$40,000 a Year Is How Much an Hour? Better Question:, Can You Live on $40K a Year?

Inflation is high. In many industries, incomes are not keeping up with inflation. What was a good salary in past years often doesn’t add up today. The minimum wage is still at $7.25 an hour. A 2,000-hour work year amounts to an annual income of only $ 14,500 at the minimum wage. Most would agree that living in most areas of the country, that income is insufficient.

What about an annual income of $40,000 a year? $40,000 a year Is how much an hour? Should we be calculating incomes based on an hourly wage? These are all good questions. Depending on the industry and job title, the answer may differ.

Jobs After College

My first job out of college paid $27,000 per year. It felt like all the money in the world. I graduated with a degree in English Lit. More schooling was out as I didn’t want to go to law school or get a master’s degree. I didn’t want to teach.

I had no work experience besides scooping ice cream, bagging groceries, and delivering pizzas. I was still running my part-time “Guy With Truck” business, where I hauled stuff to the dump or helped people move for a reasonable fee. It wasn’t a career and didn’t generate enough money for all my living expenses.

After applying for every entry-level full-time job opportunity I could find that wasn’t food service or retail and getting zero interest, my friend’s dad stepped in. He was a pretty big deal in certain circles. He got me a job at the private bank where he worked. Given my resume, or lack of one, $27k seemed like a pretty good salary. For a while, it did the trick. I had roommates, low overhead, and few responsibilities.

Fast forward several years, in 2020, my nephew was in a similar situation. He has a degree. He doesn’t have much work experience related to what he wants to do. He doesn’t want to live in his mom’s basement. His tech degree offers more immediate employment potential than my English degree. Competition in his field is challenging, however, especially for entry-level jobs.

Most jobs in his desired industry pay about $40,000 yearly to start where he lives. The question on his mind, and possibly yours too, if you’re changing careers or are interested in a job that pays similarly is this:

Is $40,000 a Good Salary?

Fast forward to 2023, and the answer is probably no. 

A salary of $40,000 a year is below average for a full-time, non-seasonal employee. In a September 2023 article from DemandSage, they say the following:

“According to the U.S. Bureau Of Labor Statistics, the median weekly earnings of the 121.5 million full-time workers in the United States is $1,101 as of the second quarter of 2023.”

The Bureau of Labor Statistics reported a median personal income of $1,037 per week for the first quarter of 2022. The U.S. Census Bureau lists full-time, year-round employees’ annual median personal income at approximately $57,406 annually for 2023.

That doesn’t mean a $40,000 salary is terrible. Whether $40k is a good salary highly depends on your circumstances. Is $40,000 a good salary for me? That’s the question you should ask yourself. You have bills, obligations, and financial goals. The cost of living in your area might be high, low, or somewhere in between.

Perhaps you live somewhere where jobs are scarce. Or maybe you’ve been looking for work for a long time. You might not be able to turn down $40k a year.

$40,000 a Year Is How Much an Hour?

Breaking Down a $40,000 a Year Salary

If you’ve been offered a job or are thinking about pursuing an opportunity paying $40,000 a year, in addition to wondering if $40k a year is a good salary or not, you probably want to know how much that works out to. Here are the pre-tax numbers for various time periods:

$40,000 a year is how much a month?

$40k per year works out to $3,333.33 per month. If you get paid biweekly, that’s $1,538.46 per paycheck. If your employer pays twice a month, $40k annually works out to $1,666.66 per pay period.

$40,000 a year is how much per week?

A $40,000 annual salary breaks down to $769.23 per week before taxes and other deductions.

$40,000 a year is how much an hour?

If you make $40,000 a year, your hourly rate is $19.23. That’s based on 40 hours per week and 52 weeks in a year.

Is 40K a Year a Good Salary for a Single Person?

According to MIT’s living wage calculator, $40,000 a year is enough for a single person with no children in the U.S.

Whether $40k is a good salary for a single person or not depends heavily on where you live. While a single person can make ends meet on $31,000 a year in Iowa, you’ll need at least $42,000 to manage if you’re single in Manhattan.

Keep in mind MIT’s methodology accounts for housing, food, health care, utilities, and other basic living expenses. It doesn’t consider conveniences or expenditures unnecessary, like vacations, dining out, entertainment, or savings.

Your financial situation also determines whether $40,000 per year is a good salary while single.

If you graduated college with no debt, live rent-free with your parents, and ride your bike to work, $40,000 could be an excellent salary. You might even be able to save money aggressively under those conditions.

If you owe a ton of student loans, carry credit card debt, and want to rent an apartment in San Francisco, you’re probably looking at a second job or a side hustle to supplement that $40k salary.

Single people are also subject to certain financial disadvantages. Here are some examples:

  • Insurance companies usually consider a married person less risky. Married individuals might pay less for car insurance than an unmarried person.
  • Married couples filing jointly get a higher tax deduction.
  • Families can shop in bulk to save money. Buy in bulk when you’re single, and you might have spoiled food and regret.
  • Family plans for mobile phones, gyms, and other memberships are often cheaper than individual plans.
  • Traveling alone is more expensive. Hotels, cruise lines, and tour operators usually quote prices based on double occupancy. They charge single travelers more.
  • You don’t have a partner to share expenses with or help you stay afloat if you suffer a job loss or other financial setback.
  • If you don’t want to be single forever, it’s hard to be frugal when dating. Going out on dates and trying to look your best usually costs money.

Generally, $40k a year is enough for a single person to at least get by. Depending on your location, circumstances, and lifestyle, it can provide a decent quality of life or be a struggle.

How Much Rent Can I Afford on $40K?

If you make $40,000 per year, you can afford to pay $1,000 monthly rent. That number is calculated using the 30% rule, which states that your monthly housing expenses should not exceed 30% of your gross monthly income.

While the 30% rule is the rule of thumb landlords, property managers, and government programs often use to determine how much rent you can afford, it’s outdated. The 30% rule stems from a 1969 amendment to public housing requirements raised from 25% to 30% in 1981. It’s also not universally accepted.

Personal finance guru Dave Ramsey is adamant that your rent payment should not exceed 25% of your take-home pay. What would that look like in dollars and cents compared to the 30% rule?

Here in Georgia, a $40,000-a-year salary will net you about $2,627 per month, according to this paycheck calculator. Using 25% of net pay as our maximum rent amount works out to $656.75 per month.

That’s much less than the $1,000 max the 30% rule suggests. That’s also not much to spend on an apartment, even in Georgia. You might need one or more roommates to share expenses, or you might need to look for housing in a different area if you use 25% of your take-home pay as your guide.

Living on 40K a Year

If $40,000 per year is reasonable or adequate but not great for you, how can you make the most of it? Here are several things you can do to live well on $40k a year:

Follow a budget

When you’re struggling or unsure where your money goes, budgeting your money is essential to controlling your finances.

Your budget is your roadmap. You’ll know how much you have coming in, where all your money goes, and how much progress you make toward your financial goals.

Cut expenses

Once you have a budget, you’ll see where all your money goes. Look for ways to trim expenses.

When we first set up our budget, it surprised us how much we spent on dining out and groceries. Will convenience foods or buying coffee make you poor? Probably not, but you can save four figures a year if you make your own coffee and meals at home.

We cut cable, ate out less, and saved at the grocery store by buying in bulk and using coupons. We also switched mobile phone providers.

When you create your budget, you’ll be reviewing your spending habits. You’ll probably identify areas where you could reduce or eliminate some of your expenses. You might find little money leaks you can easily live without.

You also want to focus on reducing significant important expenses as well. Looking at your spending, would you be better off lowering your housing costs, spending less on your car, or slashing your insurance bills? Find ways to reduce those expenses, too.

Build up your savings.

Saving money seems impossible when you’re on a tight budget. But if you make saving a top priority, you can do it. Every penny adds up.

Having a goal helps. Maybe you need to start an emergency fund or have a specific purpose, like buying a house. Whatever your goal is, do something every time you get paid to build your savings.

Here are some ideas:

  • Automate your savings. Have your bank or employer put a specific dollar amount into a separate savings account every time you get paid. You won’t miss the money that way.
  • Have a change jar and empty your pockets into it every day.
  • Add the money you save from cutting expenses to your savings account. The $115 we save monthly from getting rid of cable and the $60 we saved switching phone plans goes into our savings.
  • Try a no-spend challenge for 30 days. It’s incredible how much you can save quickly if you only spend money on your needs and nothing else.
  • If you get paid bi-weekly, two months out of the year, you get three paychecks. During those three paycheck months, budget as if you’re getting your usual two checks and bank the entire third paycheck.

Avoid debt

It’s very tempting to whip out a card when you don’t have the money to pay for something you want. You figure it won’t hurt and can pay it off later or in installments.

That’s how it starts. Before you know it, you’re thousands of dollars in debt.

When you’re stretched thin, you must live within your means. If you’re not paying your credit card balance in full each month, you’re overpaying for your purchases and throwing money away on interest.

Increase your income

The quickest way is to get a raise at work, but that might not be possible. Your company might not be financially stable; maybe you haven’t been there long enough or done enough to justify a salary increase.

Another option is to start a side hustle if a raise is unlikely. You can start plenty of low-cost side hustles without spending any cash to get going.

  • If you have specific in-demand freelance skills, picking up extra work on the side is an excellent way to make more money, even if you’re a freelancing beginner.
  • The gig economy also offers plenty of opportunities to make extra cash, like driving for DoorDash or doing tasks for others via TaskRabbit.
  • You can monetize your passions, like charging for music lessons or earning money for reading books.
  • You could make money selling clothes on Poshmark, restoring discarded furniture, and selling it via one of these apps for selling used furniture or renting out your stuff for profit.

You could also supplement your income with a second job, but there are downsides to working two jobs. For the pros and cons of getting a second job, see: Is Getting a Second Job Worth It?

Even if your job is primarily recession-proof, exploring other opportunities is smart if you’re barely getting by on your $40k salary.

Get resourceful

Corporate stooges talk about doing more with less all the time. But it applies to more than just recovering from poor business decisions, company-wide budget cuts, or layoffs. You can do more with less for your finances.

Here are some things you can do to make your money go further:

  • Cook at home. You have to eat, so spending too much on food is easy. Restaurant meals, takeout, and prepared foods from the grocery store add up. Set a food budget, then stick to it.
  • Stop being loyal to brands. Often, lower-priced alternatives to popular brands offer the same or better quality.
  • Take care of your stuff. Preventative maintenance prolongs the life of the things you buy. You could save hundreds or even thousands in repairs or replacements by taking good care of your things.
  • Fix things instead of throwing them out. You don’t always need to drag something to the curb and buy a new one when something breaks. Things can be repaired or restored to good new condition, often for less than the replacement cost.
  • Learn to DIY. Not every repair or maintenance task requires an expert with years of training and experience. Books or YouTube teach you minor home repairs and car maintenance tasks. They might be easier than you think.
  • Replace store-bought products with homemade versions. You can make your own pasta sauce, bread, yogurt, dog treats, beauty products, and cleaning supplies for much less than you’ll spend on the familiar brands.
  • Choose free or low-cost entertainment options. Get outside. Enjoy parks, hiking, or walking for exercise. Visit local libraries, museums, and historical sites. Have a movie night or a game night.

Final Thoughts

$40k a year is below the median individual income in the U.S., but it’s enough to survive. Where you live, how you manage your money, and your current financial situation ultimately determine whether $40,000 is a good salary.

A $40,000 annual salary won’t launch you into the top 1%, but you won’t automatically face a life of poverty either. If you have trouble making ends meet on $40k a year before taxes, there are things you can do to stretch your dollars. Following a budget, increasing your income, and being resourceful go a long way toward making it on any salary.