$40,000 A Good Salary? A Budget Breakdown by State

By in Finance

Hi. Today I’m going to talk about a much sought-after question that has been making rounds over the internet, especially among the recent grads and new hires: Is $40,000 a good Salary for someone planning to or currently living in America?

$40,000 is a below-average salary for a full-time employee in the US. It’s good for someone who is just starting off his career as a young adult and has minimal expenses. But someone who has a family and has a higher cost of living would financially struggle with a $40,000 salary or below.

According to the Economic Policy Institute, the average median hourly wage was around $19.33 a few years ago. If I worked full time, this would amount to a total of $40,000. 

So, for starters, a salary of $40,000 per year is about normal.

It’s natural that when hunting for a new job, one of the first concerns on everyone’s mind is compensation. 

Let’s dig in some more numbers to know how your life would be with a $40,000 annual salary.

$40k Salary Breakdown — Hourly, Weekly, and Monthly

Crop man counting dollar banknotes

So how much is $40k actually? The simplest approach to understanding how far a $40k paycheck may go is to split it down into monthly payments to help better organize expenditure.

An income of $40k per year rounds up to:

Annual Salary$40,000
Per Month3,333.33
Per Week$769.23
Per Day$153.85
Per Hour$19.23
Per Minute$0.3205

This table shows the hourly, weekly, and monthly breakdown of a $40,000 salary.

This calculation is based on 8 hours of work a day while working 5 days a week, and 52 weeks a year. You might make even more depending on extra working hours, additional shifts, and even working on holidays.

You might find surveys and findings that ‘label’ $40,000 as a lower bracket of income, but I have always made it a point to stay happy in what I have, while not giving up on better opportunities.

Remember: Be Ambitious – Don’t Be Picky!

Although the amount you might earn from a job might vary widely depending on the employer, the average job pays around $40,000 per year in some situations. 

If you’re just getting started, you might be wondering if this amount is adequate.

Wages differ greatly between different American states, and there are other aspects worth considering as well. Is $40,000 a year a good compensation if you’re offered this position?

Can You Live Comfortably On $40,000 a Year?

Family Making Breakfast in the Kitchen

With $40,000 a year, you can comfortably live in US states where the cost of living isn’t high such as Mississippi, Oklahoma, and Kansas. However, it’s difficult to live in New York, California, and Massachusetts with a $40,000 salary especially if you have a family to support.

Your monthly household expenses, and how you budget yourself also factor in judging how comfortable you can live on this pay.

Whether $40k is suitable is determined by your current living circumstances. There are some states in the US, such as Massachusetts, where the cost of living is quite high, while others, such as Texas, have a lower cost of living.

Other elements that affect the cost of living include the number of persons living in a house, the services being paid for, and the locality.

As you learn more about whether $40k is a reasonable wage, you’ll want to figure out if you can live comfortably on this amount.

And, as you may be aware, one of your most significant expenses will be your existing monthly rent or mortgage payment.

Let’s dive into the cheapest and the most expensive states in the US to live with $40,000.

Cheapest US States to Live In With $40,000 Salary

RankCheapest US StatesCost of Living (Index)Housing Cost (Index)

This table shows the cheapest US states with their cost of living and housing costs.

Now, I know what you’re thinking right now – that of course you will choose the cheapest place to settle and live in, but let me just add in my two cents here.

While settling on the ‘cheapest’ state might be appealing to you as a $40k earner, as you live your life, either as a family or single, you also look for other things.

Things like environment, community, friend’s circle, professional contacts, job opportunities, and family.

While these might sound trivial to you as compared to your financial situation, the aforementioned are important nodes in your life. Your life is built around them.

Suppose my family or friends are too far away from where I live. Will I, on $40k, afford to visit them often or on holidays? 

Will the same work opportunities – opportunities that can help me grow – exist for me in a cheap state as they do in a comparatively expensive one?

Do I have to raise my kids in a place that boasts high crime, drug, or assault rates just because it is cheap?

These are all questions whose answers you should thoroughly search. And then choose from the area that best fits you. 

Most Expensive US States to Live In With $40,000 Salary

RankMost Expensive US StatesCost of Living (Index)Housing Cost (Index)
3New York139.1192.7

This table shows the most expensive US states with their cost of living and housing costs.

These are some US states where it might be difficult for you to with just a $40,000 salary a year. If you are a single parent or a couple who are looking forward to their career growth, you might struggle with your monthly expenses such as mortgage, taxes, household costs, etc.

Wait, What About My Taxes?

Man in Gray Crew Neck T-shirt Reading Book

Umm yeah, so, Let’s just get the sticky parts over with quickly. If the $40k salary does not include taxes for you, then you should start off by calculating and deducting them first.

The amount you receive in the end is determined by your tax deductions. State income taxes, federal income taxes, healthcare taxes, and social security taxes are all included in this.

It is important to note that your earnings are influenced by where you reside and a variety of other factors. Consequently, it is not only the rent or mortgages that will vary but the taxes will as well. 

Different US regions will have different income tax rates. 

For example, if you live in the state of California and have a gross income of $1,538 every two weeks, you can deduct $273 in taxes. Every two weeks, you would get a net compensation of $1,266 in this situation.

In the case of your annual wage, if you earn $40k in California, you may be taxed $7,090, leaving you with a net pay of $32,910 every year. 

Remember that tax deductions differ by state, so make sure you conduct your calculations correctly based on the tax deductions available in your state.

What Will Be My Rent Affordability On $40k?

If I have a $40k yearly wage, I may end up paying up to $1,111 in rent on average. This is based on the principle that my monthly gross income must be equal to or greater than three times my rent. 

When considering rent qualifications, most individuals would tend to choose this method.

Personally, though, I recommend that you pay your rent with no more than 25% of your monthly gross income. This means that if you make $2,742 per month after taxes, your monthly rent should be around $685.5.

Both methods are equally acceptable, but be sure to keep in mind that the goal is to not spend your entire earnings on rent. You can still save money if you select the latter route. 

Saving money at the start of a career or a self-dependent financial journey can help you go very far later in life.

What is the Affordable Mortgage Range in $40,000 Salary?

White Roll-up Door

With a yearly gross salary of $40k, the greatest house value you could afford would be between $100k and $120k.

However, this is just a rough guess. Each person’s financial condition will be unique. Remember to account for your property taxes, regular maintenance, and primary upkeep while planning out a mortgage.

According to some financial gurus, you should pay no more than 28% of your monthly gross income on your mortgage, which means that with a $40k yearly salary, you could spend up to $933 every month.

I recommend that you pay your mortgage with 25% of your monthly gross income, just like you did with your rent. The end result is to save as much money as possible. 

A salary of $40k per year is regarded as below average in America, but it does not, and should not, mean it is insufficient to live comfortably in it. Or that it hinders you in planning for your future.

Most people can live well on a $40k annual wage, but they will need to make major changes to their budget to make it work.

Taking this into consideration, a 25 percent down payment might considerably assist you in finding an inexpensive property, and it won’t consume all of your monthly income, giving you more breathing room.

How to Maximize My $40k Salary?

Wallet with coins banknotes and credit card for payment

You will end up broke whether you make $40,000 per year or $100,000 per year if you do not live within your means. To avoid such a scenario, I have compiled a list of essential financial recommendations to help you make the most of your $40,000 paycheck.

These suggestions will assist you in keeping the money you earn in order to guarantee a secure financial future.

#1 Budget It

As I said previously, a $40,000 salary is a little less than the national U.S. median wage. As a result, if you want to get the most out of your money, you need to create a budget. That isn’t to say you can not have a good time.

It simply implies that you should make a monthly financial plan for your money and stick to it.

No matter how much money you make, you must be careful with your spending. Your net worth is measured by how much money you maintain rather than how much you earn. So make a budget and make saving a priority at all times. 

Learning to save money in order to be frugal is easy and can be achieved with very little effort.

#2 Remove Your Debts

I say, the more debt you have, the more difficult it is to get by. And when your annual salary is $40,000, you need to make the most of every single dollar.

As a result, you should stay away from debt at all costs. If you are in debt, you should devise a strategy to get out of it as quickly as possible.

Often it doesn’t matter how you fell into debt but rather how you are planning to get rid of it. I always suggest others direct your earnings in a fashion that prioritizes debt removal, after your essential expenditure is met (rent, gas, mortgage).

#3 Monitor Your Cash Flow

Maintaining your economic health requires you to keep track of your money. It’s tough to make financial improvements until you know exactly how much money you have coming in each month and how much you’re spending.

#4 Plan On Investing Smartly

You must make investing a significant element of your financial plan if you want to accumulate enough wealth to live off the interest on your investments. 

Now, I understand that $40,000 does not appear to be a salary that can generate any form of wealth, but that is completely incorrect.

Consider this: if you invested $500 every month for the next 30 years and earned a 10% annual interest rate, you would have more than $1 million in investments. 

You’d be earning $100,000 per year just from interest at that point. On a $40,000 salary, I am sure you can find a way to invest $500 per month if you truly try. 

What’s, even more, is that this figure can rise further based on the amount of debt you have to pay off, even better if you do not have to pay off any debt at all.


If you know how to handle your money, a $40,000 annual wage will surely suffice you. There are a few cities where that pay is ideal for you, and other cities where it is not. Make sure to decide wisely.

To make a more realistic evaluation of your expenses, keep in mind the typical cost of living in your location.

Overall, if you reside in a low-cost living area and organize yourself and your expenditures properly, you should be able to avoid debt and even save money in most circumstances. 

Regardless of what others tell you, $40,000 is not ‘nothing’ but is sure ‘something’ to start off with. 

Remember, this is not your goal but your starting point and you will make it through with this salary proactively, with a smile over your face 🙂

About topworklife.com Hi' my name is Simon. I am the owner of Top Work Life. Together with a my team, I write content about income generating ideas, entreprenurship and growth as a person Read more about Simon & TopWorklife

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