Here are some ways for baristas to take charge of their finances.
BY JESSICA LARSON
SPECIAL TO BARISTA MAGAZINE ONLINE
Cover photo by Jennifer Bedoya for Unsplash
One of the unfortunate truths about the coffee industry is the necessity of tips and gratuities for workers. The lack of a living wage is rampant in the industry, and for many, tips are an essential part of the job. If you’ve read the October + November 2021 issue of Barista Magazine, you’ve also read plenty about what a true living wage is for a barista.
The pandemic continues to impact the industry, and the financial futures of many baristas remain uncertain, at best. Now more than ever, it is important to make sure you have a sound financial plan. Every plan, though, begins with some simple steps. So, here are some tips to help baristas stay on top of their finances.
Be Sure to Budget Your Finances
Make sure you know where your money is going. Track every dollar and avoid unnecessary expenses, especially when you need to make every penny count. Set aside 10%-15% of each shift’s earnings for taxes (or needed savings goals).
Know Your Tax Rules
In the United States, you are required to report your tips for taxes. In fact, employees should keep track of their tips every day and report the monthly total to their employer. Baristas are responsible for paying income tax. Medicare and social security taxes are also required on tips. Use IRS Form 4137 at tax time.
Keep an Eye on Your Credit
Tipped income can fluctuate from week to week. Having a financial safety net is a smart way to counter the uncertainty of tips. If you can’t build up a cash account, consider a credit card for emergencies. You don’t have to use it for day-to-day purchases. And if you do have an emergency, you’ll be able to stay afloat until your next paycheck. With any card, keep the balance low and always pay at least the minimum every month to help you build credit.
Demand More
Push for wage transparency in all areas of the industry. With its massive profits, the coffee industry must focus on living wages. Though there are currently only a few in the country, barista unions can strengthen the power of baristas as a whole. Until tip culture adapts to create a living wage, baristas need to ensure they’re getting the most out of every dollar.
In sum, budget, stay on top of taxes, and keep your credit score healthy. By doing so, you will be better protected against future financial uncertainty.
ABOUT THE AUTHOR
Jessica Larson (she/her) is a married Midwestern mom and a “solopreneur.” She creates online courses for students, and has started and run several other businesses through the years. Her goals are to support her family while still actually spending time with them, to act as an entrepreneurial role model for her two daughters, and to share what she has learned through The Solopreneur Journal.
