$40000 A Year Is How Much An Hour? And Is It A Good Salary?

Woman calculating 40000 a year is how much an hour

How does a $40k salary convert to an hourly wage?

Depending on where you’re at in your life, $40,000 per year can sound like a pretty attractive income. If you’re looking for a new career opportunity that pays a $40k salary, you might be wondering how this compares to the jobs you’ve had in the past that paid an hourly wage.

In this post, I’ll break down a $40,000 income into various units (hourly, daily, weekly, and monthly).  Then, I’ll go over how you can successfully build retirement savings and still have plenty to live on with a $40k salary.

First, let’s answer the question $40,000 a year is how much an hour?

With a $40,000 annual salary, your hourly wage would be $19.23/hour.

This calculation assumes that you are paid 52 weeks out of the year and you work 40 hours every week:

$40,000 ÷ 52 weeks = $769.23/week
$769.23/week ÷ 40 hours/week = $19.23/hour

This might sound more than acceptable to you, considering the average hourly wage for all U.S. employees in February 2021 was $11.40.

But, there are other important factors to consider. What does earning $40,000 per year mean for you and your lifestyle? Let’s take a look at a few other common questions in regards to earning a $40,000/year salary.

NOTE: This article does not take taxes into consideration.

Is $40,000 per year a good salary?

Regardless of your annual income, it’s important to remember that your salary is completely relative. Whether or not you consider a $40,000 salary “good” depends a lot on your circumstances.

If you’ve just graduated from college or you’re re-entering the workforce after taking care of the kids for a few years, $40,000 is definitely a good starting point. Also, if you’ve never worked a corporate job before and got offered a $40,000 salary for your first job then you’re doing pretty good!

On the other hand, if you’ve been working in the same position for years, have tons of experience, and work 80 hours per week then you should probably try to negotiate something a little higher.  Someone who spent 8 years in medical school and has been working as a brain surgeon for 10 years should probably be making more than $40,000!

It’s also important to note that, at the end of the day, your salary is just a number and you shouldn’t make any decisions based solely on a monetary figure.

Before accepting a job, you should consider what your work/life balance will be, who you’re working with, and if you find the type of work fulfilling. These are all much more important questions than how high is the salary.

According to Policy Advice, the average annual salary for 2019 in the United States was $51,000 and the median total household income was $68,000. According to this figure, $40,000 is significantly below the average wage. However, keep in mind that averages can be skewed by outliers on either end of the spectrum (e.g., top executives who earn millions of dollars will pull the entire average up significantly).

Can you live off of $40k per year?

Calculator and cash

As long as you have a handle on your budget and are good at controlling your spending, then $40,000 should be plenty to live on.

Of course, your lifestyle on a $40,000 salary greatly depends on how many expenses you have.

For example, if you have a family of four with two dogs and a mortgage then $40,000 will need to stretch much further than if you only need to take care of yourself.

The same is true for which part of the country that you live in. A $40,000 salary in the midwest will go much further than in New York City or San Francisco where the cost of living is much higher.

Considering that your personal finance choices are entirely up to you, having financial stability is definitely attainable earning $40k a year. You just may have to make some major lifestyle adjustments or sacrifices to get by.

To get a good idea of how you can live on $40,000 per year, it’s easiest to break it down into daily, weekly, and monthly earnings.

$40,000 per year is how much per day? Per week? Per month?

Earlier, we saw that $40,000 per year is $19.23 per hour. Assuming that you work 40 hours per week, this equates to: 

  • $19.23/hour × 8 hours/day = $153.84 daily
  • $153.84/day × 5 days/week = $769.20 weekly
  • ($769.20/week × 52 weeks/year) ÷ 12 months = $3,333.20/month

If your job issues paychecks on a bi-weekly basis, then you could expect your average paycheck to be about $1,538.

However, this number might fluctuate slightly depending on things like days off, holidays, any overtime that you work, longer vs. shorter months, etc.

Now that you know exactly what your income will look like on an hourly, daily, weekly, bi-weekly, and monthly level it becomes much easier to break it down into a budget.

What’s a good monthly budget for a $40,000 salary?

A simple way to set a budget is to focus on your monthly spending. Creating a 30-day spending plan will give you a better view of trends over time.

Here is an example of a budget (using the zero-sum method) that you can use to stay on top of your own income and expenses with a $40,000 salary:

$40K Budget Table

This is just a general template to budget your income.  You’ll need to make adjustments by adding and subtracting expenses that are more relevant for you or that aren’t included above.

The main idea is to figure out exactly how much money you’re making (listed at the top) for the month. Then, go through and allocate a realistic amount you can spend in each budget category.

If you get your balance to zero after all expenses are accounted for, then you’re maximizing your income by giving every dollar a place to go and minimizing wasted spending.

Once you have everything written down, you’ll find that you’ll have a more accurate idea of how much money is coming in and out each month. It will also show you where you need to cut expenses or boost income.

Remember that cutting your expenses is just one way to save money. The other is to increase your income. If you’re able to add more money under the green income line then you can also increase spending under the two expense lines.

As long as your monthly budget is below your income and also includes a savings category then you’re doing well!

If it doesn’t then that means you’re spending more than you earn each month, which you should try to resolve as soon as possible. The best way to do that is by either cutting expenses or finding another source of income.

This brings us to another very common question.

How can I save money on a $40,000 salary?

If boosting your salary or adding a source of side income are not options for you, then the best way to save money is to focus on minimizing your expenses, particularly your variable expenses.

When it comes to your budgeted expenses there are two main types you must account for on a monthly basis:

  1. Fixed expenses:  These are things that you need to spend money on each month and the amount rarely changes. Rent, your cell phone bill, insurance, and taxes are all good examples of a fixed expense because it’s rare that these expenses fluctuate on a monthly basis.
  2. Variable expenses:  The majority of your expenses are variable expenses. This means that they fluctuate month to month. A few examples of variable expenses are new clothes, food, or entertainment. These can change drastically on a daily or weekly basis depending on your decisions.

To improve at saving money, it’s important to track your spending. To do this, you can either download a good budgeting app or simply scroll through your bank statements to look at your spending over the last few months.

Also, most banking apps will automatically categorize your expenses and track your spending for you.  For example, here is a screenshot of the Bank of America mobile app:

BofA Mobile App Screenshot

This type of format gives you a quick snapshot of what your biggest expenses are and the areas where you can limit your spending the most. Additionally, many of these apps will track your spending for several months so that you can compare them over time and see if you’re improving.

Tools like this are invaluable when it comes to properly managing your finances.

What careers make $40k a year?

If a $40,000 salary is a goal that you’re hoping to achieve, then you might be interested in knowing what available career options there might be. Luckily, there are plenty of jobs that will pay you $40k a year that have fairly low barriers to entry (meaning that you don’t need an advanced degree).

The following options for some of the best jobs that pay $40,000 per year come from Credit.com. None of these listed require extensive education:

  • Sales Representative
  • PR Specialist
  • Automotive service
  • Film & Video Editor
  • Adult Education/Literacy
  • Social Science Research Assistants

Your best strategy for securing a $40,000 per year salary would be to work backward.

First, find an opportunity for a position you’d be interested in that offers a $40,000 annual salary. Then, learn what the requirements are and start doing the work to fulfill them. Once you have most of the requirements you can start applying.

If you aren’t feeling immediate financial pressure to earn more money then I would suggest pursuing something that you’re passionate about.  It may take more time, but putting your efforts toward earning money with something you greatly enjoy doing will bring more personal fulfillment in the end.

What lifestyle can you afford making $40k a year?

After you’ve secured a job that will pay you $40,000 per year, you may wonder what kind of lifestyle you can expect.

For most people, a $40,000 per year salary is not going to be life-changing money. Earning this type of income will probably not be enough to buy the house of your dreams or put you in a position to never worry about money again.

That being said, $40,000 is definitely enough to provide you with a comfortable life if you’re willing to be flexible.  You can definitely meet all of your financial obligations if you choose a low-cost area to live in, stay out of debt, and minimize your expenses.

If this is something you’re struggling to do with a lower income, then earning a $40,000 annual salary might provide some much-welcome financial relief.  When you have a job with an income that allows you to live below your means, you’ll feel more secure about your finances.

Where can you retire on $40k per year?

Storefronts

For the late savers who are concerned about retiring on time, you might be wondering where you can retire on $40,000 a year. Thankfully, there are several viable options where you can comfortably support yourself with this income.

AARP Magazine published a 2018 article listing 10 cities to retire in for under $40,000:

  • San Marcos, Texas
  • Alton, Illinois
  • Canandaigua, New York
  • Munhall, Pennsylvania
  • Gulfport, Florida
  • Guthrie, Oklahoma
  • Coralville, Iowa

These locations offer median home values between $80,000 and $300,000, as well as a variety of retiree-friendly activities.

If you’re retiring with a partner or spouse then you might have two incomes to work with.  Even increasing your income by $20k a year would open up a lot more choices for you.

Also, if your retirement investments can support a $40,000 annual withdrawal, your social security benefits may add a considerable amount to your monthly budget.  This additional income will give you more location options to choose from.

Lastly, keeping an easy part-time job after you retire from your career will only help strengthen your financial security.

The bright light for the late saver is that there are plenty of good possibilities that allow for a comfortable retirement with only a modest income.  The priority now is to save as much as you can, as quickly as you can, so you can support yourself throughout your retired years.

But, how much would you need to save?  That’s the next topic we’ll cover.

Savings you’ll need for a $40k/year retirement

If you think you’d be happy living on $40,000 a year in retirement, then you’ll need to set a savings goal that will generate this income by the time you retire.

Although figuring out how much you need to save for retirement depends on many personal circumstances, there are a few specifics that everyone should consider:

  1. Your expenses in retirement
  2. Your earnings on your investments
  3. Your annual withdrawal rate
  4. Your estimated life span

You can control #1 and #3, but #2 and #4 depend on external factors.  This is why it’s important to revisit your retirement plan at least once a year as you get closer to your retirement date to make any necessary adjustments.

A $1 million dollar nest egg will give you $40k/year for 30 years if your savings never grows or diminishes.

However, this is not a realistic scenario.  More than likely your savings will earn an average return between 5% – 10% over 30 years, depending on your investment mix and risk tolerance.

As an example, let’s assume your savings will earn an 8% average rate of return throughout your 30-year retirement.  If you can limit your annual expenses to $40,000 and maintain a withdrawal rate of 4%, then you’ll only need to build a nest egg of $656,000 by the time you retire.  (This assumes a 3% rate of annual inflation.)

Here is a screenshot of this calculation from MyCalculators.com.

Retirement Income Calculation

This calculation doesn’t even consider social security benefits, so if you expect to receive this additional income then your nest egg will need to be even smaller.

Let’s say your social security benefits will be $2,000 a month.  This means you only need to withdraw $16,000 a year from your retirement fund to generate a $40k/year income.  With this reduced withdrawal and using the same previous assumptions, your savings only need to total $393,000 at the time of retirement.

All of these scenarios assume that you want to live on 100% of your pre-retirement income of $40,000 a year.  However, many personal finance advisors suggest a target retirement income that replaces approximately 80% of your current income. 

If you were able to cover all of your pre-retirement expenses on a $40k salary, then you’ll likely only need $32,000 a year (80% of $40k) in retirement.

This, of course, makes your nest egg requirement even less.  To generate a $32k/year retirement income over 30 years, with an 8% rate of return, 3% inflation, and a $2,000 monthly social security benefit, you only need to save $131,118!

For the late saver, this should be an attainable goal.  All you have to do is save $313 monthly for 15 years and get an average rate of return of 10%.

In conclusion

In the end, it’s up to you to decide if a $40k salary will meet your financial needs.  The good news is, making a $40,000 annual income can provide you with a comfortable life before and during retirement.  You just need to determine if you’re willing to make the choices that allow you to live within the lifestyle it can support.

Whether you’re a late saver or not, the safest strategy is to save as much as you can, as quickly as you can, for as long as you can.  The more you have in savings earning compound interest, the stronger your financial stability will be throughout retirement. 

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$40000 A Year Is How Much An Hour? And Is It A Good Salary?

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