Understanding your salary is an important part of creating a budget and knowing the worth of the work you do. When searching for a new job, you want to understand how the pay relates to your day to day, and whether you consider it a good wage.
A wage of $40,000 can seem like a lot on the face of it, but when you break it down to the hourly wage, that number shrinks significantly. But how does that hourly wage compare to daily expenses? And can you live comfortably on $40,000 a year?
In this guide, we cover all the ways to break down $40,000 a year, and whether it can be considered a good salary.
How Much Is A $40,000 Annual Wage Per Hour?
A $40,000 annual salary works out to be $19.23 per hour, assuming a 40-hour work week. This doesn’t include taxes.
To understand how we came to that figure, here’s a simple breakdown.
The standard work week in America is 40 hours long. Assuming a person works every week for all 52 weeks of the year, they’ll have worked 2,080 hours. Therefore, we need to divide the $40,000 salary by the 2,080-hour work year. This gives us an hourly income of $19.23.
40 hours a week assumes we work 8 hours a day, 5 days a week. From this, we can calculate that the average daily pay of a $40,000 salary is $153.84.
By understanding our daily salary, we can calculate a weekly salary. Working 5 days a week, earning $153.84 every day, will provide a weekly wage of $769.20. Every two weeks, you’ll be earning roughly $1538.40.
To calculate your monthly salary, divide the $40,000 annual salary by 12. This will show that with each monthly pay you’re earning roughly $3,333.33. You may notice that this is different to the weekly salary times 4. That’s because the structure of the year leads to different hours worked per month, so the exact monthly pay will vary.
These calculations aren’t always entirely accurate, depending on the month and days worked. However, they provide a usable breakdown of your pay.
A $40,000 salary broken down would be:
$19.23 per hour.
$153.84 per day.
$769.20 per week.
$1538.40 every two weeks.
Roughly $3,333.33 per month.
We’ve calculated these on the assumption that you work a 40-hour work week. However, there are many reasons why that might not be the case! Instead, a $40,000 annual salary may relate to a significantly higher or lower hourly wage, depending on how many hours you work.
What About Tax?
Of course, all of these calculations refer to your salary before tax. The chances are, your $40,000 salary will be taxed, which will decrease the pay that ends up in your bank account.
There are nine states that don’t collect income taxes. These are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. So, if you want to keep that full $40,000, you may want to consider working in one of these states. (Although, these states often charge higher taxes in other aspects).
Income tax does vary depending on where you live, so if you want to work out the exact amount you’re being taxed, you need to do the math yourself. However, we can provide a rough average.
Depending on the state on which you work, $40,000 a year will be reduced to somewhere between $31,100 and $33,800.
Assuming you live in a state with a high tax rate and an eventual income of $31,100 a year, your hourly income would be $14.95. The monthly salary would become $2591.67.
If you live in a state with a lower tax rate, then an income of $33,800 can be broken down into a $16.25 hourly rate. The monthly salary would become $2816.67.
It’s important to consider taxes when calculating an hourly rate. As you can see, it makes a significant difference to even the hourly wage.
One final thing to remember is that these rates don’t account for paid holiday. Included in these figures are hours that were paid, but not necessarily worked.
Similar Wages To $40,000, And How They Compare
If you’re receiving a wage of $40,000 a year, this is likely to be what you’re paid before tax. As you can see from the calculations above, the after tax wage can be significantly reduced.
To be paid $40,000 after taxes, you’d need to earn a pre-tax salary of around $50,000. With taxes paid, this would then be reduced to an amount around $40,000, although the exact total will depend on your tax level and the state you work in.
Before tax, a wage of $50,000 works out to an hourly wage of $24.04. The monthly wage would be $4,166.67.
A salary of $42,000 a year, before taxes, would provide an hourly wage of $20.19.
If you make $45,000 a year before taxes, the hourly wage is $21.63.
A salary of £38,000 a year, before taxes, would provide an hourly wage of $18.27.
If you earned an hourly wage of $20, your yearly salary would be $41,600 before taxes. That’s a difference of $1600, compared to an hourly wage of $19.23.
Although that may seem like a minor amount compared to the overall wage, it could be enough to cover two months rent. If you’re negotiating for a higher salary, you may want to consider a tactic based on hourly pay.
Those small differences can add up to quite a lot over the course of the year!
When considering hourly wage, it’s worth noting the federal minimum wage for non-exempt employees is $7.25 per hour. Some states do have a higher minimum wage. An hourly wage of $7.25 is a yearly salary of $15,080.
Is $40,000 A Year A Good Salary? Or Not?
$40,000 a year is a decent salary, for the most part. In most areas of America, a $40,000 salary will allow you to live comfortably. However, how good a salary it is will depend on the exact circumstances of where and how you live.
When determining how good a salary is, it’s important to consider your own unique circumstances.
First, where you live. In many parts of America, $40,000 will be enough to afford a decent level of housing. However, in major metropolitan areas, this may not be enough.
For example, the average rent in Manhattan is $4,045 for a one-bedroom apartment, and it’s $3,029 in Brooklyn. In a major metropolitan area such as this, a $40,000 salary can’t cover the cost of living.
But the average rent for an apartment in Atlanta is $1,790. So, $40,000 could more than cover your cost of living there.
The second factor to consider is: how many people does this wage support? For a single person, $40,000 is enough to live comfortably in most parts of America.
For a small family, $40,000 could still offer a decent level of support. A larger family may find they struggle from time to time, and can rarely save.
Finally, consider any additional income. This may be passive income, second jobs, or others who contribute to expenses (such as a partner or roommate).
Once you’ve considered these factors, you can see how $40,000 compares to your yearly outgoings, and determine whether the salary will work for you.
This is a big reason why it helps to know your hourly, daily, and weekly salary. By doing so, you can compare what you earn to your average outgoings. Consider a daily salary of $153.84 (before tax), and how much you spend per day.
Something else to consider is the job itself. $40,000 a year is a fantastic salary for a number of entry level and advanced positions. However, particularly demanding jobs which require a high skill set and frequent training should potentially earn a higher wage.
If you’re applying for a job with a $40,000 annual salary, consider exactly what the job entails. Do you feel you’ll be fairly compensated for your workload?
Creating A Budget For A $40,000 Salary
Below, we’ve listed some tips on creating a budget, and the outgoings you must consider. Although this works as a starting point, it can’t account for your own unique circumstances. It’s important to play around with the numbers, to create a budget that works for you.
If you’re struggling to come up with a budget, start by looking over your previous bank statements. Using this, you can see where the potential outgoings are, and your average spend for the day/week/month.
When creating your budget, make sure to consider:
Rent or mortgage.
Utilities.
Insurance.
Transportation.
Groceries.
Entertainment.
Misc.
Savings.
These are some fairly broad categories, with a lot of room for adjustment. However, there are some basic rules to follow. Housing should consist of roughly ⅓ of your overall income, and you should always try and save at least 10% of your paycheck.
For a monthly salary of $2591.67, we might expect this to look like:
Rent or mortgage: $863.89.
Utilities: $300.
Insurance: $300.
Transportation: $250.
Groceries: $350.
Entertainment: $100.
Misc.: $150.
Savings: $259.17.
Together, this comes to $2,573.06, leaving you with $18.61.
These numbers will probably change significantly depending on your own lifestyle, but hopefully you can see how a $40,000 salary can be a decent wage for even a small family.
When it comes to creating your budget, always leave room for savings. You’ve probably noticed that there’s very little left over in this budget — less than you’d make in an hour, actually. But with 10% already going straight into your savings, that cushion is already built in.
Can You Live Comfortably On A $40,000 Salary?
For many people, it’s more than possible to live comfortably on a $40,000 salary. Make sure to carefully consider the budget, and always prioritize savings over additional expenses.
If you want to make sure your $40,000 salary is enough for you to live comfortably, there are three important things to consider:
Create an effective budget.
Save as you go.
Look to cut costs.
First, create an effective budget. We’ve gone into more detail on this point above, to help you construct a budget that works for you. With a salary of $40,000, you may have a little wiggle room. Even with housing and savings taken out, there’s still a good amount of money left.
Second, keep on saving. If $40,000 is a pay increase for you, then you might consider saving less necessary. Money won’t be stretched so tight, meaning there’s less reason for a cushion.
Don’t think like this! You’ll only regret it when you need those savings. Instead, start thinking about retirement funds, investments, and future upgrades. You’ll be grateful for those savings when they inevitably come in handy.
Finally, try to cut your day-to-day costs. With a $40,000 budget, there’s often less need for frugality when it comes to structuring a budget. But there’s always a reason to consider what we’re buying, and if we could be paying less.
Two other ways to help with living comfortably are:
Pay off debts.
Investigate a side hustle.
Interest payments on debts can quickly eat away a huge chunk of your budget. Paying off a debt that’s costing you a significant amount is a fantastic way to gain control of your finances. Try and work this into your budget.
Side hustles and passive wages are increasingly common, with many Americans working extra jobs to earn some spare cash. If you don’t think $40,000 is enough to support you or your family, then a side hustle could be a low effort way to improve your earnings.
How Does $40,000 Compare To The Average American Wage?
A May 2020 report from the National Occupational Employment and Wage Estimates by the BLS stated the average salary in the United States is $56,310. The average is found by adding a group of numbers, and dividing by the count of those numbers.
Meanwhile, the SSA calculated the median wage for 2019 as $34,248.45. Median is determined by the number that’s in the middle of the data.
With a lower median wage, we can assume that some numbers used to calculate the average are significantly higher than the wage earned by most Americans.
So, what does this mean for the $40,000 salary? For a start, it’s above the median wage, which means it’s more than most Americans. But as it’s significantly lower than the average wage, we can see that there’s plenty of room for growth.
These numbers are tricky to deal with, due to the range of wages covered (as well as various side hustles and investments that might change the data).
A clearer picture appears when we consider the poverty line.
In 2020, the poverty threshold in America was considered to be an annual income of $12,760 for a single person. So, an individual earning $40,000 a year would be well over the poverty threshold, and able to live fairly comfortably.
The threshold for a group of four, two adults and two children, was $26,200 in 2020. Again, this is significantly less than $40,000 after taxes. However, we can quickly see how that buffer has decreased. One person supporting a household of 4 on a salary of $40,000 may find some difficulties without a careful budget.
Overall, $40,000 is a solid salary for the average American.
What Jobs Pay $40,000 Per Year?
By now, you should have a good idea of how a $40,000 salary might work for your budget. But what kind of jobs typically pay around $40,000, and what kind of qualifications do you need?
Physical Therapist Assistant – Accredited Associate’s Degree, and Licensing.
Equipment Operator – High School Diploma.
Real Estate Appraiser – Bachelor’s Degree.
Various Science Technicians – Bachelor’s Degree.
Flight Attendant – High School Diploma.
There are plenty of other jobs that come with a salary of around $40,000, but this list should give you some idea of the range of careers available. Although some of them require qualifications and intense learning, others are entry level, or only need on the job training.
Many of these jobs also offer the opportunity to increase your salary, particularly jobs which require education past the high school diploma.
How Can I Supplement A $40,000 Wage?
Earning a passive or side income is a common choice among Americans nowadays, with many choosing to supplement their wage with additional work.
In some cases, these side projects will be time-consuming, and could potentially lead to a future career. But other side hustles are simple ways to earn extra cash.
When you select a side hustle, you need to find a job that plays to your strengths. It should also be easy to work within your average day to day.
A common side hustle is freelancing. If you are particularly knowledgeable in an area, this can be a great way to indulge a passion while earning money. For example, if you can put together an excellent budget, people may pay to hear about it.
Another popular option is to become a ride-share driver. Many find this is an easy way to supplement income, and works well with their daily activities.
Drop-shipping, or eCommerce, involves selling items from an online store. If you’re knowledgeable about trends, can use Amazon skillfully, or have an eye for web design, a drop-shipping business could quickly build into a significant wage. Many drop shippers are able to run the company with a relatively hands-off approach.
Other methods for side incomes include online surveys, writing transcriptions, or renting out your car or appliances.
Choosing the right side hustle can be hit-and-miss, but many find it’s an exceptional way to supplement an income.
Another option to consider is investing. With $40,000 a year, there may be room in your budget to consider investing in stocks. Done right, your money then starts to make money for you.
Final Thoughts
A yearly wage of $40,000 can be broken down into an hourly pay of $19.23. This is less than the American average, but more than the American median.
Individuals should find that $40,000 is enough to live comfortably, while even small families can support themselves on a $40,000 wage. There are a wide variety of jobs that offer a salary in the range of $40,000.
In most parts of America, $40,000 is a respectable salary. There should be enough money left over from basic living expenses to indulge in entertainment and personal items, while still having money to put into savings. With careful budgeting, $40,000 can stretch to very comfortable living.
With that said, in some cities, $40,000 won’t go nearly as far. For example, someone who earns $40,000 in Manhattan will struggle to afford even a one-bedroom apartment on their monthly wage.
If you don’t think $40,000 is enough to support you or your family, you can consider side hustles for another income. Otherwise, reconsider your budget, and look for areas where you can cut costs.
$40,000 is typically a good salary, and many people will find they can live comfortably, if not luxuriously.
Frequently Asked Questions
How Much Is $40,000 A Year Per Hour?
A salary of $40,000 a year is $19.23 per day, before tax.
How Much Is $40,000 A Year Per Day?
A salary of $40,000 a year is $153.84 per day, before tax.
How Much Is $40,000 A Year Per Week?
A salary of $40,000 a year is $769.20 per day, before tax.
How Much Is $40,000 A Year Biweekly?
A salary of $40,000 a year is $1538.40 per day, before tax.
How Much Is $40,000 A Year Per Month?
A salary of $40,000 a year is roughly $3,333.33 per month, before tax.
Why Is It Important To Know Your Hourly Rate?
An hourly rate helps you to better understand how well you’re being compensated for your time working. When you know the yearly salary, you might not see the point of understanding your hourly rate.
After all, it all adds up to the same thing. But by breaking the salary down like this, it’s easier to see how the wage relates to your day-to-day workload.
Also, breaking the salary down into an hourly rate can help us in the short term. Although a savings cushion is an important part of financial stability, it’s not something everyone has.
By understanding an hourly rate, you can better see how that compares to your daily spending habits
Hi, my name is Deborah White, and I love to save money where possible. I will be the first person to admit that I am frugal, but when you have three children and two low income salaries, saving money makes all the difference. This is why I decided to set up this site, to help others save money too.
