Sometimes I get asked how much an hour is 40000 a year?
It looks like you don’t like my reply back saying “It all depends on where you live”
First, when looking for a new job opportunity, it is a huge mistake to take the net salary before taxes and divide it by 2000
Bear with me, I will tell you where the 2000 came from?
In this post, I will discuss how to calculate 40000 salary hourly in the right way
How much is 40000 salary hourly?
Before we start, it is common to assume and generalize working hours as 40 hours per week with 2 days as weekend
This is 8 hours a day excluding half an hour or an hour break times 5 days a week
So, 8 x 5 is 40 hours, multiply it by 52 weeks per year, we get 40 x 52 = 2080 hours
The 2000 mentioned above came from rounding 2080 to make it easy to do the division process
For example, if I divide 40,000 over 2,000 you can come up with the result without using calculator
You remove the 3 leading zero, so it becomes 40 / 2 = $20 an hour
In fact, even if I do 40,000 / 2080 = $19.23, this is not the correct amount, why?
Because we ignored the taxes and it varies vastly from a state or province to another
In Canada, it can be an average of 19.5% so you earn $40,000 annual salary but there is $7,792 cut from source
It end up that your take $32,208 in your hand – deposited into your bank account
is 40000 a good salary?
It depends where you live, I live in Canada in the GTA (Great Toronto Area)
It is very minimum and it barely hard to live with but why?
Simply because it all depends on the cost of the basic shelter needs like rent/mortgage, food and transportation
The latter represented in car insurance if you own a car and car loan payment if any
$32,208 in Ontario, particularly in GTA means you get 26 biweekly payment each is equal to $1,238.76
It is hard to find a cheap rent like $800 unless it is a basement
Realistically expect to pay around $1,400 in rent so this means you have to deduct $700 from each paycheck
Leaving you with around $538.76 and if you drive a used car, you need around $250-$300 as a car insurance
That’s another $125 from each paycheck leaving you with $413.76 for the food and gas in your car – I know I neglected the entertainment and miscellaneous expenses
On the other side, in Montreal, a different province you can earn the $40,000 but still pay way less in rent like $500 and like $50 for car insurance
So, if I deduct $275 from every paycheck $1,238.76, you still have 963.76
I cannot believe it, you save $550 in every paycheck – that’s really unfair
How to budget $40,000 on monthly basis?
Again, it is hard to budget generically as I proved above that location matters
Since I don’t know where you live, I will assume your rent/mortgage is $1200 which is almost 40% of your monthly income $2,477.52
Keep in mind, I stretched your rent to the maximum of 40%
Savings of 10% = $247
Rent/ Mortgage= $1,000 (40% of income)
Utilities= $180 – I deducted it $20 dollars to adjust the total
Car Payment= $200
Car Insurance= $100
Health Insurance= $200 – no health insurance in Canada so this number goes to Car insurance in province like Ontario
Personal & Misc= $50
Total = $2,477
It took me a hard time to tweak all amounts to fit in the $2,477
Good news, you will get 2 extra payments during the year because you get paid biweekly, usually on Friday so you got 26 weeks
If you deduct 10% automatically from every paycheck, what we call it pay yourself first
In my opinion, even $40,000 in a city like Montreal looks like you have enough room for other things like increasing your savings but it is still minimum wage
Everybody deserves to live better life, it is OK if it is your starting job
Definitely go for $40,000 as a start up to gain experience but don’t stay on that level for too long
How to live with $40,000 salary a year?
It is not a matter of how much an hour is 40000 a year, what really matters is how are you going to live with $40,000 salary a year
You can live with $40,000 only if you apply the below methods one by one – these are mandatory not optional to guarantee that you stay out debt
- First create a budget and stick to it – no kidding here
- Force yourself to save money and live frugally
- Do your best to lower your bills and reduce expenses
- Start building your emergency fund
- If you follow step 1 to 4 and still not able to cope with your salary, then you must follow the cash envelope method