Is $40,000 A Good Salary? And Can You Live Off It Today?

By Todd Kunsman

Make Money

Published on

Updated on

Whether you are just starting your career or on the job hunt currently, it’s common to directly focus on the salary tied to the position.

After all, depending on your cost of living, if you have any debt, and your retirement planning — your salary matters a lot to your livelihood. 

One common salary offer might be $40k per year. And a question you might ask yourself, is $40,000 a good salary?

When I was first making that much money a year, it was the most I ever made in my life up until then. I was certainly pumped! But quickly based on where I lived, my debt, and bills — $40,000 per year didn’t get me as far as I hoped. 

Now that doesn’t mean it won’t be a good salary for you as it depends on various personal finance factors. So if you are looking to make $40k per year or were just offered that much, I dove in to help you see if this is a good salary today. 

How Much Is $40,000 A Year (Hourly, Weekly, Monthly)?

Before accepting a job that offers $40,000 a year, it’s essential to understand how your wage will breakdown. For most people, you’ll be paid weekly, bi-weekly, or even monthly. 

But the easiest way to see how far your $40k wage can go is to break this annual salary down to help you plan your finances better. 

Gross income of $40k per year equals:

  • Hourly: About $19+ per hour.
  • Weekly: About $769+ per week
  • Bi-weekly: $1,538+ every two weeks.
  • Monthly: About $3,333+ per month.

Remember, these above numbers are your gross income which means before things like taxes, insurances, or retirement are taken out of your paycheck.

Additionally, if your salary is set at $40k per year, but some weeks you work less than 40 hours, your hourly rate would show an increase. Say you worked 38 hours a week, your hourly rate becomes $20+ per hour. 

Pay ScheduleIncome Amount
Weekly$769 per week
Bi-Weekly$1,538 bi-weekly
Monthly$3,333 per month

Is $40k a year middle class?

A $40,000 a year salary can put you in the middle class in America. However, depending on where you live, your expenses, average spending, and how much debt you have accrued — a $40k salary can also put you in the lower-end of the middle class in today’s world. 

Defining the middle-class today can also be a bit confusing, as there are tons of data factors out there.

For example, your salary can be just one aspect as you may have saved quite a bit of money, own appreciating assets, or have built a nice retirement nest egg too. 

Middle Class Data

According to Pew Research:

“A household in a metropolitan area with a higher-than-average cost of living or one with four or more people needs more than $48,500 to be included in the middle-income tier. Households in less expensive areas or with less than three people need less than $48,500 to be considered middle income.”

And in this U.S. News article, their numbers break down a bit differently.

In the article, Stephen Rose — a nonresident fellow at the Urban Institute and research professor at George Washington University — breaks down income levels based on a family of three in the image below.

Middle Classe Income Levels Today

Don’t get discouraged by the averages in the research, $40,000 per year can potentially be a great income for you. Let’s keep diving into the data further. 

Can You Live Off $40k A Year?

With a $40k a year salary, you will be able to live off that amount. However, if you are a single-family income or live alone, you may feel that you are financially struggling a bit. But other factors of how comfortable you live on this salary include your location of where you reside, current expenses, and how you spend your money. 

So as you begin exploring more if $40,000 is a good salary, you’ll want to calculate and understand if you can afford to live on this amount.

And as you may know, one of your biggest expenses will be where you live, meaning your current monthly rent or mortgage payment. 

How much rent can I afford on a $40,000 salary?

If you make a $40k yearly salary, you can realistically afford about $1,111 in rent per month. This number follows the general rule that your gross income per month must be equal to or be 3x higher than the cost of your rent. 

Remember, $40k a year equals about $3,333.33 per month. And when you divide that by the standard 3 for example, you’ll get $1,111.11 for rent. 

Personally, I’m more conservative and I think plenty of people in the personal finance space are too.

If you are making $40k per year, I’d look at keeping your monthly income 4x the amount of your monthly rent. This would change the rent you can afford to around $833.33 per month. 

This will help you not overextend yourself on rent, allow you to tackle any debt you have a bit more aggressively, or give you more cushion to save or invest still. 

How much mortgage can I afford on a $40,000 salary?

If you make a $40k yearly salary, the maximum amount of house you could afford would be somewhere between $100k and $125k. This is only a rough estimate as the amount can change based on your interest rate, amount of your down payment, property taxes, and location. 

There are tons of mortgage calculators that you can mess around with that can give you some pretty good estimations. I used this calculator from SmartAsset to get an estimate. 

Now if you already have a home and mortgage payment, you want to ensure the maximum of your spending is 25%-28% of your monthly gross income. 

While some financial experts will say you can go to 30%, a vast majority stick to the 28% number for mortgage payments. Similarly, I’m also conservative and think you should aim to go a bit lower if possible. But generally, 28% is a safe and affordable number to go by. 

So with your $40k yearly salary and 28% for a mortgage payment, that means you can afford $933.33 each month. If you stretched it to 30%, you can basically afford $1,000 per month on a mortgage payment. 

So Is $40,000 A Good Salary?

While a $40,000 a year salary might categorize you in the lower-middle class and below the median individual income in America, it’s still plenty of money for you to survive on. However, there are tons of factors that determine if you will struggle with $40k or live more comfortably than you expected. 

How you manage your money and if you live within or below your means, will help ensure your $40k yearly salary doesn’t leave you struggling. Even if you have superb money management and are living frugal, it still doesn’t mean this salary will be good.

Many areas of the United States have a very high cost of living, where a $40,000 salary just won’t get you very far at all, unfortunately.

There are a few things you can do if you are in a high cost of living:

  • Look for a career in a more affordable area
  • Find a higher paying job to cover costs
  • Work remote for a better-paying company (if your career field allows you to be a remote employee)
  • Start a side hustle or find under the table jobs on the side
  • Work on your skills to be able to boost your salary

Many of the above options might not be ideal nor will it be easy, but it’s some of the best options to consider if a $40k salary won’t get you very far. 

Is $40,000 a good salary out of college?

For the majority of recent college grads, a $40,000 a year salary is a solid start and will be a healthy salary to get started making some financial choices. However, the average starting salary of recent college graduates does hover around $51,000 per year.

Personally, I think a $40,000 salary out of college is great. Of course, the field of study and where someone gets a job can nab someone a salary much higher to start. 

But most likely, $40,000 per year is the most money many in their early 20s will have seen up to that point. It’s also a great start for college grads to begin saving, thinking about getting an apartment, and puts them more in the financial driver’s seat. 

Best U.S. Cities To Live Well On $40k A Year

As you recall from earlier in this article, one of the things I mentioned was that where you live plays a major role in deciding if $40,000 is a good salary. 

AARP has done a few studies over the years about the best American cities where you can live quite comfortably on $40k a year or less. And besides housing costs, they also accounted for the weather, safety of neighborhoods, parks, and more. 

10 best cities to consider with $40,000 a year salary:

  • San Marcos, Texas
  • Alton, Illinois
  • Canandaigua, New York
  • Duluth, Georgia
  • McMinnville, Oregon
  • Munhall, Pennsylvania
  • Gulfport, Florida
  • Guthrie, Oklahoma
  • Coralville, Iowa
  • Coeur d’Alene, Idaho

Worst U.S. Cities Where A $40K Salary Is Not Enough

As you have seen up to this point, $40,000 per year salary can let you live comfortably if you manage your spending, have a budget, and keep your cost of living healthy. 

And as you saw, there are some great cities and states where $40,000 can go pretty far. That being said, there are also many expensive cities where that salary won’t get you much nor could you afford to live there without struggling. 

10 cities to avoid with $40,000 a year salary:

  • New York, 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 $40,000 Salary

So how can you make the most of your $40,000 salary?

If you aren’t able to make more currently or that’s the highest offer right now you will get, don’t panic! We all want to make more money, but you can certainly maximize the potential of this amount. 

People with much higher salaries can be in far worse financial shape if they have been living above their means and not properly managing their money. So you can certainly have a leg up on others who may even be making six-figures

Follow these simple personal finance tips to help you keep more of the money you make and start making the most of your $40k a year salary. 

1. Budget

Since $40,000 a year might be in the lower-middle class, you’ll need to focus some energy on creating a budget. Your salary can quickly disappear if you aren’t careful about your spending and expenses.

So the best way to stay on track is to get organized with a budget calendar and create a financial plan for your money. 

Your goals should be to keep your expenses as low as possible, cut unnecessary spending, and see how to save as much money as possible. It doesn’t mean you need to become a cheap person, but you do want to live more intentionally and frugally as needed. 

2. Remove Debt

Debt is always a killer when it comes to your income and accumulating wealth, which is no different when you have a $40,000 salary. 

The quicker you can pay off your debt, the more your salary can go to work for you. So along with your budget, figure out a debt-payoff plan that works best for you. It might take you time, but put as much effort into removing debt as you can. 

Additionally, you want to continue to stay out of debt. Credit card debt is a biggie, especially with how high-interest rates can be and can snowball out of control. If spending money is a vice of yours, you can try the 30-day rule to control impulse spending. 

3. Live within your means

Living within your means is the simplest concept to managing money, yet so many people still struggle with this. You have to learn to be comfortable and grateful for what you have and content with your needs. 

Often, your wants can take control, and you feel the need to keep up with what everyone has currently. It’s a great way to go broke or end up in way more debt. 

You can always treat yourself from time to time but beware of the instant gratification dangers and how it can affect your finances. Stick with the budget and plan you create, don’t worry about others that are not you or your own family. 

4. Invest what you can

I know $40,000 can disappear quickly after taxes and all your expenses, but you need to be investing what you can as well.

Every little bit helps and thanks to micro-investing apps, you can start investing with as low as $5 or spare change. 

Two investing apps to consider:

Start paying yourself first, that is save money and invest before taking on your bills or debt. That doesn’t mean you shouldn’t pay your responsibilities, but instead give yourself the financial boost first. 

This helps you get in good money habits and you won’t be tempted to spend because you already saved or invested the money.

Let’s say you could only contribute $150 per month for the next 35 years. That would mean each year you are contributing $1,800. If you earn an average interest rate of 8%, compounded over time you would end up with over $590,000+ towards retirement!

Hopefully, you’ll end up investing more overtime or even get a company match in a 401k, which can elevate you further. 

Final Thoughts

Is a $40,000 a good salary? Although it might be a bit less than the median income in America, you can survive well on this amount.

And how far that income goes generally depends on your location and how well you pay attention to your finances.

But if you can find a low cost of living, avoid debt and keep expenses low, you can make $40k a year go pretty far and even save and invest.