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How to Budget With a Tip-Based Income

 How to Budget With a Tip-Based Income

If you have a reliable and consistent stream of income, to create a personal budget is some kind of tricky. However when your income is based on tips, or other kinds of variable sources, such as commission, freelance work or independent contracting fees, your financial planning should be more trickier. In this way inconsistent income would put money management on top priority. If you learn to organize well, it could be much helpful weather you would meet the ups and downs of a tip-based income.

1. Put away some savings.

If you have an income based on tips, the income level could be various largely from week to week and even month to month. Sometimes, your income could be really low because of not so much tips received. So you should have some money put away for a rainy day, it would greatly help you get across when something bad really happens.

2. Deduct for taxes as you go.

Tips should be reported on your taxes, and you’ll have to pay the money you owe when you file. You should have an estimation of ¬†your yearly income in the best possible way. By doing so, you could take your averages based on the first months of your employment and then use this as the standard to calculate your entire year’s income. You should work out your IRS tax bracket and set aside slightly more than the percentage you need to give yourself a buffer.

3. Keep track of your everyday earnings.

No matter in which way you do with keeping track of your earnings, using pen and paper, a word processor or budgeting software, you should do it week to week. The more time history you keep doing it, the more accurate the estimation would become in terms of your average earnings, which would be helpful for the long-term financial planning.

4. Save your change.

It is easy to think of coins as too little money to be saved. However, if you receive change as part of your tip on a regular basis , you should have them accumulated for more savings. You had better keep a piggy bank or change jar close somewhere accessible at home, put your coins there until the container is full and then turn them into cash at the banks. If you keep doing it, you could get an extra, unexpected $20 to $40nearly every month, but the sum of such savings depend on how big your jar is.

5. Make bank deposits after every work shift.

You should do it especially if you are receiving cash, because having too much cash at hand is not only unsafe, it should also encourage you do with some impulsive spending. At the same time, doing this could help you always keep in mind to count and keep track of exactly what you have rather than spending it before you do.