# \$40000 a year is how much an hour? And is it a good salary?

## \$40000 a year is how much an hour

If you are looking at getting a new job, or just starting your career, figuring out a good salary is important. And knowing how much you can actually expect to take home per month is a big part of knowing if a salary is good for you or not.

Let’s take an example of \$40000 per year salary.

## How much is \$40000 a year per hour?

\$40,000 a year per hour is: \$19.23 (assuming 40 hours per week, 52 weeks per year.)

\$40,000 per year broken into per week is: \$769.23

\$40,000 per year broken into per month is: \$3,333.33

Now these numbers are gross income. They do not factor any taxes that will be taken out when you get paid.

## Is \$40,000 a year a good salary?

This question is a little harder to answer, because it is so subjective (and depends a lot on where you live).

The Bureau for Labor and Statistics says that the Median weekly earnings, during quarter three of 2020, was \$994 per week. That is roughly \$51,688 per year. So \$40,000 is almost \$12,000 under the Median for the whole country.

If you live on either of the coasts of the United States (East Coast or West Coast), cost of living is going to be higher. Rent prices and home prices are a lot more expensive on the coasts than they are in the more middle states of the country. So, more of your income will be eaten up in housing costs.

Also, some states do not charge you income tax, so you actually get more of your money into your bank account. But then plenty of states do charge a state income tax, on top of the federal income taxes.

Another factor to consider is your personal situation. Are you married? Do you have children? Are you paying down debt?

When Mr Dentist finished dental school, we received a \$40,000 per year salary. We had 2 children and were not yet paying his student loans. We managed to make it work, but it was tight. You can read all about how we lived on \$2500 per month here.

So, to truly answer if \$40,000 is a good salary, you really need to evaluate your own situation from all angles to see if it will work for you or not.

## How to make the most of \$40,000 a year salary

Honestly, no matter how much money you make, you need to learn to make the most of it and use it wisely. Your income is your best wealth building tool, as Dave Ramsey says. If you don’t learn to manage your income, whether you make \$40,000 per year or \$120,000 per year, you will always overspend and never make progress toward your financial goals.

Here are the best ways to make the most of your salary

Get on a Budget. A budget is going to be your best tool for managing your money well, and living within your means. When you have a smaller income, making the most of every dollar is even more important.

Start making it a habit to set up your budget every month. Give every dollar that is coming into your bank account a job, before it reaches your account. Then stick to your budget. A budget is only good if it is actually used.

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Track Your Spending. To make budgeting even more efficient, you have to know where your money actually goes each and every month. So tracking your financial transactions is going to help with that.

When you track your spending, you don’t have to wonder where your money went at the end of the month. You know exactly where every dollar, and that will help you know where to make changes in your budget.

By the way, you get a spending tracker in the mini budget planner above!

Adopt Frugal Lifestyle. When you have a smaller income to work with, you need to start getting creative with how to make it stretch as far as possible. Learning about being frugal, and adopting frugal practices into your life can be HUGE in helping you stretch your dollars and keep more of your money in the long term.

RELATED ARTICLE: Frugal Living Tips from the Great Depression

Get Out of Debt. Debt can eat into your finances faster than you can blink. If you have debt, making ends meet gets harder and harder, especially when you have a smaller income to begin with.

If you do not have debt yet, avoid it at all costs. And if you do have debt, it is time to start tackling that beast. And if \$40,000 per year isn’t enough to do that, you may need to take on some extra work to make some extra money.

RELATED ARTICLE: Paying Off 6 Figures of Student Loans

Make Saving a Priority. The more that you can train yourself to save in your finances, the more freedom you will have with your money. Having money saved brings so much peace to your financial life. When you have money saved, you know that you pay your bills, and keep food on the table.

Don’t say “I will save whatever I don’t spend”. That doesn’t work, because there never is money leftover to save. Instead, plan to save first and spend what is left. This means you need to plan for saving in your budget.

RELATED ARTICLE: Save \$1000 Fast
Creative Ways to Save Money

Start to Invest. To really make the most of your salary, you also want to use it to plan for your future. Investing even a small amount, each and every month, will reap big rewards in the future as that money grows.

Your income is your best tool to create financial independence and wealth for you and your family. Once you are out of debt, set aside money each month to invest for your future. This will bring you further peace in your finances as you won’t have to worry about how to live once you are retired.

## Example Monthly Budget for \$40,000

So now you need to decide if a \$40,000 salary is really going to work for you. Well, the best way to do that is to create a budget, using the monthly income for a \$40,000 salary.

To help us get started, and make things not so hypothetical, I like to use Dave Ramsey’s budgeting percentages as a baseline.

Okay, now we want to apply those budget percentages to the monthly income and create a budget. For this example, I will use the monthly income we received when we were being paid \$40,000 per year. At the time, we lived in Washington, which does not have state income tax. So our paychecks reflected that. Your actual numbers may look different for that reason.

And, if this example doesn’t work for you and your situation, then tweak the numbers until it does.

Monthly Income: \$2679.66

Giving (10%) = \$268

Housing (25%) = \$670

Savings (10%) = \$260

Utilities (5%) = \$150

Food (12%) = \$300

Transportation = \$150

Health = \$100

Clothing/Personal = \$200

Insurance = \$270

Recreation (3%) = \$100

Leftover: \$211 (can be used for debt payments, savings, or to beef up other categories)

This is just a basic budget outline to help you get an idea of if a \$40,000 salary would work for you. I did play with the percentage numbers a bit to make the budget more realistic for how we lived. That said, our rent was \$1000 a  month, when we were making \$40,000, and that made our budget pretty tight.

But if you are going to know if \$40,000 will work for you, you have to run the numbers. It is possible to live a good life on a salary like this, but you need to know if it will work for your life and your family.

Still can’t get \$40,000 salary to work for your needs? You may need to ask for a higher salary, look for a new job, or plan to pick up a side hustle to bring in more income.

## Final Thoughts on \$40,000 salary a year per hour

If you are looking at a job, and being offered \$40,000 per year as a salary, it is entirely possible to live a good life on that salary.

That being said, you really need to look at all the factors of your situation and life style and see if it is actually enough for your needs and where you live.

We have done it as a family with 2 small children, but it was tight (mostly because of high housing costs). If we had lived somewhere with cheaper housing, it wouldn’t have been as difficult.

Does \$40,000 per year work as a living wage where you live? Let me know in the comments!