Hi Ben, is $40,000 a good yearly salary? How long will it take me to retire?
The number of people who makes this question is overwhelming. It doesn’t have to be $40000; I get the very same question for $20k-$200.
I think that most people are essentially trying to know how that salary compares to what other people earn. Most people who ask me want to know whether they can retire early.
We try to measure our success based on how it looks compared to other people’s success. Money is an easy way to compare ourselves with others. I think that many people end up making ridiculous comparisons – those that completely ignore important variables. Afterall, we shouldn’t compare ourselves with others that fast. We may make tons of mistakes.
For instance, I’ve come up with really good answers to convince some people their $40,000 or $50,000 salary was good, even when they thought it was not. I’ve convinced some people that $100,000 was not exactly a good salary, given the potential, location, and goals of one specific coaching client.
What is the lesson then? Well, each salary is attached to a specific person, with a specific background and education, in a specific city in a specific country. I cannot say outright whether $40,000 is actually a good salary. It depends on many variables, which I will review in this post.
OK, but is a $40,000 salary good?
I will break it down this question into several parts, that will probably help you given the number of scenarios I am pointing out.
It definitely depends on the context you’re in…
It depends on your skills
It depends on the goal…
Early retirement
It is not how much money you make, it is how much you keep!
It depends on the number of dependents you have
You meant “Ben, is $40,000 a good salary for myself?”, right? Making $40,000 can be a very good salary for one person, but it can be a very bad one if you have many children or you need to support your spouse. It can be great as well – again, it depends on many variables.
Scenario with kids….
Now, let’s say you just graduated and you got an offer for $40k. That is most certainly enough to put you on the early retirement path if you do things right. 40k can go a very long way in the hands of a recent graduate. Especially if you’re single or you don’t have to support your spouse.
How much is 40k after taxes?
Again, this highly depends on the country you live in. I can tell you about Portugal, where I live now.
40k means $3,333 a month. This translates into $2,136 net per month, as the original salary is taxed at about 30%. This is very similar to what you’d get in the US. However, note that there are many variables here, including the state where you are, the number of children, etc.