Is $40,000 a Good Salary? Pink piggy bank with $100 bills
Is $40,000 a Good Salary? Pink piggy bank with $100 bills

Often people wonder if what they are making is enough. You may be asking yourself, is $40,000 a good salary? And the answer really depends.

$40,000 per year salary is less than the average salary in the United States, Nonetheless, depending on the city you live in and your lifestyle, $40,000 may work for you. Furthermore, if you live in a low-cost area and don’t have many bills, $40,000 is a good salary. However, if you are well-established in your field and have a family to support, $40,000 won’t’ be enough.

If you are just starting out, $40,000 is definitely a livable wage, considering you will probably get raises along the way. If you factor in how many work hours are in a year, you will see you are making about $19 to $20 per hour, considering you are working a 40 hour work week.

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When I started teaching back in 2000, I made almost this exact amount. I started at $39,000 per year and worked my way up. I was elated to be making $39.000 at the time.

Keep in mind that I was able to live well at the time because I found cheap rent and had a roommate. I bought a new car for the first time in my life (gulp, now I only buy used), and I was able to pay my student loans too (extra bill = no fun!)

Yet, I left a job as a preschool teacher making $8.50 per hour so I could student teach, and after only babysitting that summer, $39,000 sounded amazing to me! At age 23 $39,000 was a dream come true and it was the first time in my life, that I did not feel broke!

If you are curious as to if $40,000 per year is a good salary, keep reading to find out your answer.

Can you live comfortably with a $40,000 per year salary?


Yes, you can live comfortably with a $40,000 per year salary. Again, this depends on where you live and what your level of comfort is. Yet, if you are able to live below your means and keep your expenses low, you can live a suitable and comfortable lifestyle with $40,000 per year.

Typically rural areas have a lower cost of living. Growing up in a small lake town, I can see the difference when I visit family as opposed to the suburbs of a major city where I currently reside. Things such as food and gas are often cheaper in my small town area.

If you live in a small town or rural area, you can find cheap rent or housing, as opposed to a city where housing prices cost more and you will also pay higher taxes.

If you make a salary, this is great news. You know your exact income which often makes it easier to pay bills. Yet, if you are paid on commission or hourly, your take-home pay will depend on how much you sell or how many hours your work is able to give you. This makes your income less stable and it’s harder to budget for incoming bills.

When asking yourself if your salary is enough, you must take into consideration how much your cost of living is. $40,000 may be a decent salary in one part of the country, whereas in an area such as New York City, $40,000 per year will not get you far.

Best Cities to Live on $40,000 per year


Obviously, if you find an area with a low cost of living, it will be easier to live well on $40,000 per year. Yet if you are in a high cost of living area, $40,000 probably won’t’ cut it.

According to Insider, here are the top ten low-cost cities in the U.S:


  • Wichita Falls, Texas
  • Brownsville, Texas
  • Beaumont, Texas
  • Amarillo, Texas
  • Fort Wayne, Indiana
  • McAllen, Texas
  • Abilene, Texas
  • South Bend, Indiana
  • Montgomery, Alabama
  • Toledo, Ohio

If you are making a $40,000 per year salary, these cities will be a good fit for you.


Worst cities to live on $40,000 per year


Unfortunately, if you live in a high cost of living area, $40,000 probably won’t be enough to live on. If you are making $40,000, according to Investopedia, these are the highest cost of living areas in the U.S.:

  • New York City, New York
  • San Franciso, Californiania
  • Honolulu, Hawaii
  • Boston, Masechutsettes
  • Washington D.C
  • Oakland, California
  • San Jose, California
  • San Diego, California
  • Los Angles, California
  • Miami, Flordia

If you are only making $40,000 avoid living in these high-cost areas.


What is $40,000 per year after taxes?


Let’s say you make $40,000 per year. We will estimate a third of that will be given to your government as taxes. So we are left with around $26,667.

Now we must do the math… That leaves you with $2,222.25 per month after taxes. (Note, this is a rough estimate and you may end up paying more or less for your taxes depending on a number of things, but I rounded up.)

What can I afford to make $40,000 per year?


If you can find cheap rent for around $800 per month (yes, I paid that in a suburban area, so it can be done) and $300 per utility including gas, water, and electricity, a cheap cell phone service such as a mint mobile with plans for only $15 per month and cut cable and just use a streaming service such as Hulu for $4.99 per month, you are left with $1,077.

Keep in mind, that you will need to pay for car insurance and your car note if you have one, and assuming you are driving a car you can afford, you are now down another $500 for those things. If you have roughly $600 left each month to spend on groceries and other items, you can surely find a few hundred to save for the future and still have fun.

If you learn to live below your means, you can find free things to do in your city or town or give yourself a cash budget for going out to things such as restaurants and movies.

All in all, you can live a pretty comfortable lifestyle if you are planning on taking any luxury vacations or breaking the bank with things you cannot afford.

If you make $40,000 per year, you can definitely make it work by shopping around for housing, buying a nice used car, and shipping around do for auto insurance rates.

Things can get tricky, however, if your current employer does not offer insurance or a retirement plan. You may need to do some careful planning to save for these things.

How to live well no a $40,000 per year budget


Live Frugally

If you are new to frugal living, this is the term to describe living below your means and making budget-conscious decisions with your money. By living below your means, you will be able to save more money which will help you build an emergency fund, rainy day fund, and save for retirement.

If you are making $40,000 per year, you may want to consider using some of the frugal living tips listed in these posts below:


Learning how to budget can take some time, especially if this is your first real job and you’re making $40,000 per year.

Start by determining your expenses and subtracting this amount from your take-home. Again, if you are spending more than you make, try some of the frugal tips listed above.

Here are some budgeting posts to help get you started:


9 Advantages of Using a Budget

Budget Basics

Over 100 Budget Categories for your Personal Budget

How to use a Budget Planner

Set up an Emergency Fund


An emergency fund is an important aspect of any budget. Moreover, when an emergency comes up, you will then have the means to cover it. You can avoid pricey credit card bills by being prepared.  If you are making a $40,000 per year salary, it is best to tuck some money away every month and build up at least $1000 in an emergency fund.

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Invest the Easy Way


The two apps I recommend for newbie investors are Acorns and M1 Finance. These are easy to use for beginners and give sign-up bonuses too.

if you have been nervous to invest because you don’t know what you are doing, these apps offer tips and help you get started with little money.

Sign up for Acorns here and get a free $5.00 to invest

Sign up for M1 Finance here and get $500 for a seed investment (new accounts/restrictions may apply)

Find a Side Hustle


If you are short on cash, making $40,000 per year, you can always find a side hustle to hold you over until you start making more.

I love side hustles and my number one side hustle is blogging. It is a fun way to help people and I can do it from home.

If writing is not your thing, here are some posts to help you find a side hustle:

Continue Learning


Learning is earning! Did you know the average CEO reads 50 books per year? if you want to earn more than $40,000, continue learning and honing in on your expert skills to advance in your career or start a new one that pays more!

Is $40,000 per year a good salary final thoughts…


Depending on where you live, $40,000 can give you a good, comfortable life. Yet, if you live in a high cost of living area or have a family, consider living frugally and finding a side hustle to make ends meet. There are thousands of people in the world that would love to make $40,000 per year. Keep in mind, that even if this seems low now, be grateful and continue working your way up. Keep in mind, It is a great salary for someone starting out or living in a low-cost area.



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