The Perfect Budgeting System For A Irregular, Cash Income

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Irregular income can be a nightmare. I was a server /bartender for over 4 years before leaving the industry. It is such great money. It is also super convenient to walk out with cash immediately after my shift. The people were great, but I mostly stayed for the flexible income. The problem I quickly saw was that I wasn’t actually getting a paycheck.

In a majority of the places in the U.S. Servers make less than minimum wage per hour and rely completely on tips. The federal minimum wage is $2.13 an hour. Many servers owe in on taxes at the end of the year because our hourly wage isn’t enough to cover the taxes owed. I was just walking out with a part of my paycheck every night that I worked. The first month, I was so carefree because I had cash in hand.

The other servers and I love to go out for drinks after work, which quickly became my second problem. On a good night, I find myself tipping the bartender $10-15 on a $5 drink.  It quickly became a little excessive, but many bartenders believe in good tipping karma (when you tip others really well and hope that it comes back to you in return.)  Even if I wasn’t drastically over tipping, I was spending $10-20 of the $100 that I just earned working.

I needed help setting up a server budget.

I looked all over the internet to find anything that had ideas for how to budget as a server. Turns out that there isn’t as much as I thought there would be. Apparently, not many people are writing about budgeting as a server. Probably because not many of them have an effective system. When you have the opportunity to make that good of money in one weekend, budgeting isn’t necessarily a must.

Then I turned back to cash envelopes. Of course, the envelope system. This system works great as a server, but now that I have irregular income as an entrepreneur, I am finding that I am leaning back on these basic skills again. I have made money in a variety of ways throughout my years as a budget blogger and on this financial journey, but my basic budgeting always comes back to cash envelopes and a list of bills.

It took me a little while to get into a routine, but once I did, it was a lot faster process. Don’t get discouraged if it takes you an hour the first time you sit down to try to do this. Keep going because I promise that having a ton of extra money is so worth it! Soon, it will be an automatic process and you will have much more financial success!

Here are 9 Steps to Budgeting as a Server (or any irregular income jobs)

1) You Need A Reason/Goal

I truly believe that when doing anything in life, there has to be a goal. While saving money in general is a good reason to start budgeting, you need a reason to say no to yourself for drinks after work or getting food from your restaurant. Your reason may just be that you need a vacation. Lord knows that working so much can get to you, but taking time off work isn’t always possible as a server. Many servers don’t have paid time off, so you are saving for your own vacation and making sure that your bills are covered during that time. Or you want to pay off debt, like me! It could be something as simple as paying for next semester’s classes or books out of pocket so you don’t need student loans.

The key to this step is that if you don’t have a goal in mind, there isn’t going to be a lot of tug on your heart when you find yourself spending money at the bars after a few weeks. With no goal, there is no reason not to spend money. My reason is to get out of debt and buy a house! 

Having a goal is the very first thing I go over in The Savvy Budget Workbook. I talk about this more in depth on episode two of my podcast.

2) You need a plan for your irregular income

If you haven’t already, start by listing ALL of your expenses. I go over this in my first budgeting blog post. List anything and everything that you ever spend money on. It doesn’t matter if you buy it once a year or every single day. Write it down. Then, estimate how much you spend on each item per month. I have found that the best way to do this is to go back through the last 30 days of your bank statements and see what you paid for. However, if you are largely spending in cash, it may not be 100% accurate.

Once you get in the routine of just your monthly expenses, you can add in sinking funds. This is a more advanced budgeting set up, so don’t feel like you need to do all of this on your first budget. If you don’t spend money on the item every month, figure out how much it usually costs when you do. Then figure out how often you spend money on that item. For yearly items, estimate how much it is a year and divide it by 12. You will put that much for your monthly payment. If you usually spend $120 on fireworks for 4th of July, you will put $10 aside every single month for that expense.  For example, I buy contacts once a year for $120, so every month I put $10 into my contact envelope.

3) Sit down with a box of envelopes and a couple of binder clips.

Sit down with a pen and a box of envelopes and assign an envelope for every single expense. While some of them have changed throughout my budgeting process, I still use my envelope system. There will be envelopes that you add and get rid of as your life changes, but it is important to have an envelope for any expense. This will help with the spending of your irregular income too.

Mine are very plain and just have the category written on the front, but you can decorate them however you want. You can even get a little fancier and purchase some pre-made systems on Amazon. Otherwise, there are some colored “Spend-velopes” that are also really fun! Both of the envelope systems are relatively cheap and super functional! The colored “spend-velopes” are on my to buy list!

4) Put them in the order of importance or the order in which they are due.

There are some items that you can live without and there are some necessities in life. Items like rent, electricity, phone, and groceries are at the front of my pile. I ordered my bills in the order that I have to pay them during the month. All of the bills due at the beginning of the month are towards the front and then as the month goes on they are farther back in my pile. After bills are monthly funds like holidays, clothing, electronics, and other such expenses.

If I make really good money in a month, all of my envelopes get filled within just a few weeks. Where ever I am at on the 21st of the month is where I stop filling, because at that point it is time to focus on paying rent again. This is going to be a test of your priorities. Also, as you go you will find that some “funds” envelopes are not getting spent and probably won’t. It is okay to move money around if you feel like you estimated too much for the fund in the beginning.

5) Clip them together in “Paid” and “Unpaid” Categories

You can pretty much organize and store them where ever you want. I use binder clips and two folded sticky notes to keep them organized. After the expense is paid, clip them together with the other paid categories. This makes it easy to keep up throughout the month.

I always kept my “Student Loans” envelope in the unpaid because I try to always pay more towards them. Whatever your goal envelope is, it is where the extra money goes on monthly that you pay your bills a little early.  I have an old recipe box to hold all of my envelopes, my expense list, a highlighter and a pen.

6) Fill them in order and cross them off your list

One of the first things I do after work is fill my envelopes with the money that I made. I divide my irregular income out in the first unpaid envelopes. Once my bills are paid and I have moved on to the “funds,” then I try to divide it into categories that I can pay in full. For example, if I have $63, I put $20 in clothing, $10 in holidays, $10 in contacts, $15 in electronics. I have an odd amount left. This odd amount goes to the next envelope. These are for the little things that I shop for. I try to put money away for planned purchases and some of them I count as “sinking funds.” Sinking funds can be used for expenses that don’t come up often, but when they do, they can be expensive. Clothing, for example, is a good sinking fund. I don’t really purchase clothing every month, but when I do, I usually end up dropping almost $100. Putting money aside for those trips every month is a great way to build up savings!

7) After all of your envelopes are filled, have a goal envelope.

This goes back to number 1. What is your reason for budgeting? If you have a super irregular income, you may find it exhausting to try to keep up with filling all the bills envelopes and trying to get ahead. But having a goal envelope makes it a little more of a challenge.

If it is vacation, I have a vacation envelope that gets my odd amount of cash at the end of spreading it out. This also means that after I have earned more than all of my total expenses and funds, my extra money goes toward that envelope as well. Say the total money that I need is $1,400. Once I have earned that all of my money goes towards my debt that I am paying off. Using the envelope system is a good portion of how I paid off $15,000 of debt during 2017.

8) Plan ahead for irregular income

Along with any budget, there has to be a plan. Because I don’t get paid on the 1st and the 15th like many, I have to be ready to pay rent/mortgage ahead of time. This is when I set aside money every single week for the bigger expenses. Once you have your list of bills, you can sit down and plan how much each week you want to go towards those expenses.

One thing I did as a server was budgeted weekly. So every week I would figure out what bills need paid NEXT week after I go to the bank to deposit my cash. Write those down and then divide out the bigger expenses like rent and a car payment if you have one. Because my budget is a little weird, I have a few different bank accounts that I use to keep it organized after I deposit the cash!

9) Since you are spending in cash, save your change.

Make it a habit to use an old jar or something pretty to keep all of your change in. This gives you a goal to fill the jar to use for a set expense. For example, every time I cash my coin jar in, I buy myself a new book with the money and then put the rest towards my debt. Books are not something I budget for because I currently am trying to downsize my books and the rest of my stuff. The last time I cashed in my change, I had almost $90, which I took with me to Disneyworld. It is also a fun challenge to see how much you can get into the jar!

 

Make your server income fun!

While my server budgeting plan does take a little bit of maintenance throughout the month, it is very minimal compared to what it could be. Budgeting can be extremely hard, especially when you constantly have money coming in and out. Walking out of the restaurant as a server with your paycheck every night is great unless you have zero plan. If the money is gone, it is gone and I don’t really spend a lot of time calculating what I spend on my expenses.

The envelope system is great for any kind of income, not just servers. If you have a regular paycheck, I suggest withdrawing the extra cash after you pay your bills and splitting up the cash into similar funds. It is the best way to not spend the extra money that is in your account! If you give the money a name and a place, you are much less likely to overspend in categories that you are trying to cut back on!

I highly recommend checking out The Savvy Budget Workbook to help get you started with your budget. It takes you through the steps of creating goals, analyzing your spending, setting up a budget, and then tracking the first month. It might seem impossible to have a budget with an irregular income, but you can be one slow month away from an emergency if you don’t get on a budget. You are also missing out on the opportunity to crush your financial goals without a budget for your irregular income.