Financial Planning
August 10, 2022

Best ways to budget when you work for tips

When you earn tips on top of a lower hourly wage, your budgeting approach might need to be modified.

How to budget as a restaurant server?

If you are a restaurant server, then you probably make a low hourly wage and rely on tips every day to make ends meet. The average restaurant server salary in the United States is $24,500 a year. This includes hourly wages, tips, and bonuses. 

According to statistics, restaurant servers earn between $16,000 to $52,000 a year in wages, tips, and bonuses. However, the range depends on the following: education, skills, experience, employer & location. Because serving in a restaurant is a common high school and college job, it can be deduced that the lower income bracket involves fewer hours worked paired with a lower skill level. 

With that being said, it’s possible to budget even if you make as little as $16,000 to $24,000 a year. Budgeting comes in all shapes and sizes. 

To start budgeting, take into account your expenses. What do you need to spend each month? Make a list of everything you need to pay for in a month. It can help to prioritize your expenses. Rent, utilities, and food are your most essential expenses, but you may have car insurance, car payments, a phone bill, and internet. Budget only what you need to spend and track your spending so you know what to expect.

Your income isn’t going to be exact when you are making tips, but you can get your expenses in such a way that they’re nearly exact and then paid in full by the beginning of the month, so anything you make outside of that can go towards your debts or savings account.

Can you lower your phone plan or car insurance? This will help you save. Try to save around $20-$80 a month by changing plans and budgeting the extra into a high-priority category (like food or rent) or in your savings account.

Any frivolous spending should be avoided to budget most effectively. Limit purchasing high-end products and going out to the movies every week.

Best ways to budget when you work for tips

Be intentional about your budget when you work for tips. Variable incomes can make it harder to budget. 

1. Figure out your monthly expenses

Just like we mentioned above, hash out all of your monthly expenses. A spreadsheet, a journal, or a phone app can help you do this. If you can, lower some expenses by switching providers or premiums.

2. Figure out your monthly pay and plan for the worst

Once you have your expenses figured out, try to figure out an average goal you can consistently hit. For instance, you may not be able to make over $3k each month from one income stream, but you know you always reach at least $2k there. Then, you may add a side hustle to even out the difference. If you can’t find the difference, plan for it by saving the extra dollars you make in previous or future months. That way, you plan for the worst and hope for the best.

3.Track your tips for tax season

Because you make extra income on tips, you’ll need to track that. Otherwise, you’ll be charged taxes on your tips. Save around 20% each month for tax season.

4. Adjust your budget as needed and save extra

Perhaps you just paid off your car, or you were offered by a friend to use their phone plan. If that’s the case, your budget can be altered. Adjust it accordingly and stash the extra income somewhere else. Instead of putting your extra income towards fun events, save it for next month’s necessary expenses.

5. Have a goal in mind and track expenses

Having a consistent goal in mind, something to save for that you are excited about, will make a world of difference. You don’t want to be saving and budgeting for nothing. That won’t last. Also, keep in mind what your spending habits are by tracking your expenses. This way you can keep your goals realistic and also, work towards lowering those expenses by being patient with yourself.

It’s best to set your monthly expenses at your lowest amount paid so that way, you never are without your lights or food. Also, it’s a really good idea to live a month in advance. That means you have next month’s rent, utilities, and food already lined up versus being in a panic if you don’t have enough in the bank.

Chayla Soden
Content Writer
Get the Bright App
AI Powered App, to Delete Debt

Get financial tips delivered to your inbox every week!

Subscribe to stay up-to-date on exclusive stories from Bright.
Reach out and request help as required.
Enter e-mail id
Thank you! Your submission has been received!
Please enter a valid email