Generally most of the people when they look out for a decent job they try to find a job that pays $40,000 a year to meet their standard cost of living.
But the question that strikes their mind is $40000 a year is how much an hour? Let’s find out.
The average or median salary in America during the first three months of 2020 stood at $49,765 per year, according to Pew Research Center.
Incomes in excess of this amount are considered as good, due to cost of living and quality of lifestyle they afford.
Pew Research, US Census and other organizations classify the American middle class as persons or households earning anything between $40,100 and $120,400. Incomes above $120,400 means you’re already in the upper class of Americans.
By mid-2020, about 52 percent of the American population were in the middle class, depending on various scales used by different organizations, says Pew Research Center.
This brings us to the question, how much your salary of $40,000 per year actually work out to if we calculate on an hourly basis.
This is a rather complex question, since we need to take several factors into consideration.
$40,000 A Year is How Much An Hour
For several Americans, a yearly salary of $40K may sound good enough. However, that’s not actually the case.
Bureau of Labor Statistics and other sources state that in 2019, the median annual pay of fulltime working American men stood at $57,456 while their female counterparts made $47,299.
Unfortunately, this vast difference is due to the gender income divide that persists in America and other developed countries too.
Employers tend to pay lower salary to female employees compared over their male counterparts. However, there’re some efforts from various quarters to bridge the gender income gap and eventually, close it.
And the main reason why a salary of $40,000 per year might not suit you is due to Federal taxes and other deductions or mandatory expenses you would incur.
Obviously, this also depends on whether you’re making $40,000 per year as single person or it’s the annual income of your household.
If you are unhappy with your salary and you are qualified and have relevant skills then you can always try to negotiate your salary with your employer to get a better pay for your work .
Federal Taxes on $40,000 per Year Salary
Check this link to find out how much Federal taxes you need to pay if you’re earning an average $40,000 as yearly salary.
It would be clear that after all deductions, what remains in your hand on hourly basis, works out to $19.23 per hour . That means how much is $40000 a year per hour is $19.23.
Of course, this amount is more than double of the US minimum hourly wage of $7.25 per hour for 2019.
Why Only $19.23 per Hour?
The figure of $19.23 per hour that remains in your hands despite making $40,000 per year might come as a shock to most Americans. The answer to $40000 a year is how much an hour might be surprising but undeniably true.
Therefore, let me explain how it works.
An average American works 40 hours a week. That is considering eight hours per day for five days a week. This works out to 2,080 hours a year or over a span of 365 days.
The Real Figure: $13.69 per Hour
Now here’s something that most people miss out on. Your salary of $40,000 per year also includes the two-day weekend.
Meaning, though you’ve worked only 2,080 hours a year, the salary is actually divided by eight hours for 365 days.
That means, you’re actually getting the pay as though you’re working for 2,920 hours.
If we divide a yearly salary of $40,000 per year on eight hours per day for 52 weeks and 365 days, the amount works out to just $13.69 per hour. This figure is less than double of the US minimum hourly wage of $7.25 per in 2019.
The minimum wage figures for 2020 aren’t available due to disruption of the economy and work due to the Covid-19 pandemic that struck the world that year.
Social Security Payments
Here’s one more payment that you might be overlooking from your hourly pay of $13.69 per hour. And that’s contributions to Social Security and Medicare.
During 2020, the Federal government made some changes to the Social Security structure and payments from employees. This could impact you directly if you’re a subscriber. Therefore, your money at hand can be much lower than $13.69 per hour.
At the same time, it’s worth noting that Social Security and Medicare come with lots of benefits that one can’t really afford to ignore.
Managing Expenses on $40,000/ Year
Another question that would arise in your mind: how do I manage my expenses with $40,000 salary per year or $13.69 per hour?
It depends on your money management skills, debt and spending patterns.
Unfortunately, most Americans don’t really have much savings for retirement or even to meet any crises, if we go strictly by news reports.
The Bureau of Labor Statistics has some startling figures on average expenses of an American household. This could give you a clear indicator of where you stand with an annual pay of $40,000 per year.
Rapidly Changing Income Scenario
While the above figures could cause you some concern, there’s nothing really to worry about. As a matter of fact, you can step up your annual income. And that’s by freelancing.
Studies across the US reveal, most freelancers in the country make more money than 70 percent of regular employees.
By the year 2027, more than 50 percent of America’s workforce will consist of freelancers. This means, you could earn much more than $40,000 per year by working as a freelancer.
A study by payments gateway Payoneer conducted in 2019 reveals, a freelancer in America earns median $63,488 per year.
Freelancers also have to pay taxes, though as independent contractors instead of employees. However, freelancers have the opportunity to step up their income as they gain more experience in a specific field of work.
Freelancing doesn’t automatically imply that your income would rise. It can only serve as a means to step up earnings.
However, you can increase your annual income by doing side-gigs or working part-time during spare hours.
In Conclusion
Before concluding, I’ll add that a salary of $40,000 per year is average. It doesn’t mean that you’re poor or on threshold of the Below Poverty Line level of citizens.
Generally, most American households make more than $40,000 per year, if both the spouses are working. And that can add up to a considerable amount too.
I’ll repeat that it’s up to an individual and household to plan their budget and make the best of $40,000 per year income.