Your roommates may not be as financially savvy as you think.

Off to a poor start Young adults are ill-prepared to handle the financial decisions that await them after high school graduation. According to "Our Vulnerable Youth: The Financial Literacy of American 12th Graders" by Lewis Mandell (ISBN 0-9666010-0-9), high-school seniors have a poor understanding of income, money management, saving, and debt. Of the 1,532 seniors tested on those concepts in the Jump$tart Coalition's, 1997 Personal Financial Survey, only 10% scored a "C" or better. Because they lack solid financial knowledge and skills, young adults may be overwhelmed by the true cost of living. "The first place they're likely to get in trouble with roommates is by spending a lot more than they expected," says William Furmanski, director of communications for the National Foundation for Consumer Credit, in Silver Spring, Md. "They get out in the real world, and all these other expenses pop up that they might not have planned for. It can end up in arguments or fights over what your share is or how much you have to contribute."

Roommate requirements You can avoid some of those arguments by choosing roommates who can: Pay the bills. Where will the money come from? Does the roommate have a job? Or will Mom and Dad pay for everything? "Get insight beforehand whether this prospective roommate has the capacity to go into a certain apartment or living arrangement," says Richard Flaherty, president of College Parents of America, based in Washington, D.C. Be flexible. Situations change; make sure your roommates can change along with them. Be responsible. If your friend already has maxed out his credit cards without a thought, do you want to endure his financial frivolity each month as a roommate? Although this advice may seem overly simple, many students know little about their friends' financial habits. "Young adults may be surprised to find that their roommates may not be as savvy in dealing with financial matters," Flaherty says. "This is usually the first experience for all students involved in dealing with a lease or utilities, so you can't assume your roommates know more or as much as you do."

Most young adults    are ill-prepared for the    financial decisions    that await them    after high school.

If possible, find an apartment that includes utilities in the monthly rent.

Bill of fair Roommates share responsibility for expenses. By laying ground rules for how you'll pay certain bills, you can guarantee all parties meet their obligations without holding a grudge. The lease. "List all your roommates on the lease and have them all sign it," says Beth Kobliner in her book "Get A Financial Life: Personal Finance In Your Twenties and Thirties" (ISBN 0-684-81213-4). "It ensures that you will all share legal responsibility in case of a problem. It also protects you if one of your roommates suddenly changes his or her mind and decides to move out before the lease is up." Utilities. Unlike the lease, utility bills usually carry only one roommate's name. In the company's eyes, that individual is solely responsible for making full and prompt payment. To mitigate the risk, each roommate should take responsibility for at least one bill. "Guesstimate the bills so that each person has an almost equal responsibility each month," says Furmanski. "If the water bill is $100 but electric and gas are each $50, one person is responsible for the water and the other is responsible for the other two. Each person is putting out about the same amount of money." If you can, find an apartment that includes utilities as part of the monthly rent, suggests Celia Hayhoe, an assistant professor of family studies at the University of Kentucky in Lexington. "It's one less bill to worry about," she says. Phone. If separate phone lines aren't an option, ask if your phone company can assign a long-distance access code to each roommate. The bills then will itemize calls by each code. This could become especially important if any of you uses Internet services. Food. "There are two basic rules to talk about when it comes to food: communicate and set ground rules," Furmanski says. If roommates agree to share some of the costs, spell out what items are OK to buy. Will you limit it to household supplies, like toilet paper, garbage bags, and laundry detergent? Or can you agree about how to share milk, bread, lunch meat, and other staples? Furniture. Many young adults have hand-me-downs from family members. To fill in the gaps, shop secondhand stores and yard sales for cheap furniture you can live with, says Hayhoe. That way no one will take a big loss if the furniture gets ruined. If you do purchase furniture as a group, Furmanski suggests you: Have an exit plan. Will you haul the couch to the curb, or will one roommate buy out the others? Keep your receipts. Then you can clear up any misunderstandings about who owns what.

Put it in writing To reinforce the financial arrangements you've made, have all roommates sign an informal contract, advises Marian Latzko, author of "I Can Do It! A Micropedia of Living on Your Own" (ISBN 0-9651826-0-6). The contract should include: How you'll split expenses; Dates all bills are due; Whose name is on each bill; Who owns which furniture; How you'll pay damage and late fees; Chore- and space-sharing agreements; and Provisions for moving out. Debra Kirby, a senior at Northwest Missouri State University in Maryville, signed an informal roommate contract when she rented an apartment for the summer. "It helped to have everything spelled out," she says. "It let you know up front what you're responsible for." Such a contract could have prevented Christine from browbeating Amy and Annemarie about the utility payment. The due date would have been a given. Instead, the three carried hard feelings about the incident until they parted ways.

List everyone on the lease; however, utility bills go under only one name.

Talk things out There are bound to be misunderstandings: food taken from the fridge, a bill paid late, one person monopolizing the phone. Talk about these issues before they escalate into serious grievances. When Dave disapproved of Tom and Erik's food purchases, the three agreed it would be best to shop individually. From then on, they simply initialed their food containers in the refrigerator and cupboards. By talking things out, they established a plan everyone was happy with and saved the friendship that brought them together as roommates in the first place.

Look Before You Lease Phoebe was shocked when the resident manager showed up at her newly subleased apartment. "I need the first months' and last months' rent, and the security deposit, today--or you're out." Phoebe had just signed on as the new fourth to replace one student who'd left for a semester's teaching internship. But to comply with the terms of the lease--which she hadn't previously read--she had to write the biggest check of her 19-year-old life. And make one of the hardest phone calls she ever made to her parents. "They came through, but they were majorly annoyed with me for getting into something without understanding it." The moral of the story is, read the lease before moving in, and make sure you can cover the financial commitment.