Budgeting When You Rely on Tips

As a waiter, the majority of your income comprises of tips. One of the perks of working in the restaurant industry is that you never leave empty-handed. As a result, you get to save your actual paycheck when it arrives as opposed to spending it on your daily expenses. For waiters and servers, tips tend to be very important. While one should focus on improving his/her services to receive more tips but on the other hand budgeting should also be considered. There is no point in earning more tips if you end up spending all of it at the end of the day. To help you balance both savings and expenses,we are going to share some important budgeting tips for you to consider.

Track every dollar you make

Perhaps the best answer to the most popular question, how to save money as a server, is when billionaire Warren Buffet was once asked about how he manages his income and money, his answer was “I make sure that I get a dollar back for every dollar that I spend”. You need to develop this type of mindset. You might have come across extremely successful people who made millions during their careers only to drop back to the same situation only because they couldn’t handle the wealth. And, this is something you never want to go through in life. Therefore, it is important that you track every dollar you make.

The first thing to do when it comes to budgeting is observing and counting your income. We are talking about a week’s income but months. Furthermore, plan ahead and assume the intensity of customer traffic depending on the season throughout the year. However, do not set the bar too high. Sometimes expectancies can occur, which might leave you disappointed. Therefore, expect something between low and high. Note down your everyday tips on a spreadsheet for 10 weeks. After that, calculate your average weekly income. During this time, your tips will fluctuate depending on the weather conditions and other external factors. Once you have determined your average weekly income, it will give you a clear idea of where your spending needs to go.

Create Budget and Goals

The next important budgeting tip is creating a budget and goals. Both of these factors go hand in hand and are directly linked to each other as well. Therefore, you cannot overlook one to implement the other. The reason is that creating a budget requires considering your goals. If you have not set any goals for yourself, the budgeting will be of no use.

One of the key reasons for budgeting is that once you have determined your average weekly or monthly income, you will be able to set some cash aside for your bills to be paid on time. As a result, you will not be stressed when multiple bills are sitting on your desk to be paid. With that being said, the only way to achieve the perfect balance is by creating a budget that is based on goals.

Your goals could be anything. It could be to save enough money to buy a new car, to pay the previous bills, paying the three-month rent of your apartment in advance, etc. Whatever it may be, budgeting is going to help you significantly in this matter. Furthermore, it will create a fine line between your expenses and savings. As a result, you will avoid unnecessary spending once you have utilized the amount available for spending. Once you have done the budgeting, make sure you stick with it.

Start Envelope Budgeting

If you do not intend to save your tips in a bank account, we suggest that you develop the envelope budgeting method. As the term suggests, envelope budgeting requires adding regular cash you earn to envelopes designated for specific expenses such as groceries, rent, and student loans. This will keep you in check of how well you are balancing your savings and expenses. Furthermore, this is also a good way to cut back on your “extra-expenses” because you will be keeping a track of where you need to spend your money and when.

Establish a “floating fund”

You might have not heard about it before but “floating fund” is another great way to establish sufficient savings to cover expenses such as self-employment taxes and setting up an emergency fund. It is suggested that you should atleast keep six to nine months of living expenses in an emergency fund at all times. It is important to think of the funds as “floating”, not just to pull from, but to replenish as well.

Do not make major financial commitments

Since you are relying on fluctuating income, it is important that you do not overextend yourself unnecessarily. It might be that the business collapses and you might end up losing your job in the end. As a result, these extreme situations can leave you under immense financial pressure. Furthermore, it might also drive you into deep driving situations that could impair you for years to come.

Considering this factor alone, make sure that you do not make any major financial commitments without knowing how much you get to earn at the end of the week, month, or year. This is because then again due to the fact that your income is variable and you have no control over it. Therefore, when trouble comes knocking at your door, you will have no one but yourself to blame.

Look at the bigger picture

Perhaps the best way to budget is to look at the bigger picture. Successful businesspersons consider their future goals and aim to make present decisions. The reason being that considering the future allows them to make plans and prepare for the unexpected. Compared to what they can have and want to have in the future, allows them to sacrifice the present luxuries and comforts of life. This sacrifice and compromise rewards them big time later on. Therefore, this is a type of discipline you need to practice and implement to ensure that you budget your tips the right way.

Think of the consequences

The biggest and most common problem with budgeting is that people mostly tend to overlook the consequences until they are deep in serious situations. Think about what you are going to do when you have spent all your tips on unnecessary expenditures and a lavish lifestyle and are now few months near leaving your job. You have to understand and remember that the restaurant business is variable and fluctuating.

You never know what is going to happen the next day. What if due to some reason you are told to leave after several months of joining? During such cases, you wish that you had not spent extravagantly. Therefore, to avoid such situations, think of the consequences. You need to budget your income for a better future instead of wasting it on the present.

Final Word

When relying on tips, you need to remember that it is your primary source of income. Earning it takes a lot of effort and hardwork but it does not take more than a second to blow it all up. Therefore, while you have practiced being wise and clever in terms of earning more tips, practice budgeting as well.