$ 40000 a year is how much an hour?
Whether you are a college graduate who’s just starting on a job hunt or looking for a change in careers, the salary you get is an important consideration.
It is essential to know how much you will earn from a job, as your lifestyle depends on it. Be it bills, paying off debt, or planning for retirement, it will all depend on your salary.
One typical salary offer is $40,000 a year. But is $40,000 a year a good salary?
Read on as we research various aspects of a $40k salary, like whether it is enough to live on and how to make the most of a $40,000 salary.
$ 40000 a year is how much an hour (week and month)?
To understand, if $40,000 is a good salary, you must break it down into parts.
After all, you will not get paid this whole amount together. You may be paid per hour, per week, biweekly, or per month.
Gross income of $ 40000 per year equals –
- $ 19.23 per hour
- $ 153.84 per day (hourly x8)
- $ 796.23 per week (annual ÷ 52)
- $ 1538.46 biweekly
- $ 3,333.33 per month (annual ÷ 12)
These figures, however, do not take taxes into account. Depending on the state you live in, your $40,000 paycheck may be reduced to $31,100 to $ 33,800. So, considering the taxes, how much is $40,000 an hour-
- Weekly – $598.08 to $650
- Biweekly – $1,196 to $1,300
- Monthly – $2,591.67 to $2,816.67
As you can see, there is almost a $250 difference in the paycheck of the highest and the lowest taxed state. So, you could be paying around $2,700 in taxes per year in specific states.
For example, if you live in California and earn $1,538 every two weeks, you will get tax deductions of $273. This will mean that you actually take home $1,266 every two weeks.
If your annual salary is $40,000 in California, you could be taxed $7,090, so your net take-home will be $ 32,910 yearly.
To make the most of your salary, it is advisable that you live in a state that has lower taxes. The states of Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, New Hampshire, and Tennessee don’t tax wages.
Is $40,000 a good salary?
According to the Bureau of Labor Statistics, the USA’s median individual income for the third quarter of 2019 was $47,788. So, we can say that a salary of $ 40,000 per year is below average.
However, the answer to the question – ‘Is 40k a year good?’ depends on the cost of living where you stay. In other words, a $40,000 salary would be suitable for someone living in Omaha, Nebraska, but you may have a tough time making ends meet with the same salary in San Francisco.
If you live in a low cost of living city but are still stressed about your expenditure and can’t make ends meet, it may be time to look into where you are spending your money. Budgeting and reduction of spending will help you survive on $40k a year.
Tips to make the most of a $40,000 salary
If you spend more money than what you earn, you will end up broke, no matter what your salary. These tips will help make your money last longer and build a healthy financial future for you.
1. Get on a budget
Create a monthly financial plan and stick to it. This doesn’t mean that you cannot have any fun. It just means that you must plan how much you should spend on different needs and activities and dedicate yourself to them. Your worth is not determined by how much money you make but by how much money you save.
For example, if you earn $2590 per month, this is how you can plan your budget –
- Savings = $260 (10%)
- Rent/ Mortgage= $860 (30% of income)
- Utilities= $200
- Car Payment= $200
- Car Insurance= $100
- Health Insurance= $200
- Cellphone= $50
- Internet= $50
- Gas= $60
- Groceries= $150
- Personal & Misc= $200
- Entertainment= $100
- Total = $2430 with $160.67 leftover
You can use these blank budget printables to prepare your monthly budget for FREE!
2. Pay off your debt
The more debt you have, the tougher it is to make your ends meet. Debt is like cancer; it steals your future from you. One smart thing you can do is to create a plan to pay off your debt as soon as possible. Vow to not take any more debts.
3. Track your money
If you want to be financially stable, you must know how much money is coming in and how much you are spending, and on what. It is not possible to make financial improvements if you do not understand what you are spending on.
4. Live within your means
You can always find something newer or better than what you already have. If you are always buying the latest and the newest products, there may not be much left for you to save. You may even end up in debt.
5. Live off what’s leftover
If you follow the mantra of ‘live off what’s leftover,’ you are well on your way to financial freedom. Essentially, it means your expenses should fit within the boundaries of what money is left over after you invest and save. Over time you’ll see your savings grow, no matter what salary you make.
You may think that a $40k salary is not enough to generate wealth, but you’re mistaken. If you want to create enough wealth and live off the interest, you need to invest well.
If you save $ 500 a month for 30 years and earn a 10% interest on it on average, you can end up with $1 million in investment. At that stage, you will earn $100,000 per year in interest.
7. Be resourceful
Here are a few simple lifestyle changes that can make your money last longer –
- Cook at home. Restaurant meals, takeouts, and prepared foods from grocery stores can make a dent in your budget. A little planning and cooking at home can help you save a lot more money.
- Look out for brands that cost less money.
- Repair rather than replace. Repairing something that breaks down can cost you much lesser than replacing the item with a new one.
- Learn to DIY. Not every repair or maintenance job needs an expert. You can do minor repairs and maintenance jobs yourself.
- Entertainment doesn’t have to cost money every time. There are several options to enjoy a fun day out without spending any money. Parks, hiking, visiting historic sites and museums are some great low-cost options.
You might also be interested in learning about how much is six figures income?
How much rent can one afford on a $40,000 salary?
If you make $40,000 a year, you can afford to pay around $1,000 as rent per month. This amount has been calculated using the 30% rule. According to this rule, you should not pay more than 30% of your monthly salary towards rent.
Some experts recommend that you do not use more than 25% of your salary towards rent. This means your rent should be around $685 if you make $40k per annum.
You can use either of the two rules. Just keep in mind that you should not use all of your salary on rent.
How much mortgage can you afford on a $40k salary?
If you make $40,000 per year, the maximum amount you can afford for a home is $100k to $120k. You should also factor in the property tax and the annual upkeep of the house.
According to some financial experts, you should pay around 28% of your gross monthly salary in a mortgage payment. This means, if your income is $40,000 a year, you should spend $933 on your mortgage each month.
What is the 28/36 rule?
The 28/36 rule is what the money lenders and creditors use to calculate whether they will let you take a loan. According to the 28/36 rule, a household should not spend more than 28% of its monthly income on housing and no more than 36% on debt. The 8% difference includes debt in student loans, car loans, and credit card debt.
So if you have a $40,000 salary, you will use $933 towards mortgage payment and an additional $267 towards repaying other debts.
Ten best cities to live in if you earn $40,000 a year
Those people who wonder is 40k a good salary; we have a list of ten cities that are perfect for a $40k salary. The lower cost of living and housing prices here make $40,000 stretch much more.
- Abilene, Texas
- Bristol, Virginia, and Tennessee
- Cheyenne, Wyoming
- Cleveland, Ohio
- Cañon City, Colorado
- Eugene, Oregon
- Fort Walton Beach, Florida
- Rochester, New York
- Sheboygan, Wisconsin
- Sioux Falls, South Dakota
10 Cities where $40,000 may not be enough
These are the top ten most expensive cities in the US to live in –
- Manhattan, NY
- San Francisco, CA
- Honolulu, HI
- Brooklyn, NY
- Washington, D.C.
- Seattle, WA
- Oakland, CA
- Arlington, VA
- Queens, NY
- Boston, MA
Final thoughts – $ 40000 a year is how much an hour
According to the Bureau of Labor Statistics, $40k is below the US’s median individual income. But this does not mean that you cannot survive on a $40k annual salary.
Whether 40k a year is a good salary or not depends on where you live, your financial situation, and how you manage your money.
You can make your money last longer and build a healthy financial future by planning a budget, paying off your debt, tracking your money, and investing well.