It’s not uncommon to focus solely on the salary of a position, whether you’re just starting out in your career or are currently on the hunt for a job.
Your salary is important to your life, especially if your costs of living are high, you have debts, or you plan on retiring soon.
A common salary might be offered at $40k per annum. You might ask, “Is $40,000 a decent salary?”
It was the first time I had ever earned that much in a year. I was pumped up! However, based on my location, debt and bills, $40,000 per annum didn’t go as far as I had hoped.
It doesn’t necessarily mean that it will not be a good wage for you, as it all depends on your personal finances. If you’re looking to earn $40k per annum or have been offered this amount, I can help you determine if it is a fair salary.
Table of Contents
How much is $40,000 per year (hourly, weekly, monthly)?
Can you live off $40k a year?
So Is $40,000 A Good Salary?
The Best Cities in the U.S. to Live Well on $40k a Year
The worst cities in the United States where a salary of $40k is not enough
How to Make the Most of a Salary of $40,000
Final Thoughts
How much is $40,000 per year (hourly, weekly, monthly)?
It’s important to know how you will be paid before accepting a $40,000-a-year job. Most people will be paid either weekly, biweekly or monthly.
To help you better plan your finances, it is best to break down your annual salary to $40k.
A gross income of 40k dollars per year is equal to:
Hourly: Around $19+ an hour
Weekly: Around $769+ per Week
Weekly: $1,538 plus every two weeks.
Monthly: Around $3,333+ each month
Remember that these numbers represent your gross income, which is your total earnings before taxes, retirement, insurances or other deductions.
If you earn $40k per annum, but work less than 40hrs some weeks, your hourly rate will increase. If you worked 38 hour a week your hourly rate would be $20 or more per hour.
Calculate your Pay Schedule Income
Hourly $19/hour plus
Weekly $769
Bi-Weekly$1,538 bi-weekly
Monthly$3,333 per month
Is a $40k income a middle-class salary?
In America, a salary of $40,000 can place you in the middle-class. A $40k salary, however, can put you at the lower end of the middle-class in the modern world, depending on your location, expenses, spending average, and debt.
There are many data factors that can make it difficult to define the middle class today.
You may not only be concerned with your salary, but also have a lot of savings, or own assets that are increasing in value, or built up a nest egg for retirement.
Middle Class Data
Pew Research Center:
“A household with more than four people or in an area where the cost of living is higher than average must earn more that $48,500 in order to qualify for middle income.” For households in cheaper areas or those with fewer than three members, the threshold is $48,500.
In this U.S. News piece, the numbers are broken down slightly differently.
Stephen Rose, a research professor at George Washington University and a nonresident fellow of the Urban Institute, breaks down the income levels for a three-person family in the article.
Middle Classe Income Levels Today
Don’t be discouraged by research averages. $40,000 can be a good income for you. Let’s continue to explore the data.
Can you live off $40k a year?
You can live comfortably on a salary of $40k per year. If you have a single family income or live by yourself, you might feel like you’re struggling financially. Other factors that will determine how comfortable you are with this salary include where you live, your current expenses and how you use your money.
As you explore if $40,000 a salary is a decent one, you will want to know if this amount allows you to live comfortably.
Rent or mortgage payments are one of the biggest monthly expenses, as you probably know.
What is the maximum rent I can afford with a salary of $40,000?
Rent is realistically affordable for someone earning $40k per year. This number is based on the rule that your monthly gross income must be at least 3x greater than your rent.
Remember that $40k per year is about $3,333.33 a month. Divide that amount by 3 to get, for example, $1,111.11 in rent.
Personal finance is a field where I am more conservative than most.
You can afford to pay around $833.33 per month if you earn $40k per annum. Rent would be around $833.33 a month.
You can save more money or invest more if you don’t overextend your budget.
What mortgage amount can I afford with a salary of $40,000?
The maximum house price you can afford is between $100k to $125k, if you earn $40k per year. The amount is an estimate and can vary depending on the interest rate, down payment amount, location, property taxes, etc.
You can play around with a lot of mortgage calculators to get some good estimates. This calculator from SmartAsset gave me an estimate.
If you have already paid for your home and your mortgage, your maximum monthly spending should be between 25-28% of the gross income.
Some financial experts say that you can pay up to 30% for your mortgage, but the vast majority of people stick with 28%. Similarly, i’m also conservative. I think that you should go lower if at all possible. In general, 28% seems to be a good and safe number.
With a salary of $40k and a 28% mortgage payment, you can afford to pay $933.33 per month. If you increased it to 30% you could afford a mortgage of $1,000 per month.
So Is $40,000 A Good Salary?
A salary of $40,000 per year may place you in the lower middle class, and your income is below the median in America. However, you can still survive with that amount. There are many factors that will determine whether you struggle to live on $40k, or if you can afford it.
You will not be in a bind if you are able to manage your finances and live within your means. This salary is not guaranteed to be high, even if you are a master of money management and live frugally.
In many areas of the United States, a salary of $40,000 won’t take you very far.
You can take a few steps to reduce your cost of living if you live in an area with a high price.
Find a job in an affordable area
You can cover your costs by finding a job that pays more.
If your field of work allows it, you can be a remote worker.
Find a side job or start a side hustle
Improve your skills in order to increase your salary
The above options are not easy or ideal, but they’re some of the most viable options if you’re looking to make a career change.
Is a salary of $40,000 after college a decent one?
A salary of $40,000 per year is a good starting salary for most recent college graduates. It will allow them to make some important financial decisions. The average salary for recent college graduates is $51,000 a year.
Personaly, I find a salary of $40,000 after college to be great. The field of study or the location where someone is hired can lead to a higher salary.
Most likely, the $40,000 per annum that many young adults in their 20s have earned is what they’ve seen to date. This is a good way to start saving for college graduates, think about buying an apartment and put them in a better financial position.
The Best Cities in the U.S. to Live Well on $40k a Year
You may remember that I said earlier that the location of your home plays a big role in determining if $40,000 is an acceptable salary.
AARP has conducted several studies on the best American cities to live in comfortably with $40k a yearly income or less. They also considered the weather, neighborhood safety, parks and other factors.
The 10 best cities for a $40,000 salary per year:
San Marcos, Texas
Alton, Illinois
Canandaigua (New York)
Duluth, Georgia
McMinnville is located in Oregon.
Munhall Pennsylvania
Gulfport, Florida
Guthrie, Oklahoma
Coralville, Iowa
Coeur d’Alene, Idaho
The worst cities in the United States where a salary of $40K is not enough
You can live comfortably on a $40,000 salary if you keep track of your expenses, stick to a budget and maintain a healthy cost of living.
As you can see, $40,000 is a lot of money in some states and cities. There are many cities that are expensive where a salary of $40,000 won’t buy you much and you can’t afford to live in those places.
Ten cities you should avoid if you earn $40,000 per year:
New York
San Francisco, California
Honolulu, Hawaii
Boston, Massachusetts
Washington, D.C.
Oakland, California
San Jose, California
San Diego, California
Los Angeles, California
Miami, Florida
How to Make the Most of a Salary of $40,000
How can you maximize your salary of $40,000?
Don’t panic if you can’t make more money right now or if that’s all you’ll get. You can still make the most of your current offer, even if you don’t have more money.
Even people with higher salaries may be in worse financial shape than you if they are living beyond their means and have not managed their money properly. You can have an advantage over others, even if they are making six figures.
These simple personal finance tips will help you to keep more money and make the most out of your 40k salary.
- Budget
You’ll want to create a budget if you earn $40,000 per year. If you’re not careful with your expenses and spending, your salary could disappear quickly.
The best way to keep your finances on track is by creating a financial plan and a budget.
You should aim to reduce your spending as much as you can, eliminate unnecessary expenses, and find ways to save money. You don’t have to be a cheap person to save money. But you should live more frugally and intentionally.
- Get rid of Debt
When it comes to income and wealth accumulation, debt is always a killer. This is not different when you earn $40,000 per year.
The faster you pay off your debts, the more you will be able to put your salary to work. Along with your budget plan, determine the debt-payoff strategy that is best for you. You may need to put in some effort, but you should do your best.
You also want to remain debt-free. Credit card debt can quickly snowball, especially when you consider the high interest rates. You can control your impulse spending by using the 30-day rule if spending money is an issue for you.
- Living within your means
It is easy to manage money by living within your means, but many people struggle with it. You must learn to be grateful and comfortable with what you already have.
You may feel the urge to keep up with everyone else. This is a sure-fire way to end up broke or in a lot more debt.
Treat yourself occasionally, but you should be aware of the dangers that instant gratification can pose to your finances. Don’t worry about other people, just stick to the plan and budget you created.
- Invest as much as you can
I understand that $40,000 is quickly gone after all the taxes and expenses. But you should also invest what you can.
Micro-investing apps allow you to start investing as little as $5, or even spare change.
Two apps for investing to consider
Stash
Acorns
Save money and invest it before you take on debt or bills. This doesn’t mean that you should ignore your obligations, but rather give yourself a financial boost before taking on debt or bills.
You will develop good habits in terms of money management and won’t feel tempted to overspend because you have already invested or saved the money.
Say you can only pay $150 a month for 35 years. This would mean you contribute $1,800 per year. If you earned an average rate of interest of 8% over the course of time, you would have over $590,000.
You may even be able to get a 401k match from your employer, which will help you rise further.
Final Thoughts
Is $40,000 a decent salary? This amount is enough to live on, even though it’s a little less than the average income in America.
How far your income can go depends on where you live and how closely you manage your finances.
If you find a low-cost of living, keep your expenses low and avoid debt, you can save and invest $40k per year.
