When looking for a new job, it’s typical to try to figure out if it will be a good salary or wage. So you see one that will pay $40,000 per year? But how much is that an hour? And is that even a livable wage?
Well, keep reading to find out! You’ll get the whole breakdown and a monthly budget example.
How much is $40000 an hour?
Assuming you work 40 hours every single week of the year (52 weeks), you would be working 2080 hours per year. That would make a salary of $40,000 a year come out to about $19.23 an hour.
$40,000 per year breaks down to:
- $19.23 per hour (Annual ÷ 2080 hours)
- $153.84 per day (Hourly x 8 hours)
- $769.23 per week (Annual ÷ 52 weeks)
- $1,538.46 biweekly (Weekly x 2)
- $3,333.33 per month (Annual ÷ 12 months)
However, after taxes, $40000 would be reduced to $31,100 – $33,800 per year depending on the state you live in. Your total take-home paycheck would be:
- Weekly paycheck= $598.08 to $650
- Biweekly paycheck= $1,196.15 to $1,300
- Monthly paycheck= $2,591.67 to $2,816.67
Whoa! That’s a $225/month difference between the highest and lowest taxed state. Meaning, one person could be paying $2,700 extra per year in taxes. To make the most of your salary, you might want to live in a state that does not tax your income.
States that don’t tax wages: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, New Hampshire, and Tennessee (per Investopedia)
Is $40,000 a good salary?
For my family, $40,000 per year is a great salary. In fact, here’s how we lived on $2,500 per month in San Diego. However, everyone’s situation and finances are different.
What counts as a good income depends on where you live, the cost of living in that area, your family size, etc. If you need to survive on $40,000 a year, it may be accomplished through budgeting and reducing your expenses.
Monthly Budget for $40,000 Salary
You’re probably still not sure if you can manage a 40k salary. Well, I’ve got it figured out for you!
Here is an example of how much you should budget for your total monthly expenses. This budget breakdown assumes that you make $2591.67 per month and you’re single. If the amounts don’t work for your life, play around with them a bit; but I urge you to always save first and foremost!
- Savings of 10% = $259
- Rent/ Mortgage= $860 (⅓ 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 = $2429 with $162.67 leftover
So what do you think? This sample is not even a bare-bones budget. You could save $200/month by not having a car payment and buying a cheap car. It is also possible to have cheaper car insurance, spend less on the personal, misc, and entertainment categories, etc.
40k a year is a good salary for a single person, but you can support a family on that amount as well. Where there is a will, there is a way! I, along with my siblings, were raised on that amount for a while and always lived a comfortable life. I’ve always had a roof over my head, shoes on my feet, and food in my stomach.
How to Live on $40,000 a Year
On any salary, the most important thing is to live below your means. Regardless of income, the main reason why people end up in debt is because they are spending more than they earn. If you want to live a life of financial freedom, that is not good.
The 4 main steps to being financially secure with your income are to:
- Create a budget: Learn how to create a simple budget here.
- Save money: Remember, save first then spend.
- Lower your expenses: Here are 40 frugal living tips that I live by.
- Pay off debt fast: Paying the minimum results in crazy interest fees. Fast track your debt payoff by doing these things.
Learn more tips with my guide: How To Live On A Budget.
40k is a decent salary. But, if you just can’t make this salary work for your lifestyle, then it might be best to look for a better paying job, or pick up a side hustle.
Keeping your budget at around ⅓ for housing costs ($860), you could buy a home for around $200,000 with a 30-year loan, and 3% interest rate.