Servers, bartenders, delivery personnel and others who make a significant portion of their wages as tips should think about saving differently than standard wage or salary employees. Because these employees earn their money largely in cash and on a daily basis, there may be more difficulty saving and budgeting funds. Here are a few tips that restaurant workers and other tipped employees can use to help their tips last just as long as standard paychecks – maybe even longer.
Develop a budget
Many people create budgets for themselves to plan for how their expenses stack up against their earnings. However, tipped employees can't rely on a solid number each week like a salaried employee does. Darden Employees Federal Credit Union advised tipped employees to still try to make a budget even if their income is elastic. To start this budget, start by looking at your income in the bigger picture, rather than night by night.
"Start tracking your income by week and month," Darden advised. "Do this for a few months until you can begin to determine your average monthly income … Measuring income on a shift by shift basis can create emotional ups and downs. A bad night can feel like the end of the world and a good night can make you feel like you've won the lottery. Instead, look at how much you earn on a weekly and monthly basis. After a while, you can begin to anticipate and account for any seasonal impacts on income and plan accordingly."
Creating a budget based on projected income won't always be perfect or accurate, but it can help tipped employees create more long-term financial goals.
Keep thorough records
While budgeting your expenses based off of an estimated expected income can be helpful, tracking and keeping records of your tips can prove even more successful in a number of ways. First, keeping organized records of your daily, weekly and monthly income can help with making financial decisions, like when you'll be able to take a vacation, rent a bigger apartment or buy a new car. Secondly, you may realize patterns within your earnings – maybe you make the most tips during a certain shift, when you wear a specific shirt or when you're in a particularly good mood. Tracking your tips can allow you to figure out when and how you make the most money and what can be done to make that continue.
Keeping track of your numbers can also ensure that you're getting paid what you're required to be. The Christian Science Monitor reminded tipped employees that if they make below minimum wage after a week's worth of work, their employer should pay the difference.
Start saving today
Receiving a significant amount of your money in cash at the end of your shift can make it tempting to spend it. However, when you're thinking of money from a big-picture sense, it's best to hold off on spending your cash. Every day, week or month, you should be putting some of this cash aside for savings.
Many salaried or wage jobs have programs set up where you can deposit money directly from your paycheck into a savings account or 401k to save. This allows employees to save money without ever having a chance to see it. As a tipped worker, you don't have that opportunity, but that doesn't mean that you can't still save money. It takes more effort, but also gives you more control.
The Federal Financial Literacy and Education Commission operates the website MyMoney.gov that allows U.S. residents to go online and get basic advice on safe ways to save in the short term as well as for retirement. Additionally, the American Institute of CPAs operates another user-friendly website that gives consumers advice on banking and savings, FeedThePig.org. Both sites help give the average employee the information he or she needs to make investments in the own future.
Think about taxes
If you're a tipped employee, make sure you know how much you should be paying in taxes or you'll be in shock when it becomes spring. Darden advised that tipped employees set aside about 10 percent of their income each week, month or day for taxes. You can even set aside that money in a separate savings account so that you know it's safe by the time tax day rolls around.
It's a much better situation to have saved too much money by April 15 and then have extra than be scrambling to work double shifts to earn enough for taxes.
As a tipped employee, your savings and money management skills are much more important than they may be in other careers, but that doesn't mean it's more difficult. With a bit of extra effort, tipped employees can easily save, spend and invest like anyone else.
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