How to Budget as a Server Working for Tips

First, let’s address the obvious. It can be difficult to budget when your income is based on tips. This is because you don’t know how much you will make from week to week or even day to day. You may have a fantastic shift where you make a lot of money and then a slow shift where hardly any money is made. 

It can be a struggle to have a regular budget if you never know exactly how much money you’re going to make. However, it’s not impossible, and there are some things you can do to make it a little bit easier.

waitress serving coffee

Budgeting When You Work For Tips

First, you’ll want to set aside money for your fixed expenses, as well as savings. Of course, you won’t know how much money you will bring in each month, but you can be fairly certain that your fixed expenses won’t change from one month to the next.

In order to budget when you work for tips, take a look at your last few pay stubs and tips earned to determine how much income you can expect each month and then set a goal for what percentage of that income should go towards fixed expenses and varied expenses.

For example, if your average monthly income is $2,000, then setting aside 50% for your fixed expenses would mean you need to hold back $1,000 while the other $1,000 can go towards savings, groceries, entertainment, and other miscellaneous items.

Track Each Cent You Make

Next, you’ll want to track each cent that you make. This will mean that you can see where your money went at the end of the month. A good rule of thumb is to look at your past few paychecks and tips earned and base your budget on the lowest total amount you have received.

Suppose you are able to limit your expenses during a busy month. In that case, it will be easier to have more income during slower months. Tracking each cent that you make also ensures that you’re not spending money on completely unnecessary things.

Try tracking your income for at least three months. Include your paychecks and all tips that you have earned. You can do this in a simple notebook or a spreadsheet on your computer.

By tracking your income this way, you will get an idea of the average income you have coming in each month.

waiter and waitresses working the bar

Keep Track of Your Expenses

One of the most important aspects of budgeting your income as a server is keeping track of your expenses. At the end of every week, be sure to jot down what you’ve spent money on. Also, hold on to receipts by keeping them in an envelope.

If you do this, you’ll be able to tally up how much money you have spent at the end of each month, and it will let you know exactly what your expenses are. This will make it easier to know what items you need to add to your budget.

Manage Your Income

A lot of people tend to think that wait-staff are lucky. They often make a lot of money in tips, and they probably think that servers are rolling in the dough. And while it’s certainly true that some servers do make quite a bit of money, this isn’t always the case. In fact, sometimes it’s difficult to manage a budget when you’re making your money in tips.

The thing is, if you have a bad night at work, you don’t make much. And it’s easy to go out and spend all of the money that you made during the week on one expensive night out with friends.

If you want to learn how to take control of your finances as a server who’s making their money in tips, you can do so in a couple of ways.

One way to manage your income is to use an envelope system. Another way is to deposit all of your earnings into your bank account and track your spending with an app.

hand writing with black pen and a coffee cup on top of desk

Using the Envelope System

The envelope system is a tried and true budgeting method you probably have heard about before. The great thing about the envelope system is that it forces you to plan ahead. And since most servers are paid every week, plus daily tips, this works out perfectly.

To use the envelope system, you will want to have a separate envelope for your fixed expenses, savings goals, and spending money.

Fixed Expenses: These are expenses that you incur each month no matter what, such as rent and bills.

Savings Goals: A dream vacation or new furniture is certainly nice to have. However, you can find yourself in debt if you purchase these items without saving up for them first. You also will want to have some savings set aside for emergencies.

Spending Money: This is money that you can spend without feeling guilty. Allow yourself to spend some of the money you worked hard to earn.

When you receive your tip money, take out the appropriate amount for each envelope and label them with what the money is for. Then, only spend money in each envelope on the item that is written on the front.

If your fixed expenses are more than normal one month, don’t try to make up the difference by dipping into other envelopes.

You’ve worked hard for that money, and you’ve earned the right to spend it on what you want. Just be sure that you can afford all of your expenses without taking out extra money from each envelope.

Use a Banking App

Another way to manage your tip money as a server is to deposit it into your bank account and then use a banking app such as Mint or You Need A Budget (YNAB).

You can also download a free “checkbook” app to track every purchase you make so that you can subtract those items from your budget to see how much you have left.

50/30/20 budgeting spreadsheet on a computer screen

How to Stick to Your Budget

Once you’ve created a budget and you know exactly how much money you can spend, it’s time to implement it. You don’t want to break the bank when you’re out with your friends or accidentally buy something that is well outside of your spending limits.

When deciding on a night out (or any purchase for that matter), you should ask yourself these simple questions:

Can I afford to do this? Will buying this item cause me to go over budget? Can I make up the money elsewhere if need be?

Suppose you can answer all three questions without having any reservations. In that case, it’s probably safe to say that your purchase is okay.

Budgeting as a Server Working for Tips is Difficult But Not Impossible

Managing your finances as a server who’s making their money in tips can be difficult. However, it is possible with some forethought and discipline.

Look at your earnings from the past three months and base your budget on the lowest amount that you have earned. When creating your budget, make sure to write down fixed expenses such as rent and varied expenses such as groceries.

To help you get started on the right foot, we’ve outlined two strategies for managing your tip income: an envelope system or banking app. Once you have these tools in place, it will be much easier to stick to your budget and save up for your goals!

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Kristen is the founder and content creator at Mom Managing Chaos where she teaches busy moms how to simplify and organize their life and finances. She writes about frugal living, budgeting, productivity and organization.