Forty thousand dollars isn’t chump change, but is 40K a lot of money? It’s really going to depend on your personal situation. Let’s take a closer look to determine what you can and can’t do with 40 thousand dollars. You might be surprised.
Is 40K a Lot of Money
When I was broke and didn’t have a real income, $40,000 dollars would have seemed like a great deal of money.
But if you have a family or living somewhere where the cost of living is high, then 40 grand might not meet your needs.
Here are a few scenarios to check out.
$40,000 Dollars as a Salary
Forty thousand dollars isn’t a bad salary. It’s about five thousand dollars above the national average, so that’s good.
If you’re single, you should be able to pay your monthly expenses on this and have some left over for fun and savings.
Of course, if you have a lot of debt such as student loans or credit card debt or you live in a really expensive city, you might not be able to make it on 40K.
Where I live, you can live very comfortably on this kind of money. Add a second income into the mix, and you would be in really good shape even if you have kids.
$40,000 Dollars as a Gift
Wouldn’t it be nice if someone handed you $40,000 dollars as a gift?
This extra money could really come in handy.
Most likely if someone did give you this money it would be for a down payment on a house, or maybe to pay for your wedding.
Regardless, it is a nice amount of money and would certainly help improve your personal finances but most likely, it isn’t going to change your life.
$40,000 Dollars for Retirement
Forty thousand isn’t going to get you very far when it comes to retirement savings.
It’s certainly better than nothing, but if you are saving for retirement, you will need a lot more if you want to be able to cover your living expenses and enjoy your retirement.
Most experts suggest having at least a million dollars in your retirement savings.
Things to Buy with $40,000 Dollars
If you happen to have 40K laying around and want to spend it, there are a number of things you can buy.
- Some SUVs
- A decent boat
- Maybe a cabin in the woods
- You might be able to pay off your student loans
$40,000 Dollars to Live On
As mentioned above, as a single person, you can live on $40,000 if you are careful with your money and don’t live in an expensive city, but it is going to be difficult to buy a house, have a nice car, and make sure your kids can get involved in activities.
For most major cities, you will need closer to $65,000 dollars a year to live comfortably and in some places such as New York City, you will need closer to a hundred thousand dollars.
So, be careful where you decide to live.
Find a place you like and where your money can go further.
$40,000 To Have In Your Savings
Forty thousand dollars is a nice amount to have in your savings accounts.
A rule of thumb is that you should have 3 to 6 months of your monthly expenses in a savings account to use as an emergency fund.
This should help you cover any unexpected expenses.
Anything over that, you should really try to invest.
$40,000 Dollars to Invest
If you have $40,000 dollars to invest, you’re in a great place financially.
Whether you invest in the stock market or something less risky such as a mutual fund, or something else your financial advisor suggests, you will make good money over time.
If you are able to invest this amount and receive 9 percent interest for 30 years, you would end up with $530,000 dollars.
It’s amazing how much your 40K can grow into.
Add an additional 10 years and you would earn about $1.2 million dollars which would certainly make retirement much more enjoyable.
Here is a free calculator that will show you how your money can grow.
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What Can’t You Do With $40,000 Dollars?
While $40,000 is nothing to sneeze at, there are many things you can’t do with it.
For example, you can’t:
- Spend a month at the Ritz Carlton
- Buy a 10-carat diamond
- Buy a speed boat
- Buy a brand new Ford F-150
What is $40,000 Per Year an Hour?
If you are working full-time then you are making $19.23 an hour.
That is two and a half times the current federal minimum wage.
How Much Per Month is $40,000?
That will mean you are making $3,333 dollars as your monthly income.
Not amazing, but not bad either.
It won’t give you financial freedom, but you won’t be broke either.
Can You Buy a House with $40,000 Dollars?
You might be surprised to discover that if you live in a small town in the middle of the country, you can actually buy a house for $40,000 dollars.
It’s not going to be a fancy home, but it won’t be a dump either.
Of course, if you live someplace where housing costs are higher, you could still use the 40K as a down payment on a $200,000 dollar home.
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To Sum it All Up:
$40,000 dollars isn’t a bad annual income at all, but it might not be enough to live the life you’d like. You’ll have to be careful with your spending, so you can save for retirement and help put the kids through college.