Service industry workers put in the time to pay for the necessities of life. They bus tables, take orders from hungry customers, and sometimes, pacify the same hangry mouths. Service industry workers pool tips and hourly salaries to cover groceries and rent. Some days are good. Others are a scramble to get by.
So how do service industry workers get out of this cycle and not only build savings but plan for the future?
What’s in this article
- Who are American service industry workers?
- How are American service workers doing?
- Six ways for service workers to save
Who are American service industry workers?
The number of service workers tops almost 25 million, most of whom work in restaurant and food services.1They’re more likely to be a woman than a man (55% to 45%) and are just over 38 years old.2They earn an average of $29,440 a year.3A service occupation, according to the Cambridge Dictionary, is a job in which someone provides a service for people.4Examples of service jobs include waiter, bartender, hair stylist, cab driver, or plumber.
How are American service workers doing?
Service industry workers work in all different kinds of businesses, from restaurants to retail to ride-sharing. Many who work in person were among the 30 million who lost their jobs during the COVID-19 pandemic.5That has since rebounded as employment has rebounded across many sectors, but a persistent labor shortage exists. The U.S. Chamber of Commerce estimates there are 2.9 million job openings left unfilled as of December 2023.6While many have seen their take-home pay rise after the pandemic, service industry workers often earn low wages at or near the minimum wage.
In 2022, about 3 out of 4 service industry workers making the minimum wage or less worked in service jobs, mostly.7For many of these workers, they supplement their base pay with tips. In some states, the base pay for tipped wages starts at $2.13 in states like Georgia, Texas, and Virginia.
Some industries like restaurants and ride-hailing that rely heavily on service-industry workers are expected to grow in 2024.89
Others like retail are facing “uncertain” times after dealing with rising inflation for two years and consumers concerned about rising prices, according to Deloitte’s 2024 outlook on the industry.10
Six ways for service industry workers to save
There are many ways for service workers to save their hard-earned money for today and tomorrow.Here are six suggestions to get started.
Create a budget
Start with the basics. Look at what you earn for average service industry workers. Look at what you spend. Put it all down on paper (or a spreadsheet).
How much is your rent? How much do you spend on groceries? Subscribe to any streaming services? Mark that down as well. Don’t forget utilities and other regular expenses like your phone or broadband.
Now it’s time to plan.
One popular way is to use the 50/30/20 rule pioneered by Elizabeth Warren in her book, “All Your Worth: The Ultimate Lifetime Money Plan.” It calls for you to spend:11
- 50% on what you need
- 30% on what you want
- 20% on savings
The benefit of the 50/30/20 rule is that it helps you put money away for the future should you need it.
Another option is the envelope rule. You create envelopes for different monthly expenses such as rent, groceries, insurance, and utilities. Then you take your monthly income and place cash in each envelope. (on TikTok? Then you’ll know it as “cash stuffing”).
The envelope rule helps you control your spending and limit unnecessary or on-the-spot purchases you haven’t planned for.
There’s no right or wrong way to do budgeting. Try different approaches and see what works for you. What’s important is to get a handle on your finances and ensure you’re spending and saving money when you want to.
Automatic savings
Once you receive your paycheck, it’s as easy to spend it as drinking a cup of water. $10 here for some nonessentials. $40 for something you need from Amazon. $100 on groceries. Before you know it, your take-home pay has vanished and you’re living paycheck to paycheck.
Take advantage of automatic transfers offered by most banks for yur hourly service insurance workers pay. You can set your checking account to deposit a set percentage of any incoming deposit to your savings.
Some experts encourage you to aim as high as 20 percent of your post-tax income for savings. If you can’t manage that, start low and gradually build up.
What is the best part of automating your savings? You won’t know it’s happened as it’s done once you’ve deposited your paycheck. The next part? Watching that savings account grow.
Build an emergency fund
Life is good until it isn’t. The unthinkable has happened, and you’re sick and unable to work in your service industry worker job. Paychecks stop coming in. Your bills are late and creditors are starting to call asking to be paid. How can you avoid this?
Put aside money in an emergency fund. Experts suggest having three to six months of living expenses on hand.12
You never know when you may need to pay for something unexpected and expensive. Also, for the self-employed who can’t turn to unemployment insurance or employer-based disability coverage, it’s always advisable to have some runway in case you can’t generate any income.
Take advantage of work and government benefits
Chances you’re not taking advantage of free benefits and services available to you as service industry workers. This could be at work where your employer may offer health insurance, contributions to your retirement account, or tuition reimbursement. This could also be with government programs that run the gamut from food assistance to help with utility bills.
Sometimes, you have to put money in to get something back. For instance, your employer may match cash you put toward retirement. But if you don’t set aside part of your paycheck for this, don’t expect to receive anything.
Think about it this way: you could spend the money paying for services and goods you might otherwise get for free. So why not see what’s being offered and what you qualify for?
Retirement
You might think retirement’s so far in the future that you don’t have to plan for it. But it’ll creep much quicker than you think. That’s why it’s important as service industry workers to start planning today.
Where do you start? Think about your quality of life and how you’d like to live when you stop working. Then figure out how much money you would need to maintain that standard of living. From there, map out how much of your income you’d need to put away yearly to meet that goal.
There are several ways to help plan for this with online and in-person help just a few clicks or a call away.
What’s important is to start thinking and acting on retirement. Make sure to put money aside each year into a retirement account like a Roth IRA. The earlier you put funds into the account, the longer it has to compound, multiply, and get bigger.
Speak with a licensed financial planner who can help plan out your next steps. Make sure to note if they make money through commissions (aka selling products to you) or if you have to pay a set fee for their help.
Take care of your health
This is a big one. No matter how much money you’ve put away and how much you’ve saved, it’s moot if you’re not healthy as a service industry worker. You won’t be able to enjoy all that you’ve earned.
So make sure to take care of your body so it cooperates when you want to start tackling your lifelong bucket list.
Medical bills are also another expense to watch out for. Two-thirds of bankruptcies are tied to medical debt.13That’s why having health insurance is important. It’s shown that if you have it, you can generally improve your health and your financial status.14
But health insurance won’t cover all medical costs. You’re usually on the hook for some out-of-pocket costs (e.g., copayment, coinsurance, and deductible). Investing in supplemental health insurance to help with those expenses can make sense. Some options include accident, disability, and hospital indemnity to name a few.
Supplemental health insurance provides extra coverage to your primary health plan. You’ll get monthly or one-time, lump sum payments, depending on the kind of plan you enroll in.
Next steps
Life can be tough, no doubt about it. But you’ve made it this far. And you’ll make it farther by planning ahead. Check out resources offered to you by your employer or government. Plan for rainy days and the day when you can stop working for a paycheck. Most importantly, take care of your body. You’ll only get one so it’s worth keeping it healthy.
