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Knowing how much is $40,000 a year per hour can be an important fact to know in many regards. If you are considering relocating to a different part of the country, you’ll want to know if you can afford the same lifestyle on $40,000. While you may be able to live comfortably in a rural area, $40,000 may not be enough in an urban area.
Additionally, it’s often hard to determine if you can afford necessities like rent, utilities, and food based on a yearly amount of $40,000. So I am going to break down how much $40,000 is in several different units so you can see if it’s enough money for you to live on.
How Much is $40,000 an Hour
Wondering 40k a year is how much an hour? You’ll need to know about job classifications to answer that. There are two type of job classifications when it comes to employment and pay which are exempt positions and non-exempt positions. Employees who are classified as an exempt employee are salary-based positions and must be paid a salary and are not allowed to collect overtime pay. This means an exempt employee may work more than 40 hours a week, but the pay will always be the same for that employee.
Employees who are classified as non-exempt on the other hand, are paid for the actual hours they work. If they work more than 40 hours a week, then they are paid for those hours at a premium rate according to the Fair Labor Standards Act.
A lot of people are classified in the US as non-exempt and work hourly jobs in the United States. There are 2,080 work hours in a year. Assuming you work full time throughout the whole year, you would work a total of 2,080 hours. Therefore, $40,000 per hour is $19.23 an hour based off of working 40 hours a week for a total of 2,080 annual hours. This is the standard hourly rate and would not include additional incentives such as premiums for holiday pay, hazard pay, or time and a half pay.
How Much is $40,000 a Year per Paycheck
While the future of money is evolving, you still need to know if your paychecks will cover your expenses. If you are trying to determine if you can afford to relocate to a new area, you will have to create a monthly budget based on your pay. The problem is that some employers use different types of pay schedules and have different pay dates. You may receive a monthly paycheck from one employer and others may pay biweekly. Some companies and employers will choose to pay their employees weekly, biweekly, bimonthly, or monthly. Those are pretty much the standard options for your paycheck that your employer could use to pay your compensation.
This sometimes can be hard to figure out how much you are earning though per month especially if you are trying to start a personal budget method. Don’t worry. By knowing how much is $40,000 a year per hour you can calculate your paychecks no matter how the pay dates fall.
Below I have detailed out how much is $40,000 a year per paycheck:
- $769.23 per weekly paychecks ($19.23 x 8 hours x 5 days)
- $1,538.46 biweekly paychecks ($19.23 x 40 hours x 2 weeks)
- $1,666.66 bimonthly paychecks (Annual / 24)
- $3,333.33 monthly paychecks (Annual / 12 months)
You may be wondering what the difference is between bimonthly and biweekly?
- Well, biweekly actually amounts to a total of 26 paychecks a year because you are receiving a paycheck every 14 days. This means that there are two months out of the year where you will have three paychecks instead of two.
- Bimonthly paychecks on the other hand is being paid twice a month for example on the 14th and 28th of each month. Therefore, you will only have 24 pay dates. Bimonthly paychecks will be higher than biweekly paychecks because you will have a less number of pay dates in a year with bimonthly.
Is $40,000 a Good Salary in the US?
A $40,000 salary is an above average salary for an individual. According to the US Census Bureau, the annual median personal income was $35,977 for 2019. Based on this information, if you are an individual you can live on $40,000 without making a lot of sacrifices. You should be able to live in a lot of parts of the country.
On the other hand If you have a family, $40,000 would be difficult to live on. You will have to follow ways to improve your budgeting skills to succeed. Consider if you have a family structure of three or more individuals and only one salary, you have to make your salary cover more. If your only salary is $40,000, it will be difficult to support three people. Supporting a family on a household income of $40,000 will encompass living a frugal lifestyle and really utilizing a budget. There are a lot of personal budget models that will help you achieve your living goals if your are destined to relocate.
Is 40k a Year Middle Class?
Determining how much is $40,000 per year per hour can help determine your class status. There are US federal poverty guidelines that are used to determine things such as benefits, public assistance programs, and also certain federal subsidies for households. The US Federal Poverty Income Guidelines for 2021 detail the income threshold for the 48 contiguous states based on number of people in a household. For a family of four, the US federal poverty level is an income of $26,500 or lower. For an individual, the US federal poverty level is an income of $12,880. Based on the US federal poverty income levels, 40k is considered to be middle class in the United States even for a family of four.
Any family below a family of seven, $40k a year would be considered middle class. For a family of seven, 40k a year would not be considered middle class as the US federal poverty income is $40,120.
|Persons in Family or Household||Federal Poverty Income Guideline|
Can You Live on 40k a Year?
The number of people in your family or household will determine how you can live off of 40k a year. If your family consists of you and your spouse, 40k a year is more than double the federal poverty income level and you should be able to live a middle class lifestyle on 40k a year. Become familiar with bank direct deposit times as well so you can be sure to avoid overdraft fees at banks.
How to Live on a $40,000 Yearly Budget
The key to living on a $40,000 yearly budget is planning. To live on a $40,000 yearly budget successfully, you will need to chart your expenses and income each month. Monthly reconciliation at the end of the month is also essential. If you don’t plan out your expenses carefully, you could find yourself completely out of income. Below are some steps how to live on a 40k yearly budget.
Set up a Budget
Obviously the most important step is to create your own monthly budget and stick to it. If you are relocating for a job or for other reasons and you don’t know if a $40,000 yearly budget will be enough to live on, that’s ok. To determine if a 40k budget would be enough for your new location, simply use estimates for your monthly expenses. This will give you a good idea what kind of lifestyle you might have in your new location.
By using your $40,000 biweekly or bimonthly amounts, you will know how much income you will have to work with each month. Be sure to make the appropriate tax adjustments for federal and state taxes so you have an net amount each month. Below are some common things to budget for to live on a 40k yearly budget.
- Housing (either rent or mortgage)
- Car Payments
- Student Loans
- Insurance (house, renter’s, or vehicle)
Be sure to take a look at the current expenses you have in your life right now. Maybe some of those expenses can be eliminated especially if you are relocating. You may be paying for things currently that you won’t have to pay for in the future.
You can use tools such as a personal finance flowchart to help you determine what expenses will be necessary going forward and which ones you can eliminate or reduce. Reducing unnecessary expenses is one of the fastest ways to increase your income. Housing is one of the biggest monthly expenses and by reducing your housing expenses, you can significantly boost your income.
If you have debt and are scraping by at the end of the month, consider eliminating or reducing it. Living on a 40k a year budget can be hard. Having debt doesn’t make things easier for you. If you budget by paycheck, you can payoff your debt. Try to get out of debt by negotiating with credit card companies and refinancing high interest personal loans. If you have auto loans with high interest rates, you can also look into refinancing those as well.
Another option to reduce debt is to make additional monthly payments and lower your overall balance and interest that is charged. You can use the available money from reducing your monthly expenses.
Some months, you may find your expenses lower and therefore finishing the month with a surplus. You can also put your monthly surplus towards paying down your debt.
Can You Afford Rent Earning 40k a Year?
If you are earning 40k a year as a salary, you will be able to rent in certain parts of the country. To determine how much rent you can afford you will have to calculate how much income you have available as a maximum that you can dedicate to rent. Calculate your amount available for affordable rent by dividing 40k a year salary into monthly amounts which equals $3,333 a month as available income before taxes. This is your maximum monthly income to cover all of your expenses.
Most Landlords and property management companies will require a credit report and a rental application to determine if you are able to rent from them. Having a stellar credit report is important for your application. If you need credit repair, you can repair your credit yourself and you should do that before submitting rental applications. Property management companies and Landlords will only allow a maximum of 33% to 50% of your monthly income to go towards rent.
I have listed below how much rent you can afford on a 40k year salary based on the above scenarios.
- At 33% max of monthly income, you could afford a rent payment of $1,111 based on 40k a year.
- At 50% of monthly income, you could afford a rent payment of $1,667 based on 40k a year.
You can find a lot of places in the country that will have rents under these amounts. However, if you are relocating to an urban area like New York, Washington DC, Atlanta, or Los Angeles, you may have to consider other options. Some of those would include moving further out and having a longer commute.
Can You Afford a House on 40k a Year?
You know that $40,000 a year is $19.23 an hour based on 40 hour work weeks. While this is not a lot of money, owning a home is not out of the question. The maximum amount of monthly income available to go towards a mortgage would be 30% to 40%. Loan underwriters don’t allow much over 40% debt-to-income per month. You can afford a house on 40k a year because of low mortgage rates. For example the payment for a 30 year $200,000 mortgage loan at 3% is $843 per month.
Remember additional tax benefits of home ownership are mortgage interest for itemized deductions. See is a federal tax refund deductible if wondering about refund status and deductions).
There are a lot of places where you can buy a house for $200,000 or less.
What to do if you can’t afford a house on 40k a year?
Everybody has different financial comfort levels when it comes to living expenses and mortgages. If you are not comfortable with a third of your monthly income going to housing, there are other options. If you can’t afford a house on 40k a year look into affordable housing options for cheap living such as renting a guest house, house sitting, getting a roommate, and living with family or relatives. You could also purchase a multiunit property such as a duplex and help offset your housing costs with rental income.
Best Cities Where You Can Afford to Buy a Home Earning Under 40k a Year
There are a lot of affordable places where you can afford to buy a home in the US earning $40,000 or less. While you may be discouraged considering the national median home price is $313,000 currently, there are other affordable areas in the country. The big factors that will affect affordability for the house you buy will be interest rates, location, how much saved towards your house down payment, and the square footage of the house.
Below are some of the best cities where you can buy a home earning under 40k a year:
- Pittsburgh, PA
- Oklahoma City, OK
- Cleveland, OH
- Louisville, KY
- Indianapolis, IN
- Memphis, TN
- Cincinnati, OH
- St Louis, MO
- Birmingham, AL
- Buffalo, NY
- Detroit, MI
- Kansas City, MO
Remember the key to affording a home earning under 40k has a lot to do with interest rates and you down payment. The steps to obtaining a mortgage take those issues into account. Low interest rates and higher down payment amounts will help to make your home payment affordable.
There is a lot to be said about making $40,000 per year. Knowing how much is $40,000 a year per hour can help determine a lot of lifestyle expenses. As you can see $40,000 works out to $19.23 an hour which is just shy of two rolls of quarters. Additionally, your take home pay of $40,000 will vary based on taxes, and your pay date.
If you are single or have a small family, $40,000 is considered a good livable salary. A salary of $40,000 is considered middle class wages and you would be able to afford a house in certain parts of the country. If you are considering relocating to other parts of the country for a job, using a budget would be highly recommended.