Are You a Restaurant Server? Here's How To Budget When You Work for Tips

Jill Huettich

WealthFit Contributor

It’s difficult to get ahead when your income is based on tips. You might feel like planning is pointless. But the service industry can be predictable and lucrative. Whether you’re a server, bartender, busser, or barista—you can use these budgeting tactics to get into the driver’s seat of your finances.

Do you work really hard to earn good money as a bartender or server, but have very little to show for it?

Would you like to set aside money to pay off your credit card debt or student loans but never manage to do so?

Do you think it’s a good idea to save money but still burn through your tips every month?

If any of these sounds like you, then you need to read this. Although budgeting when you work for tips may seem like an impossible task, it’s actually easier than you might imagine.

It does, however, make a plan. Fortunately, we can help with that. Read on to learn why budgeting seems so hard when you work in the service industry and what you can do about it.

The Frustrations of Budgeting When You Work for Tips

It definitely seems more difficult to budget when you don’t know how much money you’re going to make each week. Unfortunately, that uncertainty leads to a “spend it while you’ve got it” mentality—with the expectation that you’ll earn great tips on Saturday night to make up the money you spent impulsively.

However, there are a few problems with that mindset. First, it can really stress you out. Not knowing whether you can afford to pay rent or buy groceries makes you anxious and unhappy. And those negative feelings can affect other areas of your life like your health, job, and relationships.

Secondly, when you spend every dollar you make, you never start saving for the important stuff—things like a mortgage, a new car, or the vacation you’ve been dreaming of for years. Instead, you remain on a financial treadmill—just getting by without making progress toward your long-term goals.

Finally, have you ever noticed that the more desperate you are for good tips, the harder they are to come by? By putting yourself in a position where you have to have a good night at work or else, you’re less relaxed with customers—and your tense demeanor shows.

Fortunately, there are ways to combat this tendency to squander your tips.

Budgeting When You Work For Tips: Track Every Penny You Make

As a server or bartender, your first step is to track the amount of money you make for three months. Include your paycheck, as well as your tips.

To make this a no-brainer, buy a small notebook or use an Excel spreadsheet. Then, at the end of every evening, record exactly how much you earned.

Ultimately, what you want to find out is how much you make on average each month. Once you figure out your monthly average income for three months, use your lowest-earning month to create your budget.

Write Down Your Expenses

You can’t make a budget without knowing what your monthly expenses are, so take a moment to write them down. Don’t forget to include rent, utilities, phone, Internet, credit card payments, car payments, medical bills, student loans, and subscriptions.

If your employer doesn’t withhold taxes based on your tips, you’ll also want to set aside enough money to cover your taxes at the end of the year. Although the amount you should set aside varies based on your individual circumstances, it’s a good idea to aim for at least 15%.

Once you’ve written all your fixed expenses down, figure out what percentage of your income needs to go toward those expenses. For example, let’s say your fixed expenses are 60% of your total income.

After you have that percentage, think about how you’d like to divvy out the remainder of your money. Since you’ll have 40% of your total income left, you might put 20% of it toward groceries, 10% of it toward entertainment, and 10% into a savings account.

Manage Your Incoming Cash

Now that you’ve created a budget, you’ll need to manage your incoming cash. There are two ways you can do that. One is to use an envelope system, and the other is to deposit money into your bank account and track your spending with an app.

Using the Envelope System

Let’s say you determined that 60% of your income needs to go to fixed expenses and 40% can go to groceries, entertainment, and savings. With the envelope system, you’d create an envelope for each of your expenses and then, order your envelopes based on when each bill is due.

As you get incoming cash, you’d put 60% of it into the envelopes for the bills that are due first. You’d divide your extra money (the remaining 40%) into envelopes for groceries, entertainment, and savings.  Then—and here’s the important part—you only spend what you actually have in each envelope.

Many people have a lot of success with the envelope system, because they can easily see all of their money categorized.

Using Your Bank Account with an App

For people who prefer a digital approach to money management, you can adapt the envelope system by depositing your tips into a checking account.

Then, you’d use an app to categorize all of your expenses and track your money that way. We like Dave Ramsey’s free budgeting app, EveryDollar, because it allows you to quickly see how much you’ve allotted and spent in each category.

By following one of these money management methods, you can easily start to get a better handle on your finances. You’ll also be able to build up your savings account so you can follow expert recommendations and put aside enough money for 3-6 months of living expenses.

Once you get to that point, you’ll be on easy street—then you can just pull out the full amount of money you need for an entire month from your savings account and put in your envelopes or a checking account.  You’d then just deposit 100% of your tips into your savings account.

Budgeting When You Work For Tips: Stick to It

Our final and most important tip is to stick to it. Whenever you begin a new habit, there’s usually a period of adjustment. Rather than telling yourself that budgeting when you work for tips is too hard or too time-consuming, think of this as something that will get easier the longer you do it.

We promise you the benefits of budgeting will overcome any doubts you may have.  For instance, not only will you handle your money better, but research shows that good control over your finances has a positive effect on your happiness, self-esteem, and overall wellbeing--even more so than earning a lot of money!

So, rather than leaving your finances to chance, think about where you want to be financially three years from now. Then, whip out a notepad and start working toward your dream today!

Like these tips?

Learn more of them in our article, Budgeting Fundamentals: A Life Saving Habit, where we’ll delve further into the benefits of budgeting and give you advice for honing your budget-building skills.


Written By

Jill Huettich

With an MBA in Marketing and a Digital Marketing Strategies certification, Jill Huettich frequently writes about marketing, entrepreneurship and wealth-building strategies.

Read more about Jill




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