Whether you’re looking for a new job or are about to renegotiate your existing salary, it can often be tricky to know if you’re on the right path. Which is why you may be asking yourself: “Is $40,000 a good salary?”
And if you do manage to lock that in as a salary, it’s also good to know the other math relating to this – like the question of “$40,000 a year is how much an hour?” And what about after taxes??
Well, don’t worry! We’re here to answer all these questions and more – as well as to show you how you can figure out these same points no matter what your salary is.
(We’ll also cover why building your wealth depends much more on how you manage your money, not what you earn – at least not entirely. For the quickest and easiest way to do this, check out Personal Capital, a FREE app that helps you manage all of your finances in one place.)
$40,000 a year is how much an hour?
Earning $40,000 a year equals $19.23 an hour based on working full time at 40 hours per week.
This is because 40 hours per week for 52 weeks a year means you’re paid for 2,080 hours of work annually. This is also true if you take any vacation days, assuming you’re paid for those days.
You can then do the same math when working out your hourly rate for other annual salaries. You can see below for a few examples.
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$35,000 a year is how much an hour?
Your annual salary of $35,000 is equivalent to earning $16.83 per hour if you work 40 hours per week.
This is based on the same assumption as above, in that it assumes you’re paid for 2,080 hours of work each year.
$38,000 a year is how much an hour?
Your income of $38,000 a year is equal to $18.27 per hour.
As above, the math is the same: simply divide your annual salary by the number of hours you’ve worked in the same time period – in this case, 2,080.
$41,000 a year is how much an hour?
Earning $41,000 a year means your hourly rate is $19.71 when you work full time.
As you can see, that extra $1,000 compared to your $40,000 salary is almost equivalent to earning an extra $0.50 per hour. Which shows how much that can add up over time!
$50,000 a year is how much an hour?
Your yearly salary of $50,000 is equivalent to having an hourly rate of $24.04 based on a 40-hour work week.
This shows that being able to negotiate your hourly rate up by even a few dollars can make a huge difference in the end.
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$40,000 a year is how much biweekly?
If your salary is $40,000 a year, this is equivalent to earning $1,538.46 biweekly.
You can also check this is correct by looking at the hourly rate we just mentioned. That is, assuming you work 80 hours over a two-week period, your hourly rate of $19.23 when multiplied by 80 produces the same result – albeit rounded to one decimal place.
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How do you calculate your biweekly salary per year?
To calculate your biweekly salary per year, simply divide your annual salary by 26, which is the number of two-week periods in the year.
You can also use your hourly rate to calculate your two weeks salary by simply doing the math in reverse. That is, multiply your hourly rate by 80, assuming you work 40 hours every week. This should produce the same result as the previous calculation.
$40,000 a year is how much an hour after taxes?
Calculating your after-tax income is going to depend on things like where you live, where and how you earned your money and the tax laws that apply to your situation. For example, in New York, $40,000 a year is going to be equivalent to around $15.43 an hour after taxes.
The best way to work this out with at least an approximate idea of how much $40,000 is after taxes is to check a tax calculator for your state. For example, the one below shows that, in New York, your net salary (that is, how much you’ll receive after taxes), is $32,085.
(Just keep in mind that calculators like this are only approximate and that you should check with an accountant to be absolutely sure.)
If we divide $32,085 by 2,080, we get $15.43 as your hourly rate.
Is $40,000 a year a good salary in the US?
Earning $40,000 a year is significantly less than the average annual salary in the US of $52,104. That said, the question of whether $40,000 is good is going to depend on where you live.
For example, this study found several states where the median household income is less than $50,000 a year. Specifically:
- Alabama: $48,486
- Arkansas: $45,726
- Kentucky: $48,392
- Louisiana: $47,942
- Mississippi: $43,567
- New Mexico: $48,059
- West VirginiaL $44,921
In states like these, when considering if $40k is a good salary for a single person, the results are pretty good as with those earnings, you’re approaching the median household income levels.
At the other end of the scale, you have states like Maryland where the median household income is $81,868. There, it may be hard to get by on earning $40,000 a year.
Of course, your answer is going to be different if you’re not the only one contributing to your household’s income, meaning you’re much more likely to meet or even exceed these median income levels.
What’s the average salary in America?
According to the Bureau of Labor Statistics (BLS), the average weekly salary of full time workers in the US is $1,002. This is equivalent to an annual salary of $52,104.
The BLS’ report does show a lot of variation in these average earnings between different groups though. For example, women had median weekly earnings of $913, or 84%of the $1,087 median for men.
Race, ethnicity, occupational groups and education levels also had a significant impact on median earnings.
What is a good salary in America?
The question of what’s a good salary in America is going to vary a lot depending on where you live and how old you are, as it’s assumed that the younger you are, the less you’ll likely earn on average.
For example, the BLS’ report sets out the following as the median weekly earnings of different age groups:
- 16 to 19 years old: $506 (= $26,312 per year)
- 20 to 24 years old: $640 (= $33,280 per year)
- 25 to 34 years old: $917 (= $47,684 per year)
- 35 to 44 years old: $1,134 (= $58,968 per year)
- 45 to 54 years old: $1,144 (= $59,488 per year)
- 55 to 64 years old: $1,090 (= $56,680 per year)
- 65 years and older: $1,018 (= $52,936 per year)
This highlights how the question of whether $40,000 is good will largely depend on how old you are.
However, it also shows how much the answer to what is a good salary in America can also vary based on your age. That is, earning $50,000 a year as a 19 year old is going to mean that your salary is almost double the median level, but earning that same amount 20 years later could mean you’re struggling.
You can also easily assume how much location is going to impact the answer to the question of what is considered a high salary in the US – and it’s not even simply a matter of knowing the city. Asking if you can live in LA on $40,000 a year, for example, will give you different answers if you’re actually planning on living in Beverly Hills.
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How much should I save making $40,000 a year?
When making $40,000 a year, you should start by aiming to save at least 10% of this, equivalent to saving $4,000 annually. From there, you can continue to adjust your spending with the objective of saving even more in the years to come.
If you’re trying to figure out how much you should be saving, aiming for 10% is a great starting point for anyone to then work at increasing their saving rate. This is generally going to be easier the more you earn, as your expenses should be taking up less of your budget.
However, that’s not always the case. Have you heard of the concept of “keeping up with the Joneses”? It basically refers to the idea that the more you earn, the more you spend in order to maintain a certain image.
And it’s a complete budget killer. If you’ve ever heard of people on six-figure salaries (or higher!) declaring bankruptcy, it’s often because of this.
So this also means that it’s absolutely not impossible for you to save a portion of your income, whether you’re making $40,000 a year or some other salary, simply based on implementing some frugal strategies in your life.
This is also why we recommend that you use an app like Personal Capital to make sure you’re managing your money as effectively as possible. It’s completely free and lets you see your entire financial situation in one place, including where your money is coming in and out as well as personalized tips.
Can I buy a home on $40,000 a year?
Your monthly mortgage payment should not be more than 28% of your pre-tax monthly income. This means that, with an annual salary of $40,000, you should only spend up to $933 per month on your mortgage.
However, your salary isn’t the only question that lenders consider, with your debt-to-income ratio also being critical for them. This refers to how much of your income goes towards other debts, such as credit cards, car loans, child support or student loans.
(Having a good credit score is also going to help.)
In addition, the question of whether you can buy a home on $40,000 a year is going to depend on the cost of living where you want the home to be located. To use some of the above examples, it’s going to be almost impossible to buy a home in Beverly Hills on that salary. At the same time, this could be feasible in some of the states with lower costs of living.
All this means that the answer to this question is: it depends. The best way to work it out for your specific situation is to do some research into possible lenders to see how much your mortgage could be, how much you’re comfortable in borrowing and whether it’s enough to buy a home in your area.
How much rent can I afford on a $40,000 salary?
The standard advice is that your rent should be, at most, one-third of your gross salary. This means that you could afford to pay rent of up to $1,111.11 per month when earning $40,000 annually.
That said, I always prefer to have my rent as low as possible so that I can use this money for better things, like investing for my future. Based on this, I’d generally recommend that you aim to limit your rent to only 25% of your income. On a salary of $40,000 per year, this would equal monthly rent payments of $833.33.
Final thoughts on whether $40,000 a year is good
The question of whether $40,000 a year is a good salary is almost impossible to answer without some extra information.
Things like how old you are, where you live and what’s your field of work will all play a huge part in determining whether a salary is good or not.
Fortunately, when calculating the answer to questions like “$40,000 a year is how much an hour?”, it’s far easier to work this out. With some very simple math, you can see just how much your salary is per hour, per day, weekly or biweekly – no matter where you live or what you do.
Ultimately, while your salary is obviously important for helping you to meet your financial goals, what you do with this money is actually going to play a bigger role. Plenty of people have shown us that earning a large salary absolutely doesn’t mean that your financial future is secure.
Instead, by making solid financial decisions now, even if you’re earning $40,000 a year, you’re setting yourself up for a strong future financially. Things like reducing your expenses, not taking on high-interest debt, growing your emergency fund and starting to invest for retirement are some of the best things you can do for growing your wealth now, no matter what your salary is.
About the author
Anna is the founder of LogicalDollar and a personal finance expert, having been featured on Forbes, HuffPost, Reader’s Digest, MSN Money, Yahoo! Finance, CreditCards.com and many more. She’s committed to helping others get on the path to financial freedom using the experience gained from turning $60,000 in debt into a six-figure investment portfolio. Find out more.