You may be tempted to grab some cash from savings and emergency accounts, but dont. There's more than one way to decide how much rent you can afford. shouldnt go higher than $18,000or $1,500 per month. Now that you know your budget, search for a rental within your preferred area. So, if youre someone who likes having a bit of extra savings in the account, its best to keep your rent to less than or equal to 25% of your monthly salary. Then tailor your budget accordingly." Plus, if you arent living in an expensive US city, you might actually even do well within the given salary. We have not reviewed all available products or offers. WebMost home loans require a down payment of at least 3%. Now, if you are raising a family that might make things more difficult. Updated July 17, 2021 - First published on July 20, 2020. One key factor is controlling your lifestyle. If your last place came with your roommates sofa, and now youre venturing off on your own, you may need to include some new furniture in your costs. ", / 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. how much rent you could pay, or what expenses are not necessary. Try to keep these costs below 50 percent of your total net (after taxes) income. 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. If your annual pre-retirement expenses are $50,000, for example, you'd want retirement income of $40,000 if you followed the 80 percent rule of thumb. With increasing inflation, producer inflation soaring, and logistics problems that have skyrocketed the price of certain goods, making good money is a priority. If utilities are included and you have low transportation costs, you might be able to afford rent closer to 40% of your income, if thats of interest to you. 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. This would change the rent you can afford to around $833.33 per month. And this is where choosing an affordable city or state to live in is essential. This way, youll end up spending $933 monthly with a $40,000 annual salary. "text": "The 50-20-30 rule is a recommendation for how to spend percentages of your after-tax income on specific expenses. But of course, every renters budget is unique. 5 stars equals Best. Generally speaking, a $40K is considered below average in the US and will probably leave you strapped for cash. But if youre more of a homebody who doesnt spend a lot of money on leisure, then invest more into your rent budget so you can afford a nicer apartment. "@type": "Answer", Proponents of raising the minimum wage argue that this helps incomes catch up with the rising costs of living and lift millions out of poverty. When he's not brushing up on the latest Finance news or feeding his entrepreneurial side, Jason loves to solo travel, geek out on SEO trends and get some exercise in with long walks. Fallback emergency funds are also very useful to avoid bad debt, and the idea is to have savings of 3 to 6 months of your salary, to deal with the unexpected side of life this can be done by budgeting on your annual salary. I also know that your primary residence shouldnt count as an investment, but owning one home makes it much easier to buy another and another and another. The first question to ask is, How much rent can I afford? If you dont know the answer, a rent affordability calculator is a great place to start. You might find that you actually spend money on more wants than needs. A good salary in America is $51,000. You would have to evaluate the market and decide whether either housing or commercial property is the way to go. Zillow, Inc. holds real estate brokerage licenses in multiple states. },{ Tell Me The 28/36 Rule And How I Can Use It On A $40K Salary. Thats a decent chunk of change. This is just a general rule of thumb but it is definitely a worthy guideline. 1. If you have to give up yoga classes or a Netflix membership to cover rent, decide if thats really something you can really live without, so you can make the most realistic decision on how much rent you can afford. You can expect to pay around $701 for monthly rent in Springfield. "mainEntity": [{ 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. In addition to making monthly car payments, you'll need to cover gas, repairs, and car insurance. Perhaps moving in with your partner or sharing a place with friends is an option. "@type": "Question", Write down a list and work backward from there. The trademarks MLS, Multiple Listing Service and the associated logos are owned by CREA and identify the quality of services provided by real estate professionals who are members of CREA. The federal minimum wage since 2010 is $7.25 per hour, which represents a gross monthly income of $1,256 or around $15,000 a year. If your dollars arent working for you, they are working for someone else. Consider that your take-home pay is probably around $2,400 per month. While theres no one-size-fits-all answer, most guidance is to spend no more than 30 percent of your income on rent. Lets pretend that you make $40K a year. Use the guidelines below to help you with your budget decisions. }. You only pay this when your deposit is less than 20% of your property's value. Is a $40K salary good or enough to live on? stands second on the list of cities with high rental costs, with, The average rental costs in New York hit a record high, peaking at. There is an assortment of loan products currently available to people looking to buy a house. If you are living in a low cost of living area you will be able to stretch your dollars even further. by Elizabeth Aldrich | But of course, every renters budget is unique. I have $700 in my IRA 665 206 206 comments Best Add a Comment WrongKielbasa 1 yr. ago Trick is to cash out your IRA and get a $120k car. "acceptedAnswer": { This is how it could look like, just to give you an idea: When living on $40k a year, your marital status is something very critical and could make things go either way, good or bad. If you live alone or you live in a low cost of living area then your dollars will stretch further. You can use the slider to change the "name": "How much should I budget for monthly utilities in my apartment? There are millions of people who make ends meet doing a lot of juggling. So, as things evolve, sure, you can live on minimum wage albeit without much dignity. Savings, debt and other expenses could impact the amount you want to spend on rent each month. if(typeof ez_ad_units != 'undefined'){ez_ad_units.push([[250,250],'pineapplemoney_com-box-4','ezslot_5',109,'0','0'])};__ez_fad_position('div-gpt-ad-pineapplemoney_com-box-4-0');Now, is $40,000 a good yearly salary? 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. Hey, I dont get paid weekly, or biweekly. Other factors like your level of education and career can also affect the amount youre able to qualify for, depending on According to Lisa Greene-Lewis, tax expert for TurboTax, In most cases, a married couple will come out ahead by filing jointly. With a diverse range o PFGeeks.com is a 201 Creative, LLC website14781 Pomerado Rd #10, Poway CA, 92064. To see how you can live on $40,000 a year, you must take into account the annual median personal income in the U.S., as well as other references to put your income in perspective. WebThe simple answer to How much rent can I afford?. if you are making $40,000 a year you are making within 20% of the average salary in the US. Which means that an average salary is typical or good. Thanks to compound interest, just $700 per month could become $100k in 9 years. Your budget is 35% or $14,000, and you plan to make a 20% down payment of $2,800. If you dont have any outstanding debts and share a place with either your partner or a friend, you might be in a very good position. Another commonly used method is the income to rent ratio. In this post, Ill break down the answer to Is a $40k salary good? and provide tips on how to make the most out of a $40k annual income. 1 star equals Poor. "text": "No, but not making that much can be an issue. WebSavings, debt and other expenses could impact the amount you want to spend on rent each month. "@type": "Question", Perhaps moving in with your partner or sharing a place with friends is an option. Now if that is good money for you, then you shouldnt worry about what others say. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. This browser is no longer supported. If you don't already have utilities set up, ask your neighbors or landlord for an estimate of what's normal." That depends on how frequently you get paid, and how much taxes you are liable for. ($40,000 - $9,000) / 52 = $596.15. Our picks of the best online savings accounts can earn you 12x the national average savings account rate. Now if you are paying taxes it will most likely be closer to $596 - $683. If you want to live on $40,000 a year, keeping track of your spending on a regular basis can give you an accurate picture of where your money is going and where you really want it to go. 2023 RentGroup Inc. All rights reserved. If you avoid bad debt, your dollars will stretch even further and be able to be put to work. } Stefan Nothegger A year has 52 weeks, so that means that we can divide $40,000 by 52 to find how much $40k is a week. If you make $40,000 per year, you can afford a house anywhere from $100,000 to $160,000. On the other hand, living with your parents or sharing a flat with your friends is a good way to save money on accommodation. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. You will probably have to decide between moving in alone in a cheap area or living with roommates somewhere more metropolitan. "name": "How much of your paycheck should go to rent? have skyrocketed in 2022, hitting $5,500 monthly. Should you still take a job that pays less than the industry average? Its essential to keep your feet on the ground when choosing where to live if youre making $40,000 a year. $769.23/week 40 hours/week = $19.23/hour. If every dollar is spent and none of it is invested you could make a million dollars a year, and have a similar networth to someone making $40k a year. With so many price points and options available in many places, it can be hard to know where to begin when, is a great place to start. Read this article to learn more about percentages of income and rent. So, if youre someone who likes having a bit of extra savings in the account, Best American Cities To Live Well on a $40K Salary. If you disagree this service is only available in very limited ways. With a fairly easy to live with budget above, there was an excess of $2,833 - $2,580 = $253. All personal personal personal and financial factors should be considered before signing a lease. That would be a mortgage amount of $241,291.87. {"@context":"https://schema.org","@type":"FAQPage","mainEntity":[{"@type":"Question","name":"How much rent can I afford on a $40k salary? You know your wage is very important to secure a good standard of living, but if you make $40k a year or are offered this wage in a job opportunity, you might start wondering: is $40,000 a good salary? To calculate the rent thats right for you, factor in your monthly expenses and how Getting your housing and transportation costs under control is the first step to getting your finances in order, and doing so will likely offer you a lot of financial breathing room. Some examples include credit card debt, auto loans, personal loans, and loan shark deals. Taking 30 percent of that, you should be able to afford up to $1,250 per month in rent." Depending on your circumstances that could leave you with a lot of money to invest with, and continue to progress towards financial freedom! 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. Thats the average, and average according to Merriam-Webster means, a level (as of intelligence) typical of a group, class, or series. This will be harder to achieve in some places than others, but it is possible. Adjust the percentage lever to determine the right fit for your budget. Cutting down expenses certainly helps. ", "name": "What is the 50-20-30 budget rule? Elizabeth is a writer specializing in credit cards, debt repayment, and small business. No, but not making that much can be an issue. We can quickly do the math by dividing the total amount paid minus taxes by the number of biweekly pay periods in a year. Your total living expenses (rent, utilities, groceries and other essentials) should be less than 50 percent of your net monthly household income. The median income for individuals in the United States is $33,706 as of 2018. However, the current government has promoted a reform to achieve $15 of hourly wage to go in effect as of March 2022. Gross Paycheck $3,333 Taxes 17.34% $578 DETAILS Federal Income 10.32% $344 State Other valuable tips to make the most of your $40,000 salary:Take a good, long look at your monthly subscriptions. That equates to a median salary of approximately $51,000 a year. A 50-50 split sounds fair, but its not always right for everyone. Its personal. WebThe home affordability calculator will give you a rough estimation of how much home can I afford if I make $40,000 a year. "text": "Most personal finance experts would recommend paying no more than 30 percent of gross (before tax) monthly income for rent. All photos, videos, text and other content are the property of RentGroup Inc.