=

How to Buy a House With Your Tips

How to Buy a House With Your tips

When your salon guests receive a service from you, they usually leave a gratuity as an extra “thanks” for taking great care of them. Service providers love having a little cash in their pocket at the end of every day. A stop on the way to work for a Starbucks, a cute pair of shoes at the end of the week or a night out with friends are all fun ways I used to spend my tips.  Until I realized how irresponsible I was being.

I want to tell you why this “Latte Factor” is a really bad idea.

Truth: Our industry is one that is highly dominated by women. Further, we are often do not make enough money to be the main revenue generator in the family. I’m disappointed to say, when we don’t work smart in this profession, making a strong, sustainable single income is almost impossible.

Truth: As far as gratuities go, cash tips given by guests are often not reported as income by the employee.

Truth: Gratuities given via credit & debit cards are sometimes ‘cashed-out’ by the salon owner and given as cash to the employee at the end of the day or week and are not accounted for on the employee's taxes.

Truth: Giving and receiving cash tips is WAY TOO EASY to be financially irresponsible for both staff & employers! <- Click to Tweet

Could you tell me, off the top of your head, how much you made in tips last year?

I didn't think so.

Service providers often look at gratuities as ‘free money’ with no regard to its legalities or it’s accumulative power.  Huge mistake...and I'll show you why.

Take out your calculator and tally up what you would have made in gratuities last year.

Let’s say you had a decent clientele: booked 70-75% of the time, 7 hrs per day, 5 days a week, 50 weeks per year with average service revenues of $1700/week ($340/day).

That’s $87,500 per year in sales.

I find my gratuities average at 15%, so based on that number and if that’s the same for you, you could be generating about $13,000 in tips for one year alone.

If that $13,000 were claimed on your income tax, it could be the difference between qualifying for a mortgage or, sadly, being turned away by the broker.

…Or being denied a loan for opening or expanding your business.

If you saved your gratuities instead of frittering them away, the difference could be a pre-paid tropical vacation that you’ve been aching to take your family on.

…Or being able to upgrade your vehicle.

…Or having savings in the bank for an emergency.

By the way, do you remember WHAT you spent your cash tips on?  <- Click to Tweet

So service providers...could it be time to put on your big-girl/boy undies and start being responsible for your unaccounted income? Beside it being illegal to NOT claim your gratuities, you are losing out on some big opportunities.

And salon owners, you don't get off scot-free on this one.  You MUST include the staff gratuities that come through your business on your employees pay checks to keep you out of hot water with Revenue Canada or the IRS.

Do just do what is easy...do what is right.

Tip: I highly recommend David Bach's book called "Smart Women Finish Rich" or "Start Late Finish Rich" to get  your own financial responsibility on track. It's an easy read and I've personally followed David's as guide to becoming clear on how to be smart with my income.