Want to know how much money you make per hour if you earn a $40,000 per year salary? You can earn money from a full-time job, from contract work or from part-time employment like freelancing. But when you add up the income from all these sources and the number of hours you work, how much do you get paid per hour?

$40,000 a year may sound like a lot of money, but when you break it down into an hourly wage, the number looks more like $18.00-$20.00 per hour.

If you want to know the answer to “$40,000 per year is how much an hour?” keep reading!

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

To calculate this you need to know how many hours per year you work, then just divide $40,000 by that number. That means, if you work the standard 40 hour work week, 52 weeks per year, you’d need to divide $40,000 by 2,080 hours (40 * 52). If this is your measure, $40,000 per year is $19.23 an hour.

However, if you freelance, side hustle or work as an independent contractor, you might not work 40 hours per week. Instead, you could work more or less depending on the nature of your work.

In the case where you work more hours, that hourly wage decreases because the numerator remains constant ($40,000) while the denominator (number of hours worked) increases. The lowest hourly wage you can with a $40,000 income in a year is $4.57/hour. That’s not quite half of the federal minimum wage. Though, to achieve such a low average wage, you’d need to work every hour of the year: 8,760 hours (24 hours per day * 7 days per week * 52 weeks per year)!

While it’s important to learn how to make money while you sleep, something tells me no one could work literally every hour of one year. We do have to sleep, eat, relax and be social. That takes away at least a third of those hours (at an absolute minimum). You’ve also got to factor in weekends, holidays and vacation. On the other end of the spectrum, when you work fewer hours but still take home $40,000 per year, you actually earn a much higher wage. Perhaps you only work part-time at 20 hours per week but still earn $40k per year. If so, your average wage actually comes to $38.46 per hour (same pay but half as many hours).

As you can see, the amount of income remains constant, but the hours you work may vary. Therefore, it is important to get the most out of your time.

Know the Opportunity Cost of Your Time

It’s important to know what your average hourly wage is because you can then judge the cost of your time and then what your opportunity cost is. This means the cost of your next best alternative. In this case, if you earn $40,000 per year and work 2,080 hours per year (40 hours per week), you know your opportunity cost is $19.23/hour.

That means if you have an opportunity to earn more than this wage per hour and you have the ability and desire to do so, it is worth your time to pursue this opportunity. Doing so makes you better off financially and earns you a higher return on your time than your current job. You can increase the opportunity cost of your time (or earn a higher wage at your current work) by working fewer hours but making the same annual pay.

This works by accomplishing the same work responsibilities in less time and more efficiently. You can accomplish this by:

gaining on the job experience
going to school to get a specialized education to work more effectively and efficiently in your job
automating routine, time-consuming tasks
outsourcing work where possible

This last one requires an even deeper understanding of opportunity cost and return on investment. Outsourcing work likely entails added expense and lower margin. However, if you can take this saved time to earn even more money, you’ve made a great investment. Do it enough and at scale and you’ve made yourself an entrepreneur capable of arbitraging an income from a company and managing freelancers or contractors to handle your responsibilities.

As another outlet for increasing your hourly wage, you can also earn money from income generating assets. While these don’t directly relate to how many hours you work, it can increase your annual income and result in a higher net effective wage.

Investments like these are some of the best assets to invest in because they don’t require you to take time to earn money beyond investing in them and letting the income payments come directly to your bank account.

How Much is Your Paycheck if You Make $40,000 a Year?

Now that we understand calculations for hourly wage, let’s explore what a person with a yearly salary of $40,000 can expect from his or her paycheck.

→ $40,000 a Year is How Much Biweekly?

When looking at how much $40,000 a year is biweekly in your paycheck, you simply need to calculate how much you would earn over every two weeks. If you assume a full-time position with no overtime and exactly 40 hours per week, then you would earn $40,000 / 26 bi-weekly pay periods = $1,538.46 per biweekly paycheck.

However, this is pre-tax, pre-deduction earnings. For anyone who lives in the real world, we know this doesn’t account for things like:

Income taxes
FICA (Social Security and Medicare)
Pre-tax deductions like those to retirement accounts, health savings accounts, dependent care flexible spending accounts or anything else
Health insurance premiums

→ How Much is $40k a Year Monthly?

If you received your salary in a monthly series of paychecks rather than biweekly, the checks would be less frequent but more per paycheck. Ignoring the effects of taxes and deductions, $40k a year monthly is $3,333.33 per paycheck.

You might be paid time off and federal holidays, depending on how many are given per year. If so, your monthly pay effectively goes up on an hourly view.

How Much is $20 an Hour Annually?

If you can earn $20 an hour, this translates into $41,600 a year. Assuming of course you mean for a 2,080 hour work year.

If you work 20 hours per week, $20 an hour equals $20,800 a year.

If you work 30 hours per week, $20 an hour equals $31,200 a year.

If you can earn a raise at your job from $19.23 to $20 an hour, you’ll earn an extra $1,600 per year (ignoring taxes)!

$40,000 a Year is How Much After Taxes?

Never, ever forgot that Uncle Sam always wants to weigh in on your earnings. Unless you earn passive income from long-term capital gains or qualified income sources and learn how to pay zero taxes, you’ll need to pay the man. Because of this unfortunate reality, your effective wage is actually less than $19.23 per hour or $40,000 per year.

Taxes are a complicated topic, and it’s difficult to offer tax information without knowing the full details about your income, job status, retirement contributions, state of residency and other factors. So, I won’t! Especially being a CPA, that’s a big no-no.

So, let’s just stick to a general example. We’ll keep it easy, too. I’m picking a state without an income tax like Florida. Heat, humidity and no state income tax. I hear they’ve also got some nice beaches on the Gulf of Mexico side of the state.

I’ll also assume you have a simple tax situation and you only claim the standard deduction as a single person. Your $40,000 a year would be this much after taxes:

$40,000 annual pre-tax income
-$3,115 federal income taxes
-$3,060 FICA taxes
$33,826 after-tax take home income

If you get paid on a biweekly basis as a full-time employee, you’d have $1,301 per bi-weekly paycheck in after-tax income.

If you get paid on a monthly basis as a full-time employee, you’d have $2,818.83 per monthly paycheck in after-tax income.

How Much is a $40,000 Salary Compared to All Americans?

Median household income for an American in 2018 was ~$63,000 annually. This means that the total annual household income of every family member is taken into consideration, not just one individual’s income, or a per capita measure.

If your household has two earners making $40,000 a year, your household income is $80,000. This would put you above the median American household income in 2018. Likewise, if your household has one earner making $40,000 a year, you’d have fallen below the median household income during that year.

What Types of Jobs Pay $40,000 Per Year?

According to the Bureau of Labor Statistics’ Occupational Outlook Handbook, these professions appear to offer median pay in the $40,000 – $60,000 range. Meaning, you might start at the lower end of the pay scale but possibly able to work your way up to higher pay as you gain experience.

Some of these jobs do not require a high level of education or have many barriers to entry because they provide on-the-job training. This list doesn’t even pick up on the high-paying and most in demand job opportunities that come with a tech degree. Many of which can pay over $75,000 per year.

Occupation	Entry-Level Education	On-the-Job Training	Projected Number of New Jobs	Projected Growth Rate	2020 Median Pay
Survey researchers	Master’s degree	None	Declining	Decline	$40,000 to $59,999
Electro-mechanical and mechatronics technologists and technicians	Associate’s degree	None	0 to 999	As fast as average	$40,000 to $59,999
Physical therapist assistants	Associate’s degree	None	10,000 to 49,999	Much faster than average	$40,000 to $59,999
Crane and tower operators	High school diploma or equivalent	Moderate-term on-the-job training	0 to 999	Slower than average	$40,000 to $59,999
Property, real estate, and community association managers	High school diploma or equivalent	None	0 to 999	Little or no change	$40,000 to $59,999
Fundraisers	Bachelor’s degree	None	10,000 to 49,999	Much faster than average	$40,000 to $59,999
Legal support workers, all other	Associate’s degree	None	Declining	Decline	$40,000 to $59,999
Tapers	No formal educational credential	Moderate-term on-the-job training	Declining	Decline	$40,000 to $59,999
Cardiovascular technologists and technicians	Associate’s degree	None	1,000 to 4,999	Faster than average	$40,000 to $59,999
Flight attendants	High school diploma or equivalent	Moderate-term on-the-job training	10,000 to 49,999	Much faster than average	$40,000 to $59,999
Plant and system operators, all other	High school diploma or equivalent	Moderate-term on-the-job training	0 to 999	Little or no change	$40,000 to $59,999
Telecommunications line installers and repairers	High school diploma or equivalent	Long-term on-the-job training	Declining	Decline	$40,000 to $59,999
Sales representatives of services, except advertising, insurance, financial services, and travel	High school diploma or equivalent	Moderate-term on-the-job training	50,000 or more	Faster than average	$40,000 to $59,999
Property appraisers and assessors	Bachelor’s degree	Long-term on-the-job training	1,000 to 4,999	As fast as average	$40,000 to $59,999
Source: Occupational Outlook Handbook

Is $19.23 a Good Hourly Rate?

Earning $19.23 per hour is a living wage that can support yourself and a small family. For 2020, if you are a single individual without any dependents, the federal poverty level is $12,760. If you have a small family of 4, the federal poverty level rises to $26,200. If you account for taxes, $40,000 a year of income after-taxes is roughly $34,000. This places a very fine level of cushion between your income and what the federal government deems to be the level national average for poverty.

However, this federal poverty level measure may have different mileage depending on the cost of living in your area and where you live.

$40,000 in New York City won’t go as far as $40,000 in Houston, Texas. Consider the cost of living for your area before deciding if $19.23 is a good hourly rate. For most Americans living outside of expensive metropolitan areas, $19.23 is a good hourly rate which can support your living needs, though not live an extravagant lifestyle.

Is $40,000 a Good Salary?

The answer to this question will vary, but $40,000 a year will firmly place you inside the American middle class. In most metropolitan areas, $40,000 per year is a respectable salary. $40,000 in Houston may not be enough for your lifestyle while $40,000 in New Orleans will pay your expenses, but you’ll need to live within your means and find a cost-cutting living situation.

If you are on your own and live alone, then $40,000 annually can be a good salary to support yourself. You may also want to invest in your retirement and build up a respectable net worth. You can do this on $40,000 a year, but the challenge will be harder than if you earned $50,000 or $60,000 a year.

That doesn’t mean you need a six-figure salary to live the American dream, because $100,000 per year is not necessary either. In most cities and towns in the United States you can make it on less than $40,000 annually if your lifestyle isn’t extravagant.