How to Have a Budget and Savings While Living on Tips?
Mike wrote a wonderful and informative series on tipping etiquette earlier this year, but I’ve been thinking about those on the other end of tipping quite a bit lately. I’ve had several heated discussions on the topic with a salon colorist I’ve been dating and have dozens of other close acquaintances in various service industries who rely on client tipping for the bulk of their income. Having personally always worked either for salary or by the hour, it seems to me like relying on tips would be extra challenging when considering a budget or planning a savings.
There’s the irregularity factor. You never actually know how much you are going to bring home in a night. You can guess and expect, but those are kind of dangerous words when it comes to personal finance. Then there’s the vacillation. A bartender friend of mine in Seattle would make up to $400 a shift on the weekends, but then he might only see $30 or $40 on his mid-week shifts. Then there’s that pocket-full-of-cash syndrome. Some people handle this quite well, go straight home or to the bank and stash that shit where it belongs. Others see cash and think spend. I don’t need to make dinner at home; I’ve got $80 dollars in my pocket. I’ll go out. Or, Wow. Look at those boots. Hey, it’s Sunday morning and I just happen to have that $280 in cash.
I’ve spoken with quite a few service industry employees this week and found that everyone, as to be expected when it comes to managing dollars, has a unique approach to handling their tip income.
One bartender told me that bartending is a second job for her and says she wouldn’t rely on it to pay her mortgage. ‘œI don’t spend anything until the end of the month when I know my mortgage is covered’¦I save all my paychecks for sure and use that towards my other bills.’
Saving those low wage paychecks for bills or partial rent also seems to be a favorite, leaving a bit more cash open for pleasure spending.
One hairdresser I spoke with uses a more steady, day-by-day method since she has no other job to fall back on. Her scheme seems highly conducive to the irregularity of tipping. ‘œI save $20 a day in tips. That puts my savings at $100 a week and $400 a month.’
Daily savings seems like it would take a lot more focus and determination than just diverting part of a bimonthly paycheck does. But it works for some. Another friend, a barista in Portland, sets aside $40 in tips just for rent, ‘œand the rest o’ my money gets spent on bullshit.’
Another, a barista in Seattle, pays for everything with American Express and then saves up her tips to pay the bill. She says, ‘œI’m able to pay my bill in full monthly and get Sky Miles!’
Many people, especially those who consider themselves artists or entrepreneurs, love having tip-reliant jobs as it often (especially in healthy economic times) affords greater income than other jobs they might qualify for or be interested in.
Do you rely on tips? Has your tip income slowed with the troubled times? If so, how have you adjusted your budget and savings?
Great story! def. not easy living on tips.. unless you have some good advice like this! And always stash some money for the rainy days!
am i gonna be famous after this posting?! but i might take that barista’s tip and start the sky miles thang. thank you for your posting. woot!
It is crazy the way the economy and the value of money has changed. The tipping culture has changed due to the crash of the economy. So, before like during the Dot.com era people would throw hundred dollar tips at me and now people wouldn’t think of it. Now it is like 50 cents per every 2 dollar beer for some. Glad I don’t have to depend on tips or hustling for them anymore to survive.
One thing I forgot to mention about that Seattle barista that Orion’s comment reminded of was that she usually pays her bills two to four weeks in advance in order to create a window to compensate for the irregularity and possible lack of sufficient tipping funds. She also said she works off of an average every week instead of focusing on the big-tip days.
Chavez, your comment reminds me of once seeing a bartender I know tip a barista $5 on a coffee. My guess is that the two had a barter system going on in which neither paid for drinks at the other’s place of work. But $5? That seems to fall into that cash-in-the-pocket syndrome. It’s generous but kind of defeats the purpose of the barter (for the bartender, not the barista). I’ve always heard that tipping the price of the drink is adequate when you get hooked up.
I once was a barista. Tips are definitely dangerous, I don’t think I ever managed that very well. It’s really hard to put the cash straight into the bank. Thanks for your various ideas! Madhu says when he worked for tips he put most of it straight into his retirement plan. He’s a good influence.
Savings? That’s a problem for me period. I would say that I haven’t noticed too much of a drop in income in my area. I’m grateful to work in south OC where people don’t seem to be hit quite as hard by the troubled economy. I’m a hairdresser, and women would rather not eat then not get their hair done. In regards to how I budget my cash…. Well, I do a little of everything. Mostly, I live on my cash for daily expenses, and save my checks for bills. There is a normal ebb and flow in my industry, and when it’s good I’ve got lots of cash and feel like a pimp. When it’s slow I’m flat broke.
Regardless of how you receive your income; hourly, salary or tips. The danger is in your fundamental ability to budget correctly. If you don’t know what comes in or what goes out, you are just asking for trouble.
I think you can definitely plan a budget off of tips…you just have to be getting good tips! It would be a challenge to live off of mediocre tips now, with the increased cost of living. During the summer, I have a job where I make tips, but the job supplements my main income. Although I don’t entirely rely on my tips to support me financially, getting good tips can still affect my attitude and job performance. The people that do rely on their tips to pay the bills need to be well-respected and tipped appropriately so they don’t have to worry about how they’re going to make it to the end of the month.
Great post Aundi. Prior to my position in the tipping industry, I too have worked both salary and hourly. My method is simple really. I have formed a complete budget with tips being very last on the list, almost not included at all. Certainly “estimating” can be a scary thing, I try to average out the slower times of the year combined with the more moderate, excluding the busiest tipping months. Therefore I’m not setting myself up for failure or wondering why I should have more money. Another key point, for myself at least, is that when receiving tips at my place of employment, we are giving tips in small envelopes. When I get home i put them in a box and only open one at a time when I know I will need cash. After a few months I deposit them into savings for security.
But to answer th topic at hand, for myself, no I honestly havn’t felt that much of a decrease with tips. Fortunately I too work in southern California, where the” rich keep getting richer”
I realized too late that being a bartender should not have been my main job, I had no benefits, no 401k, spent way too much time in a scene that should only be visited – I did for 10 years and going out should be for fun and not work just like drugs and sex, working in a bar almost turned me off to going out at all, not too mention the used condoms in the bathrooms and breaking up fights and I don’t even want to talk about all the money I blew. Not trying to be a hater but I think bar work is best as a second gig, I made some great friends and even met my husband in a bar but I am much happier now going out to dance and letting other people clean up puke etc. Much respect to those that do it and stay bright and healthy I appreciate what you do I know first hand what it’s like! Now let’s go dancing, drinks on me!
Aundi: When I made my living as a server in an upscale restaurant, I could depend on a certain amount from tips and budget accurately. I never would allow myself to spend any money on “affordable luxuries” until my rent, car payment and a couple hundred bucks for living expenses had been stored up for the following month. Anything extra went to savings and the few “wants” I felt like I could afford to buy. There was never a lot in extra column, but I could count on tips to cover my basic needs and as long as I worked 4 nights a week, then I could pretty much gauge what I was going to bring home.
Many of my co-workers (who made twice as much money because they got the power sections on Friday/Saturday nights) were like the examples you cited. They had hundreds of dollars burning a hole in their pockets. They would go out after work and blow enormous amounts of cash partying. Or I’d hear about their outings to other fine restaurants and how much an evening of expensive wine and food would cost them. The “cash” lifestyle made it seemed like they were living large, but even the ones that had been there forever and made what I considered to be good money then, never seemed to be getting ahead financially. Like Eric said above, I think bar / restaurant work is better as a second gig to supplement a salary type job. At least it seemed better for achieving longer term financial goals.
this is definitely something that is interesting to think about at this time when the economy has gone downhill. i have never had a job where i’ve received tips (but wish i had a part time one right now). it would be interesting to find out some sort of statistics on how things have changed in the past several months for say servers or stylists. i am quite curious.
I’m a bartender in Toronto right in the midst of the Financial District here in the city. I haven’t really noticed a drop in spending or tipping in the recent economic downfall. I’m actually finding that most of my patrons are coming into my establishment more frequently to relieve the stresses of their jobs. The more the TSX and DOW fall, the busier my bar gets.
I’ve also got to point out the fact that I’m a day time bartender and I have a large financial institution in the same building as the restuarant I work for (which happens to be a casual fine dining steak house).
I love my bar and my regulars and I hope that when the stock markets start to rise again, finally my bar will be as busy as it was in previous times!!