When you rely on tips for your income, it can be hard to save money.
I’ve been a bartender for years, like about 550,000 other people in the U.S., according to the Bureau of Labor Statistics. When you go home with cash every day, it seems to burn a hole right through your pocket.
And from one day to the next, you have no idea how much you’re going to make. On my worst shift, I owed the restaurant $45 (gotta love those dine-and-dash folks). But on my best shift, I made more than $1,000 (a politician and his lawyer team hit the bar hard the night before he was sentenced).
I have a friend who absolutely relies on getting the occasional group that tips $700. His other four shifts barely pay for gas to work. With those fluctuations in pay, it can seem nearly impossible to set a budget.
Over the years, I’ve developed several strategies to get you off the financial roller coaster and on to a life of greater security. Here’s how to manage your budget when you rely on cash tips.
Look at the Bigger Picture
First, start keeping track of your income. You’ve got to know where you stand.
Track every dollar you actually make, after tipping out other staff (but before buying post-work shots). Write it down in a journal or spreadsheet after every shift, which you should do anyway in case of an audit.
Total up your income for 10 weeks, then find your average weekly income. This process helps smooth out the differences between individual shifts.
If you’re working at your job long enough, do another 10-week average, and compare it to the first 10 weeks to see how much your income varies. Now you can determine a margin of error for your budgeting.
Pick the lower of the averages, and base your budget on that figure, just to be safe.
At my most recent job, my 10-week average only different from my average of the next 30 weeks by $3, which is exceptionally consistent. That might be a rare case, but I expect you’ll find your income to be more consistent than you’d think, as long as you take the longer view.
If you change jobs, keep track of your weekly income, including the time you’re out of work. You want to know how you’re doing in the profession generally, not just at one job.
While you’re gathering this data, it’s not too early to start saving and making a crude budget. Many in the service business do something like this:
Immediately Set Aside 10-15% of What You Make Each Shift
This is to help with taxes; set aside even more if you can.
Since most servers only make $2.13 per hour or so, with the rest as tips, they’re often stuck with a large tax bill every year. Start planning and saving for it now so you don’t have to sell your car (or live in it) later.
Deposit Larger Denominations in the Bank
Different people choose different bills. I deposit all $100, $50 and $20 bills and use them to pay rent and buy groceries and other necessities.
This way, you’ll use most of your earnings to build up your checking account and cover fixed expenses.
Pay All Day-to-Day Expenses in Cash
You can feel the impact on your wallet more when you use cash than when you just swipe a card. I use $5 and $10 bills for most purchases.
When Paying in Cash, Never Use Change
Change adds up fast. For years, when I was living more hand-to-mouth, this stash was my rainy day fund, and it saved me several times.
Now I use it to fund travel. My most recent jar netted me $600 to use for a trip to Costa Rica.
And as you save change, keep your eye out for valuable coins.
If You Can Afford It, Put Aaway All Your Singles
Mike Zaunbrecker, a server and bartender in Austin, Texas, puts every dollar bill he gets into a big empty protein powder canister. This helps him save even more quickly than my change jar.
I like to use change to build up my fun/travel fund, and singles to build up my savings account. Figure out which system works best for you.
Save for Something Specific Using a Wine Bottle
Alana Ramirez, a former hostess and server in Austin, Texas, saved for a trip to Hawaii by stuffing every $20 bill she earned into an empty wine bottle for months. When the time came to buy her ticket, she smashed it open.
A wine bottle helps keep your hands off your savings, since you really need to commit to breaking it to get access to your money.
But What About Paychecks?
Out of 12 or so restaurant gigs in my life, only two paid tips in the form of a paycheck cut every two weeks.
Even if you do get a paycheck, you likely don’t get a check consistent enough to base a budget on. After all, the paycheck is just your tips from a week or two, which can be quite variable.
Enter Even. The app costs $3 each week, but there are no other charges. It analyzes your past paychecks and comes up with an average for you, which it reworks every month for accuracy.
If you get a bigger paycheck, the app takes the extra money and holds it in a separate account, and if you get a smaller check, it uses that account to cover the difference.
If you don’t have enough in your “savings,” Even fronts you the money and makes up for it with the next larger paycheck. It’s not a loan, and you don’t pay interest or have to pay the money back at a certain time.
With Even, you get the same amount of money every week or two, and you can budget without having to worry about big income swings.
Once you have a good idea of what you’re making and have developed nearly automatic savings habits, structure your finances into whatever system works best for you.
Make a budget that takes into account what you can really expect to earn, and put your cash to work by building up savings and investments. That way, you don’t fritter away all your hard earned money on shots of Jameson. (Just some of it.)
Your Turn: If you’re a service industry worker who relies on tips, how do you manage your budget?
Jeff Morrison is a bar manager and freelance writer from Austin, Texas.