How to budget on a tip-based or varying income

tip jar

I got a great question from a (new) reader friend on my Facebook page:

“Can I just say how extremely obsessed I am with you and your frugal ways!!…Question: I am a hairstylist so when it comes to budgeting it's hard to figure out my take-home because tips can vary a lot day by day and month but month. What are your tips for people who work in a for-tip industry? Never spend our tips? Put them directly into the bank? Anything helps? Thank you!!!!” – Brittini

First of all, isn't she cute?? Second of all, how amazing of a question is that!

Here's what you need to do if your take-home income varies monthly:

  • You need to put a number to it anyway. That's ok that your income changes, trust me, I know how that goes – my husband is self-employed (and I guess I am too, technically). But it's important to know how much your family takes home, otherwise you will have no idea what your budgets should look like! To put a number to your income …(see next point)…
  • Find the average. Look at the last 6 months, add up what you brought home after taxes and overhead, and average it out.


  • My advice? Aim low.  For many tip-based or self-employed people there is a high season and a low season. Finding an average will help even that out, but in general, lean more toward what you take home during the low season. If you have a good month you're thrilled! If you have a bad month, you'll have a little extra to float you.
  • Live within the average. Once the average number is set, consider that your income and set your budget around it. Try to forget that you might make more than that sometimes. Don't think, “oh well I'll probably earn more tips this month so I'm going to go ahead and buy ____”. No no no, my little birds! No touchy! Extra money is invaluable, don't go spending it on random crud! Here's what to do with your extra money…
  • Don't pay with cash. A reader left a great comment about how confusing their paycheck is because half of it is cash, half is in checks. My tip? Deposit everything – cash, checks, otherwise – and be sure to pay for everything with a credit or debit card. Cash is dangerous because you can't track your spending easily, so you could be spending double what you should be and have no idea. If you don't have the self-control, don't use a credit card. But however you decide to do it, use a card and track every penny! If it's a $2 tip, deposit it – don't spend it! See how to easily track all your spending here.
  • Put extra money toward debt first. As Dave Ramsey says, ATTACK THAT DEBT! Credit cards especially, but student loans, hospital bills, any outstanding debt you have, kill it – FAST. For me, I consider a reasonable mortgage and car loan to be fine, but just make sure your interest rate is competitive and if it's not, refinance! Trust me, paying off debt isn't fun. But you will NOT GET AHEAD IN LIFE until that debt is out of your way. It's slowing you down and hindering you from a better life. Sacrifice good things now so you can live a great life for the next 60+ years.
  • Next, build up savings. Once your debt is paid off, put your extra tips/income into savings. You should have 3-6 months of income in your savings account to protect you and your family. (Read all about savings and the 7 bank accounts you should have for more info on this.)


  • Then…save up for something fun! Once your debt is gone and you've got a good cushion in your savings, take some of that extra tip money and save up for something fun! Don't run out and buy a new shirt, that should fit within your weekly budget anyway. Save up for something fabulous that you've been wanting. A vacation. A new dishwasher. A trampoline. Make it a family goal, and make it awesome. It will make your sacrifice all worth it. For the record, this is exactly how you're able to buy big, fun things on a small or varying income…patience. Oh, and remember to please never pay full-price for whatever it is you're saving up for. Just follow the “3 month rule” once the money is all there and you should be set.

So there you go, Brittni! Hope that helps.




Tip jar photo cred HERE


  1. AvatarAlysia says

    I am also a self employed hairstylist. Another comlication to budgeting on our income is the fact that our “paycheck” comes in 3 forms: cash, checks, and debit/credit. On any given week, not only will our income vary, but the amount that comes in via these separate forms of payment varies. It just makes it hard to know what to do with what money.

    • AvatarFunCheapOrFree says

      Man! That’s confusing! Just be sure to deposit everything immediately and spend all your money using a credit/debit card. That way you can track everything you spend. Buying things with cash is hard to track. It may mean multiple trips to the bank each week, but checks are easy because you can deposit them with your bank’s app right on your phone.

  2. AvatarBrittany says

    These are great tips! Thanks! I need some tips on saving for a house. That is our biggest goal right now, but I feel like it’s a little different than saving for other things. Tips?

  3. AvatarLauren says

    RE: FCF’s comment about using phone to deposit check

    If you’re trying to save money/budget, why would a person be spending such a large amount of their budge on having a smartphone? Shouldn’t they give up those sorts of “wants” and put their “need-to-have’s” first until they get things in order?

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