives as well.
#1: One resident acts as the ‘bank’ - everyone pays them, and they pay all the bills
Works best when:
The individual is comfortable taking on a large amount of financial risk and can personally cover any potential shortfall
Everyone trusts the individual enough to not worry about them pocketing any surplus
The group is highly organized and can keep track of expenses to ensure the individual’s risk is minimized & the group shares in any surplus
How this works:
Despite the very obvious downsides, this happens more often than you might think: an individual or a small group are highly motivated to get a house started and are willing to take on a big financial risk to make it possible.
The individual can (and should, for simplicity of accounting) open a separate bank account (it’s usually trivial to open another checking account at a bank you already use) to keep house finances separate from their personal. All rent/dues are paid to the individual, who then pays the landlord, utilities, etc. Whenever someone buys something for the house, they request reimbursement from the individual.
Side note: we recommend using Apartments.com (which acquired cozy.co) to automate collecting rent payments, regardless of which of these systems you’re using. It works for the US only, please let us know if you have alternative suggestions for other locales.
Alternatively, the individual can open a Paypal account for the house and share the login with co-residents. This has gotten harder as Paypal now usually requires 2 factor authentication, and there are a number of restrictions on how money can move out/in - enough that we don’t know many people still going this route.
Pros:
It is easier to keep track of house finances with everything coming in/out of one account.
For everyone OTHER than the individual, risk and accountability is minimized.
Cons:
Everything depends on one person: if she is having an unusually stressful time with work and becomes hard to get ahold of, or he goes off-grid at Burning Man for a week, it won’t be possible to access house funds.
Because no one else is really liable, others may forget to pay their rent / other contributions. The individual is then left in the unenviable position of continuously bothering their friends for money, or covering the shortfall out of their own pocket.
It’s hard to have transparency: someone still has to keep the books, and if they’re not clear and up to date it can be hard to understand where all the rent $ are going, leading to an uncomfortable landlord/tenant dynamic instead of a harmonious coliving community.
The individual may run into problems with their bank for having a lot of large transactions move in/out of a personal account - even if you’re not making a profit, it may look like you’re running a business. (Paypal is very strict about this).
We don’t recommend this route. It works in theory, but in practice we’ve seen many, many examples of benevolent individuals setting up houses, then getting burned out, and in some cases really getting burned.
The most obvious recent example of this is the pandemic, when there was a mass exodus from coliving houses as people chose to minimize costs and/or seek out more socially isolated pastures. We know several people who were left holding the bag as less invested people left.
#2: A bank account is set up for the house, jointly managed by a number of residents.
Works best when:
Residents don’t turn over very often.
There is high trust among everyone in the group.
How this works:
Unless there is an LLC set up to manage the house (which is a level of formality beyond what most houses need), you’ll need to stick with a joint checking account. Many banks will allow joint checking accounts: Chase and Bank of America will allow up to 6 signatories on a single account, Ally Bank will allow 4 and can be set up virtually. Each person on the account will have equal access to all the funds in the account.
Pros:
As with #1, it’s easier to keep track of finances with everything coming in/out of one bank account.
More people on the account means more people are empowered to make financial decisions for the house.
Cons:
Adding/removing people from checking accounts can be tricky: it may involve every signatory being at the bank at the same time. I experienced this personally when I moved out of the Archive in San Francisco and had to ask 5 beloved and very busy housemates to find a time when they all could go and sit in Bank of America for two hours to sign one piece of paper.
Obviously you trust the people you live with, but if something were to go wrong any signatory on the account could in theory ‘accidentally’ withdraw from the house account instead of their personal and abscond with all the funds.
For small, long-term-stable houses, this can work well enough. You still need to be good at record keeping, but at least risk and responsibility is shared among the group.
#3: Everyone pays for some costs as they come up, and differences are settled up periodically.
Works best when:
The amounts of money involved are small enough that no one is ever out a disproportionate amount of money.
Residents don’t turn over very often.
How it works:
Splitwise is a great app for this use case: each house member can join, submit expenses as they come up, and use their tool for settling up easily through Venmo, cash transfer, etc.
Alternatively, you can design your own system where everyone submits expenses to a central record like a Google Spreadsheet and then settles up however is most convenient for you, but this is a lot of work.
Pros:
It’s the easiest to set up: all you need to do is have every house member create a Splitwise account.
Cons:
It’s harder to split out operational vs. infrastructure costs (which we explain here), and so residents who move out/in may end up paying an unfair % of big expenses.
Example: the fridge needs to be replaced and a new one costs $800. Sarah is moving out at the end of this month, and Mo is moving in. Sarah has lived in the house for a year and benefited from the previous fridge. Mo will be living in the house for the indefinite future. What % of the fridge do Sarah and Mo pay for?
Since it’s so easy to set up, it can be easy for housemates to slip into this without having a clear conversation about how you’re going to handle necessary vs. discretionary expenses. In my magnum opus about house finances, I talk about one example where a housemate put all the expenses for a $4000 party in the Splitwise, which didn’t seem fair to the housemates who didn’t attend or didn’t want to host the party.
This system doesn’t take into account building up a buffer fund to deal with emergencies, so when a large expense comes up it might be difficult for anyone who is running on a tighter budget to handle.
We don’t love this system unless the house is small (<4 people) and expenses are low.
#4: A virtual joint account like Braid is used to share expenses.
Works best when:
The majority of house members have a US bank account.
You want to avoid most if not all of the ‘cons’ listed in #1-3 above.
How it works:
Braid, fka Compound, entered the scene in late 2019 and has earned many devotees. It fills the painful void left by the retirement of Venmo Groups, and then some. In their words:
Each housemate downloads the app and connects to their bank account. You can also connect to Venmo, and accept contributions via debit or credit card from people who don’t download the app. You can then transfer into shared funds that can be managed collaboratively or by an admin/admins.
The funds are held by Braid but you can transfer at any time to any of the linked accounts (similar to how Venmo works). You can also spend from any fund directly using virtual debit cards, and send/receive ACH payments. You can set up recurring payments (e.g. rent or bill pay).
You can set up multiple funds for your food share, operating costs, long term projects, discretionary expenses, etc, and set rules on who can transfer however much in/out of each. We highly recommend setting up accounts based on this model for sharing funds in a coliving space.
Pros:
No single person is on the hook for house finances, and this is much, much simpler than setting up joint checking accounts or reconciling via spreadsheets.
Because everything is transparent, people are more likely to pay their contributions on time without follow-up from whoever usually keeps track of things.
Customer service has been super responsive in our experience. UPDATE: the CEO and founder, Amanda Peyton, says any Supernuclear reader is welcome to email her at ap@braid.co with any issues.
Cons:
No support for non-US banks yet.
Transfer limits are initially $500 until you petition for a greater limit, which may or may not be granted.
In conclusion
Isn’t there a simpler way, I hear you ask in desperation?
You could simply sign on to living in a for-profit coliving house with a management company that takes care of everything. There’s nothing wrong with that.
But one of the things we think is so wonderful about communally managed finances is how everyone can be invested and share in the abundance that comes from a well-functioning house.
The good news is that tools like apartments.com and Braid make managing finances something that can take 15 minutes a month.
We’re also always curious to hear of new tools people are creating to make managing coliving easier. If you know of any, please share with us in the comments or at hey@gosupernuclear.com!