Is $40,000 a Good Salary?

Last Updated: November 06, 2021 14 min read
Author: Zach L.

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Whenever I talk to my friends that are looking for a job one of the first questions I ask is if the new job is offering a competitive salary. The amount of money you get from working hard for someone else is an extremely important factor of a job because everyone should be compensated fairly for the work they provide.

Is $40,000 a Good Salary?

Every job is different, and every employer is different, but the real question at hand is if earning 40k a year is good. Now if you are 30 years into your career, or just starting the answer is different. I was curious myself, so I started to dig into it a little deeper.

According to, the median weekly income in the US is $983. If we do some quick math and divide that by an average 40-hour workweek we get $983 / 40 = $24.60 an hour. That equates to a median salary of approximately $51,000 a year.

That means that a $40,000 a year salary is about 20% less than the median salary in the US.

Now, is $40,000 a good salary? It depends where you live and what your expenses are like. If you live in New York and have 10 kids, that might be pushing it. If you live in Tennessee (no state income tax) with your parents, that’s a different story entirely. Ultimately, it depends on your circumstance.

There’s a quote I like a lot that states, it’s called personal finance for a reason. It’s personal. It’s different for every person, and what makes sense for someone doesn’t make sense for someone else.

$40,000 a Year is How Much a month?

If you are getting paid monthly then you will have 12 pay periods in a fiscal year. That means that to calculate how much 40k a year is per month you will need to divide 40k by 12.

$40,000 / 12 = $3,333.33

That means that every month before taxes you will be bringing in $3,333. That’s a decent chunk of change. After taxes that amount could be between $2,583.33 - $2,833.33. Depending on your circumstances that could leave you with a lot of money to invest with, and continue to progress towards financial freedom!

Is $40,000 a Year Good Money?

Ultimately, that is up to you. If you live alone or you live in a low cost of living area then your dollars will stretch further. Based on the research done above, $40k a year is right around average in the United States. Now if that is good money for you, then you shouldn’t worry about what others say.

Can I Live Comfortably Making 40k a Year?

Yes! I know people making much less that are living a comfortable life. One key factor is controlling your lifestyle. You probably won’t be taking extravagant trips every month, but you can live a good life and be able to enjoy yourself.

You can also take advantage of credit card rewards to travel for next to free. When Chelsea and I were just out of college we were able to take a 10 day all-inclusive trip to Costa Rica for only the price of airline and credit card signup fees. We also paid for some excursions while we were there, but that was optional.

You can also thrift your furniture, and clothes. That will help your dollars last longer, and for you to be able to put more and more of your dollars to work through investing!

Is $40,000 a Good Salary? 1

Monthly Budget for $40,000 Salary

Just in case you are worried about what your budget would look like, I figured I could give you a good example.

The important thing to note for this sample budget is that it is based on the high end of the monthly take-home range at $2,833. It also assumes that you are a single adult. If you are a single child making this much, I applaud you! If these numbers don’t work for you, feel free to change them up and let me know what you did!

  • Savings / Investments - $566 (20% of total income)
  • Mortgage / Rent - $944 (33% of total income)
  • Utilities - $200
  • Insurance - $100
  • Internet - $50
  • Cellphone - $20
  • Groceries / Eating Out - $200
  • Entertainment / Fun - $200
  • Personal / Misc - $200
  • Total - $2,580

With a fairly easy to live with budget above, there was an excess of $2,833 - $2,580 = $253. That means that you could afford even more luxuries in life, or could be investing even more money each and every month putting those dollars to work! The example above was for a single person, but 40k a year works for a family as well. It may be more difficult the more people in your family, but it is entirely possible.

Is $40,000 a year a Good Salary in the US?

Yes. if you are making $40,000 a year you are making within 20% of the average salary in the US. If you are living in a low cost of living area you will be able to stretch your dollars even further. You probably won’t be buying a yacht, but the person making $100,000 a year won’t be either.

The most important factor with any salary is to budget, invest and spend within your means. If you avoid bad debt, your dollars will stretch even further and be able to be put to work.

What’s the Average Salary in America?

The average salary in the US is $51,000 a year. That data is provided by and is extrapolated across an entire year to then provide an average of $51k.

More importantly, is what you are doing with your money. If you make the average salary in the US that’s great and all but what are your dollars doing while you are sleeping? Are they hard at work, or are they stuffed under the mattress with your box full of keepsakes and bets with your wife?

What is a Good Salary in America?

A good salary in America is $51,000. That’s the average, and average according to Merriam-Webster means, “a level (as of intelligence) typical of a group, class, or series”. Which means that an average salary is typical or good.

If you are asking what a great salary is, that is a completely different answer. I would say a great salary puts you in a position to invest or save 50% of your income without you having to penny pinch, only eat ramen noodles, or avoid enjoying your life.

How Much Should I Save Making $40,000 a Year?

You should save as much as you possibly can. You should save until it hurts, and then back up off the gas a little bit.

In the budget provided above, I showed a sample of saving 20% a month. That seems fairly doable if you are a single person. Now, if you are raising a family that might make things more difficult. I would recommend saving what you think is comfortable right now. Then next month find one area in your life that you can cut back on. Keep repeating that process until you find out what you need, and what you don’t. It will surprise you!

Is $40,000 a Good Salary? 2

Can I Buy a Home on $40,000 a year?

Yes! You can most definitely buy a house on $40,000 a year. There are so many ways to buy a house so nothing should be stopping you. I would recommend not spending more than one-third of your monthly income on housing expenses, which in this case would be $944.

There is an assortment of loan products currently available to people looking to buy a house. Using an FHA loan for example you can put down as low as 3.5% of the purchase price. Plus there are strategies like house hacking that can help bring your housing expenses down, and some people can make a profit!

Recommended Reading: Overview of Real Estate Investing

How Much Rent Can I Afford On A $40,000 Salary?

If you are making $40k a year, you will be making around $2,833 a month after taxes. Most people, me included, recommend spending no more than one-third of your income on housing. That would mean that you can afford $2,833 / 3 = $944.

Personally, if your life circumstances allow it and you are comfortable with it I would look into buying over renting. Now I know that all the digital nomads and the majority of the Financial Independence community will squawk at this. However, Real Estate is a solid investment strategy that has stood the test of time. According to Andrew Carnegie, “Ninety percent of all millionaires became so through owning real estate. More money has been made in real estate than in all industrial investments combined.”

I also know that your primary residence shouldn’t count as an investment, but owning one home makes it much easier to buy another and another and another.

How Much Mortgage Can I Afford On A $40k Salary?

A salary of $40,000 a year, means that your net monthly income is approximately $2,833. Just like rent, your mortgage payment should be a maximum of one-third of your income. In this case, we are working with $944.

Can I Invest Making $40,000 a Year?

Yes! You can invest while making any salary. I would recommend investing at any and every stage of your life. If your dollars aren’t working for you, they are working for someone else.

Start out investing what you feel comfortable with and go from there. Look into all of your investing potential and do your due diligence. You will be amazed at how many options are out there to invest in.

What Can I Afford Making 40k a Year?

You can afford pretty much anything in moderation. You can afford to spend a ton on Amazon each month or have a cool car with a payment that goes along with it, but probably not both. You most definitely can afford to invest each month and it should be one of your highest priorities.

If you are worried about what you can afford, I would look into increasing your income through side hustles. It’s easier to afford things when you have more money around to use.

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Where Can I Live on $40000 a Year Comfortably?

There are a ton of places that you can live on $40k a year and live a comfortable life. Your dollars will stretch much further if you avoid most coastal areas of the United States and larger metropolitan areas.

Here is a list of five cities in the US worth mentioning (in no particular order):

  • Bristol, Tennessee / Virginia
  • Abilene, Texas
  • Cleveland, Ohio
  • Eugene, Oregon
  • Sioux Falls, South Dakota

As for places to live outside the US the world is your oyster. There are dozens of countries where 40K US dollars a year would afford you an amazing lifestyle. Here are a few:

  • Thailand
  • Mexico
  • Curaçao
  • Argentina
  • India

In the end, it depends on what matters most to you. Write down a list and work backward from there. If you want to be close to friends and family, then that helps you narrow down your list of where you want to live. If you want to have a lively nightlife, that helps narrow down your search as well.

$40,000 a Year is How Much an Hour?

Let’s do some quick math here. If you work a position with no paid time off (PTO) then you are working 2080 hours a year.

$40,000 / 2080 = $19.23

That means you’ll be making $19.23 an hour if you make $40,000 a year and have no paid time off.

Now, what if you have a salaried position with two weeks of paid vacation each year? That means that you are working 2000 hours a year.

$40,000 / 2000 = $20

That comes out to exactly $20 an hour if you get 2 weeks of paid vacation each year. That’s not too shabby and makes for easy math if you are wanting to calculate how many more hours of work until you can afford another to buy another share of TSLA or more BTC.

$40,000 a year is how much an hour after taxes?

Roughly, if you make $40,000 a year you will need to pay between $6k to $9k in taxes. Let’s be conservative and estimate based on the higher taxes of $9k. We are also going to assume that you get two weeks of paid vacation per year.

($40,000 - $9,000) / 2000 = $15.50

That means that after taxes you will have an hourly wage of $15.50. If you know the tax rates for your state and your circumstances you can modify the equation above to determine what your actual hourly wage is after taxes.

Is $40,000 a Good Salary? 3

How Much Will My Check Be If I Make $40k A Year?

That depends on how frequently you get paid, and how much taxes you are liable for. Here are some rough calculations for a few varying cases.

($40,000 - $6,000) / 52 = $683.54 ($40,000 - $9,000) / 52 = $596.15

If you get paid weekly, you could get a check for $596 - $683, depending on your tax liabilities.

Now, what if you get paid biweekly? We can quickly do the math by dividing the total amount paid minus taxes by the number of biweekly pay periods in a year.

($40,000 - $6,000) / 26 = $1,307.69 ($40,000 - $9,000) / 26 = $1,192.30

If you get paid biweekly, you could get a check for $1,192 - $1,307, it all depends on how much taxes you owe the government.

Hey, I don’t get paid weekly, or biweekly. I get paid twice a month, now what?

We can also do the math for getting paid twice a month.

($40,000 - $6,000) / 24 = $1,416.67 ($40,000 - $9,000) / 24 = $1,291.67

When you get paid twice a month, you’ll see that you could get a paycheck of anywhere between $1,291 - $1,416. Again this is all dependent upon your tax liabilities.

$40,000 a Year is How Much biweekly?

If you get paid on a biweekly schedule you will have roughly 26 pay periods throughout the year. That means the following equation will help you determine how much $40,000 a year is biweekly.

$40,000 / 26 = $1538.46

If you are not liable for any taxes your biweekly paycheck would be $1538.46. However, if you are liable for taxes like the rest of us your check will most likely be $1,192 - $1,307 like we calculated above.

$40,000 a Year is How Much a week?


Let’s backtrack a little to find out how we got to this number. A year has 52 weeks, so that means that we can divide $40,000 by 52 to find how much $40k is a week. Now if you are paying taxes it will most likely be closer to $596 - $683.

Is $40,000 a Good Salary? 4

Conclusion: Making $40,000 Annually

Making 40k a year is within 20% of the national median salary in the US. It’s a great salary in lower cost of living areas, and is a more difficult salary in higher cost of living areas. However, I feel like if you are looking to know if this is a good salary or not, you already know in your heart the answer for you.

No matter what your salary is, the most important thing you can be doing is saving and investing your money. If every dollar is spent and none of it is invested you could make a million dollars a year, and have a similar networth to someone making $40k a year.