", Below, check out 15 cities where you can become a homeowner while earning $40,000 a year or less. If you are worried about what you can afford, I would look into increasing your income through side hustles. This is not a reasonable monthly cost for people making $40,000 per year unless you have another source of income. You probably wont be buying a yacht, but the person making $100,000 a year wont be either. },{ When you withdraw your fund money youll see how it has increased. Your total interest on a $300,000 mortgage. "@type": "Question", Elizabeth is a writer specializing in credit cards, debt repayment, and small business. Taking 30 percent of that, you should be able to afford up to $1,250 per month in rent." This page uses Cookies. The first $100,000 is the hardest to save. That means that you are working 2000 hours a year. Not only does it help consumers plan their budgets and improve savings, but it also helps lenders determine whether to lend credit to borrowers. Disclosure: This page may contain affiliate links and we may receive a commission through them, but this is at no additional cost to you. If your dollars arent working for you, they are working for someone else. I Bought Well Within My Price Range I qualified for up to a $140,000 home, but I didnt even get close to that price point. Property managers typically use gross income to qualify applicants, so the the tool assumes your net income is taxed at 25%. You can expect to pay around $701 for monthly rent in Springfield. From the age of 15, he set up and ran a successful mobile Disco company that focused on everything from local parties to (eventually) corporate events for brands like Google and Hilton. Then, get some pen and paper and put your detailed income on one side take-home pay, freelance income, investment yields and your expenses on the other rent, car, utilities, groceries, debt split by a line. Generally speaking, a $40K is considered below average in the US and will probably leave you strapped for cash. 4 stars equals Excellent. So, youll probably struggle to get by if you have a family to feed alongside a mortgage and debt to pay. Its personal. "name": "Should I split rent 50-50 with my roommate? You can apply the 28/36 on your $40K salary by spending no more than $933 on housing expenses and around $297 monthly on debts. WebI Make $40,000 a Year How Much Rent Can I Afford? Thats not too shabby and makes for easy math if you are wanting to calculate how many more hours of work until you can afford another to buy another share of TSLA or more BTC. Ive just calculated that you need to keep your monthly rent budget capped at $690 to live well when making $40K yearly. If that's too much, aim for even half that (or whatever you can). The median income for individuals in the United States is $33,706 as of 2018. The 50/30/20 rule is a technique to split your income into three categories: 50 percent for essential living expenses, 30 percent for non-essential daily expenses, and 20 percent for savings and retirement. According to this rule, you should put 50 percent towards "needs" (rent, bills, groceries and the like), 20 percent towards savings and 30 percent towards "wants," like shopping, hobbies, traveling and going out to eat. In a nutshell, this rule says your budget should be: Using this breakdown, you can see how the 25%-30% rental rate guide can change if your other expenses are different. While many states and some cities have minimum wage rates well above $7.25, those who earn the minimum wage still struggle to pay bills, find housing, and support a family. If you would like to change your settings or withdraw consent at any time, the link to do so is in our privacy policy accessible from our home page.. For example, if you're paid every two weeks, take half of your monthly rent payment out of every paycheck." Well, to be honest, a $40K salary isnt bad, but it isnt the best salary youre being offered in the US. "acceptedAnswer": { We say, invest if you can because savings is your priority. Still, it isnt the perfect pay for a large household, and you should definitely try a counteroffer for a bigger salary if possible. A $40,000 a year salary is roughly $19.23 an hour before taxes. However, this is a rough estimate; the precise costs depend on your current financial situation. The actual amount of rent you can afford depends on your personal income and lifestyle. A good salary can be multiplied if you take care of your finances and identify what is necessary and what is not. Take the average total cost of these expenses, divide it by the number of paychecks you receive per month and then set that amount aside every time you are paid. If you make the average salary in the US thats great and all but what are your dollars doing while you are sleeping? Just like rent, your mortgage payment should be a maximum of one-third of your income. Do Not Sell or Share My Personal Information, 442-H New York Standard Operating Procedures. However, with a bit of luck and persistence, you should still be able to find a decent rental place between $690-$710. A 50-50 split sounds fair, but its not always right for everyone. Whatever you decide, the most important step is to discuss it before you move in together and document your decision in a roommate agreement that will prevent this from becoming a bigger issue down the line." How Can I Make the Most of a $40,000 Salary? US Cities Where A $40K Salary Is Not Enough. If you love writing, for instance, you can explore how to make money reading books; if youre into photography, you can make money doing stock photography. Ideally, choose a city with low rental costs, plan your budget monthly you can use the 50/30/20 rule for budgeting, and stick to it. According to Lisa Greene-Lewis, tax expert for TurboTax, In most cases, a married couple will come out ahead by filing jointly. If you dont already have utilities set up, ask your neighbors or landlord for an estimate of whats normal. For example, if you like to go out often and shop till you drop, then consider setting your rent budget on the lower end so you can indulge in more of your interests. In addition to furnishing your new apartment, there will be other one-time expenses youll need to have cash to cover as well: Ideally, plan up and save for these expenses ahead of time. But this is where things can get a bit confusing because taxes vary from state to state. While many states and some cities have minimum wage rates well above $7.25, those who earn the minimum wage still struggle to pay bills, find housing, and support a family.\n\nMany states and cities have higher minimum wages, in some cases more than double, but it is still difficult for workers to go to extremes.\n\nProponents of raising the minimum wage argue that this helps incomes catch up with the rising costs of living and lift millions out of poverty. That means that every month before taxes you will be bringing in a gross monthly income of $3,333. This means that at $40,000, you're making more money than over half of Americans, which If you don't already have utilities set up, ask your neighbors or landlord for an estimate of what's normal." } From dancing to blogging, there are several hobbies or special talents you can monetize to supplement your $40,000 a year. Multiply Your Annual Income by 2.5 or 3. You should consider how long you would need to commute when choosing a specific home can you take advantage of proximity?\n\nAlso, bear in mind what other payments you must deal with utilities, student loans, debt repayment, property tax besides rent alone. The average salary in the US is $51,000 a year. In a nutshell, this rule says your budget should be: 50% of your income: fixed costs, like rent, transportation, utilities, and groceries, 30% of your income: wants, like dining out, entertainment, shopping, and memberships, 20% of your income: goals, like paying down debt and saving for the future, Last months rent (depending on your lease), Any overlap in rent from your old and new leases, The rental market norm where you live will make a big difference, too. This calculator shows rentals that fit your budget. 0000. } Tell Me The 28/36 Rule And How I Can Use It On A $40K Salary. This is even more necessary if you live in a metropolitan area. WebTo calculate how much rent you can afford, we multiply your gross monthly income by 20%, 30% or 40%, based on how much you want to spend. Youre also likely to face financial hardship if your rent costs more than that, so most experts would recommend it, even if it isnt an absolute requirement. In fact, the income of a minimum wage worker with a family of four is well below the poverty line. However, the current government has promoted a reform to achieve $15 of hourly wage to go in effect as of March 2022. Ultimately, increasing your income by negotiating raises and learning new skills will help you achieve your lifestyle goals while staying on budget. Our ratings are based on a 5 star scale. For many years he was also a Radio producer and researcher, and it's this "leave no stone uncovered" methodology that Jason now brings to all his writing - believing that deep analysis is key to a strong article. Gross Paycheck $3,333 Taxes 17.34% $578 DETAILS Federal Income 10.32% $344 State You could perfectly move in alone to any home in the cheapest cities in the country, or could share a place in more costly cities like Rhode Island or New York. This should be divided up into categories, such as dining out, entertainment, and clothing, and a cap should be placed on each category to help you stick to your budget. 40K A Year Salary Is How Much An Hour After Taxes? 2028 Making 40k a year is within 20% of the national median household income in the US. To calculate the rent thats right for you, factor in your monthly expenses and how You can make the most of a $40K salary by tracking your spending, cutting down expenses, and building your savings. \n\nNo state, county or city in the country allows a full-time minimum wage worker to pay for a two-bedroom home.\n\nA full-time minimum wage worker can only pay rent for a room in 7% of US counties - 218 counties out of a total of more than 3,000 nationwide.\n\nIn fact, the income of a minimum wage worker with a family of four is well below the poverty line. I get paid twice a month, now what? I would recommend investing at any and every stage of your life. Also, the countrys median household income is $63,179 a year, so you can consider $40,000 a good salary after all. By creating a budget, living frugally, and avoiding debt, youre more than halfway to living comfortably with $40k a year. In these cases, you might need to adjust other areas of your budget to determine, How much rent can I afford?. Finance, and Business Insider. Taking 30 percent of that, you should be able to afford up to $2,500 per month in rent. Perhaps moving in with your partner or sharing a place with friends is an option. Financial stability is certainly possible while making $40,000 per year, but it will require some sacrifices. One effective method to crunch the numbers is to follow the 50/30/20 rule, by which you should budget 50% of your gross income for needs housing, utilities, food 30% for wants, and 20% either for savings or to get rid of debt. How Much Does Home Ownership Really Cost? to survive well while making $40K include. For proper functioning of the page Cookies are needed. In this regard, other connecting aspects of housing become extremely relevant to succeed with $40k a year. "name": "What percentage of income should go to rent? All personal personal personal and financial factors should be considered before signing a lease. "@context": "https://schema.org", "text": "Use net income when calculating how much rent you can afford. {"@context":"https://schema.org","@type":"FAQPage","mainEntity":[{"@type":"Question","name":"How much rent can I afford on a $40k salary? ", The important thing to note for this sample budget is that it is based on the high end of the monthly take-home range at $2,833. Now if you are 10 years into your career, or just starting your first job the answer is different. Possibly, never before had income mattered more than in these uncertain pandemic days. Rent it out nights while you're sleeping on TORO. states that the median salary for workers in the US is around $1,041 weekly, which equates to $54,132 annually. So, for example, if you make Although the following cities offer a better standard of living, theyll definitely hurt your bank balance. Thats a decent chunk of change. Using an FHA loan for example you can put down as low as 3.5% of the purchase price. Still, there are several actions you can take to steer away from bad debt. For now, though, use these tips to make sure you stay financially stable on $40,000 per year. WebOn $40,000 annual salary you can afford ~$1,000/mo in rent Where is your money going? That means that to calculate how much 40k a year is per month you will need to divide 40k by 12. Its essential to keep your feet on the ground when choosing where to live if youre making $40,000 a year. With a fairly easy to live with budget above, there was an excess of $2,833 - $2,580 = $253. 2 stars equals Fair. Consider your monthly income and factor in your various expenses such as groceries, gas, student loans, or medical bills to estimate what you can comfortably afford. If you and your spouse will collect $2,000 a month from Social Security, or $24,000 a year, you'd need about $16,000 a year from your savings. While theres no one-size-fits-all answer, most guidance is to spend no more than 30 percent of your income on rent. Plus there are strategies like house hacking that can help bring your housing expenses down, and some people can make a profit! The personal finance rule of thumb for housing costs is that they should equal no more than 30% of your gross income (that's what you make before you pay taxes). However, you must be smart with budgeting and choosing your residence location. For instance, if you make $2,775 minus the taxes from $40K annually, your rent should be around $690. Given how rapidly cars lose their value, it's generally smarter to buy a used car regardless of what you earn. How Much Rent Can I Afford On A $40,000 Salary? If you make a $40k yearly salary, you can realistically afford about $1,111 in rent per month. Youll avoid having to pay interest on a credit card, and you wont have to drain your regular savings just to get into your new place. Based on the criteria you provided, heres how much rent youll pay monthly: X,XXX If you do know, take out the appropriate amount from each paycheck. How to use the Money Under 30 Car Affordability Calculator. "@type": "Question", ", "@type": "Question", Yes! Yes. Using a common rule of thumb, consider putting 30% of your gross income toward rent. Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. 6330 Kufstein. Most people, me included, Yes, the figure is low, but youll have to find a place that fits that bill if you want to have a bit more financial freedom and build wealth in the long run. Now if you are paying taxes it will most likely be closer to $596 - $683. A year has 52 weeks, so that means that we can divide $40,000 by 52 to find how much $40k is a week. For example, if the average cost of all your utilities for the past three months was $300 and you receive two paychecks per month, put $150 aside at every paycheck. Updated July 17, 2021 - First published on July 20, 2020. Plus, if you arent living in an expensive US city, you might actually even do well within the given salary. Separately, in another area of the paper, put your wants eating out, clothing, travel and somewhere near, your savings always keeping in mind the 50/30/20 rule. Look into all of your investing potential and do your due diligence. Single people have a tough time buying homes unless they make an above-average salary. For example, if you are a single adult living alone, $40K would be enough to feed yourself and bear all monthly expenses.