Financial Planning

Financial Planning For Hourly Employees

Hourly workers make up a significant portion of the U.S. workforce. These employees are paid by the hour and often have variable schedules. Common hourly jobs include retail associates, restaurant servers, home health aides, drivers, freelancers and more.

Hourly workers may be full-time with set schedules, part-time with set schedules, or have flexible “on call” schedules that vary week to week. Some hourly workers pick up extra shifts or work multiple jobs. Many hourly jobs are now being filled on a contract or temporary basis.

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Working hourly offers flexibility and opportunity, especially for students, parents, and those seeking supplemental income. However, it can also come with unpredictability, irregular wages, and limited benefits. Developing smart financial habits is key to navigating the ups and downs of hourly work.

Pros of Hourly Work

Hourly work provides a major advantage with schedule flexibility and work-life balance. Employees who get paid by the hour often have more control over their time compared to salaried workers.

Some key pros of hourly work include:

  • Ability to choose your own hours and set a schedule that fits your lifestyle.
  • Taking time off is easier – you simply work fewer hours that week
  • Working part-time is an option to pursue other interests or obligations
  • Shifting hours as needed for childcare, appointments, errands etc.
  • Avoiding overtime hours and long work weeks if desired
  • Taking long vacations since you don’t earn paid time off
  • Fitting work around school or another part-time job

The freedom to set your own schedule can be incredibly valuable for maintaining work-life balance. Hourly workers don’t necessarily have to commit to full-time, rigid hours. They can work mornings, evenings or weekends if that aligns better with their personal life. The flexibility empowers people to integrate work and life in a way that promotes health and wellbeing.

Cons of Hourly Work

Hourly work can be unpredictable and stressful due to fluctuating hours and income. Unlike salaried employees who receive a fixed paycheck, hourly workers may work irregular schedules that change week to week. Their pay is directly tied to the number of hours worked. During slow business periods or seasonal downturns, hours get cut back. Some weeks you may only get scheduled for 20 hours, other weeks 35 hours. This income variability makes budgeting and financial planning challenging.

Hourly workers also often lack access to employer-sponsored benefits like health insurance, retirement accounts, and paid time off. Without a benefits package, you’ll need to pay out of pocket for healthcare and save extra diligently for retirement. Hourly work provides little job security or stability. You can be let go anytime without severance. Some companies restrict hours to avoid providing benefits under the Affordable Care Act. The unpredictability causes stress and financial strain.

Budgeting Tips for hourly employees

Budgeting is critical for hourly workers to manage irregular income flows.

Here are some budgeting tips:
  • Track your spending. Use a budgeting app or spreadsheet to track all expenses, even small daily purchases like coffee. This helps identify spending habits and areas to cut back. Set savings goals and limits for discretionary spending.
  • Build an emergency fund. Aim to save 3-6 months’ worth of living expenses in an emergency fund. This protects against income drops or unexpected costs. Automate deposits to grow it faster. Keep the money accessible in a savings account.
  • Avoid debt. It’s tempting to rely on credit with fluctuating paychecks, but debt is expensive long-term. Pay off high interest debts first. Limit new borrowing and use debit/cash for purchases.
  • Look for discounts. Seek student, military or senior discounts. Buy store brands, used items, or in bulk. Negotiate bills and look for coupons or cashback. Every bit of savings helps.
  • Consider roommates. Splitting housing costs with roommates saves substantially. But screen them carefully and set ground rules upfront.
  • Learn to DIY. Do basic home and car repairs yourself. Cook at home versus eating out. Be creative and frugal in meeting needs.
  • Review insurances. Raise deductibles to lower premiums. Comparison shop rates annually. Seek discounts and drop unneeded policies.

Smart budgeting takes dedication but pays off hugely. Establishing healthy financial habits now creates stability and options long-term.

Manage Irregular Income

One of the biggest challenges of hourly work is irregular income. Hourly workers may experience wide fluctuations in their paychecks from week to week based on hours worked, seasonal slowdowns, and other factors. This can make it difficult to budget and save.

One strategy is to try to smooth out your paychecks when possible. See if your employer offers any income averaging options, where they take your total earnings over a period of time and spread them out evenly across pay periods. This helps avoid really small and really large paychecks.

Apps and tools can also help hourly workers forecast and manage irregular income flows. Services like Even allow you to track your upcoming hours and shifts and give you a prediction of what your next paycheck may be. This allows you to plan ahead and adjust your spending to match your income. Setting aside money during high earning periods for savings can help fill in gaps during leaner times.

Being proactive about forecasting and balancing your income will go a long way towards creating stability with hourly work. Don’t let fluctuating paychecks derail your budget.

Benefits Options

Hourly workers often have limited benefits options compared to salaried employees. However, there are still important benefits to take advantage of if possible.


The Affordable Care Act (ACA) health insurance marketplaces provide an option for buying individual health plans if your employer doesn’t offer coverage. You can shop for plans and determine if you qualify for subsidies to lower your premiums based on your income. Medicaid is also available in most states for lower income individuals.

When evaluating health plan options, look for a plan with a monthly premium you can afford and cost-sharing that fits your budget. Things like the deductible, copays, and maximum out-of-pocket costs determine how much you’ll pay when you get care. A lower premium plan may have higher cost-sharing that makes care unaffordable.

Retirement Plans

401(k)s and other retirement plans are less common for hourly workers. However, IRAs can be a good option to save for retirement on your own. Traditional and Roth IRAs allow you to contribute up to $6,000 per year ($7,000 if over 50). The tax treatment differs, but the contribution limits are the same.

Some employers may also offer simplified 401(k) or IRA plans for hourly workers to contribute through payroll deductions. If available, take advantage of any match the employer provides to boost your savings. Automating contributions makes it easier to save consistently even with fluctuating pay.

Take on a Side Hustles

Many hourly workers take on side hustles to supplement their income.

Here are some popular options to consider:


Freelancing offers a flexible way to earn extra income in your spare time. You can find freelance gigs related to your skills and interests on sites like Upwork, Fiverr, and Freelancer. Some popular freelance jobs include writing, graphic design, web development, virtual assistance, and consulting. The key is building up your portfolio and reviews to attract more clients. Freelancing provides a creative outlet and lets you control your schedule.

Rideshare Driving

Driving for a rideshare company like Uber or Lyft turns your car into a money maker during your off-hours. You choose when and how often to drive, so it works around your schedule. While rideshare driving has flexibility, the income can fluctuate based on demand.

Make sure to track your mileage and expenses. Some downsides are dealing with traffic and passengers. Overall, rideshare driving presents a relatively easy way to monetize your free time.


Tutoring lets you get paid for sharing your knowledge and skills. You can tutor people of all ages in academic subjects, music, sports, test prep and more. Tutoring works well if you enjoy teaching. You may be able to find local tutoring jobs through schools, learning centers, community boards or word-of-mouth. Online tutoring also gives you geographic flexibility.

Just be sure to promote your tutoring services and have strong expertise in the topics you tutor. Tutoring provides human interaction and intellectual stimulation. The pay often beats typical part-time jobs too.

Career Development

Hourly workers face unique challenges when it comes to career development. Since you likely don’t have a structured path for advancement at your company, you need to take charge of your own professional growth.

Here are some tips:

  • Up skill – Look for opportunities to expand your knowledge and learn new, in-demand skills. Take online courses, get certified, or enroll in a degree program. This will make you more valuable to employers.
  • Join professional associations – Associations offer networking, continuing education, career guidance, and industry insights. They can help you stay on top of trends and best practices. Relevant groups for hourly workers include retail or restaurant associations.
  • Get certified – Earning an industry certification shows dedication and can give your resume a boost. For example, hourly food service workers could get a food safety certification. Certifications make you stand out.
  • Attend conferences and events – Conferences allow you to build your network and knowledge base. Look for local workshops and events related to your field. The connections you make could lead to new job opportunities.
  • Find a mentor – A mentor can provide priceless guidance as you navigate your career. Seek out someone more experienced who can advise and encourage you. Mentors share insights you can’t find elsewhere.

Workplace Rights

Hourly workers have legal protections and rights in the workplace. Being aware of these can help you advocate for yourself or address any issues that arise.

Labor Laws

There are several key labor laws that apply to hourly workers:

  • Minimum Wage – The federal minimum wage is $7.25 per hour, though states and localities may set a higher minimum. Employers are required to pay at least the minimum wage.
  • Overtime Pay – Most hourly workers are entitled to overtime pay of 1.5 times their regular rate for any hours worked over 40 in a week. There are some exemptions, like for certain retail and service workers.
  • Meal and Rest Breaks – Federal law does not require breaks, but many states have laws mandating meal periods and rest breaks. Know what you are entitled to in your state.
  • Pay Stub and Wage Statements – You must receive documentation of your pay, rates, deductions, and hours worked. Review this to ensure accuracy.
  • Pay Frequency – Employees must be paid regularly, at least twice per month. Tips must be paid out each pay period.

Anti-Discrimination and Harassment

Hourly workers are protected from discrimination and harassment under federal and state laws:

  • It is illegal to discriminate based on race, color, religion, sex, national origin, age, disability, pregnancy, or genetic information.
  • Workplaces should have clear policies against discrimination, harassment, bullying, and retaliation. Report any concerning incidents.
  • You have a right to a workplace free of harassment, hostility, threats, or intimidation. Employers must investigate harassment claims.
  • Reasonable accommodations in the workplace may be required for disabilities, religious practices, pregnancies, and other needs. Request accommodations if necessary.

Know your rights and do not hesitate to speak up if you experience any mistreatment or discrimination as an hourly employee. There are legal protections in place against such behavior.

The Bottom line

Hourly work can be a great option for those seeking flexibility and supplemental income. However, the unpredictable nature of hourly schedules and wages requires diligent financial planning.

Here are some final tips:

  • Automate your savings to ensure money is set aside despite fluctuating paychecks. Even small automatic transfers add up over time.
  • Build up an emergency fund equal to 3-6 months of expenses. This cushions income gaps.
  • Explore benefits like the Earned Income Tax Credit and Medicaid that aid lower earners.
  • Develop skills, certifications and connections to access better hourly or salaried roles long-term.
  • Know your rights. Hourly workers are entitled to minimum wage, overtime pay and protections against discrimination/harassment.
  • Treat variable income as a given and budget accordingly. Planning for irregularity makes hourly work sustainable.

With smart strategies, hourly jobs can offer the freedom you want without compromising financial stability. The key is adapting your mindset and money management to smooth out the inherent ups and downs.

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