A yearly salary of $40,000 converts to an approximate hourly wage of $20 per hour.
If you work 40 hours a week and take 2 weeks of vacation per year, you work 2000 hours per year.
$40,000 / 2000 hours = $20 / hour
How to do the mental math calculation
A quick way to convert a yearly salary to an hourly rate in your head = Divide the salary by 2 and cross out 3 zeros aka divide by 1000.
- So $40,000 = $20,000.
- Then cross out 3 zeros = $20,
000and you get $20
- Let’s try it again. $100,000 / 2 = $50,000.
- Cross out 3 zeros and you get $50 per hour!
- Viola it’s that easy.
You can also do the mental math the other way from an hourly rate to a yearly salary.
- $20 per hour * 2 = $40
- Then add 3 zeros to get $40,000.
What’s your after tax hourly rate?
At an annual income of $40,000 you’ll pay about 11% in federal and state income tax. That will change sligthly depending on which state you live in or if you’re lucky enough to live in a state without income tax.
You’ll also pay about 8.25% in social security and medicare taxes.
- Federal and State Taxes = $20 * 11% = $2.2
- Social Security and Medicare = $20 * 8.25% = $1.65
- Total taxes ~ $3.85
- Your after tax hourly wage ~ $16.15
Looking for a more accurate calculation? Check out one of my favorite tools, the paycheck calculator over at smartasset.com
Learn the simple habits that can change your life
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Fast forward a decade and now I’m financially independent at the ripe old age of 32. What to learn the “tricks” that helped me get there?
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