Is $45,000 a Good Salary? What Sort of Lifestyle Will I Have?

June 30, 2021

If you’re looking for a job, then one of your top priorities will be finding a role that pays well and supports a comfortable lifestyle. If you’ve only ever worked part-time before, perhaps at an hourly rate, then it can be difficult to get your head around an annual salary. Five figures of cash may sound like loads all in one whack, but how does it translate when you break it down to a monthly or weekly income.

So, is $45,000 a good salary to earn? Imagine you’ve seen a job ad for a position you are interested in which is offering this amount of compensation.

This guide will explore exactly how much you can expect to take home as wages and what type of lifestyle you can afford.

Crunching the numbers

Let’s dive right in and crunch the numbers involved in a $45,000 salary.

It would be unusual to be paid your annual wages all at once, so how much can you expect to take home each payday?

Before accepting a job with a $45,000 salary, it’s important to know how many hours you’ll be expected to work each week.

Somewhere between 35 and 40 hours per week would be typical, with some employers offering two weeks of paid vacation too.

So, assuming that you work 40 hours a week, and receive paid vacation so your earnings will stretch over the full 52 weeks of the year, you’ll earn the following:

$3,750 per month
$865 per week
$173 per day
$21.63 per hour

If you don’t get paid vacation, then your rate will increase to $22.50 based on 40 hours x 50 weeks of the year, but remember that there will be two weeks where you won’t be paid if you take leave.

Sounds good, so far? Let’s not forget about tax though.

Tax on your $45,000 salary

Of course, the elephant in the room is that you won’t see all of this money because a chunk of it is paid out in tax. So is $45,000 a good salary after you’ve taken tax into account?

This partly depends on where you live. Nine US states won’t charge your salary, so if you’re lucky enough to live in Alaska, Nevada, Florida, New Hampshire, Tennessee, Washington, Texas, Wyoming or South Dakota then your earnings will stretch that bit further.

In the rest of the country, a federal income tax rate is charged that is based on how much you earn. There are seven different tax brackets as follows for the 2021 year:

Earnings up to $9,950 pay 10% tax
Earnings between $9,951 to $40,525 pay 12%
Earnings between $40,526 to $86,375 pay 22$
Earnings between $86,376 to $164,925 pay 24$
Earnings between $164,926 to $209,425 pay 32%
Earnings between $209,426 to $523.600 pay 35%
Earnings over $523,600 pay 37%

As you can see, a $45,000 salary appears to fall within the 22% bracket, but what this actually means is that you’ll pay:

10% on the first $9,950 of your earnings which is $995
12% on the portion of your earnings between $9,951 to $40,525 which is $3668.88
22% on the portion of your earnings between $40,526 and $45,000 which is $984.28

So you don’t actually pay 22% on your entire salary. In fact, with a combined tax bill of $5648.16, this is around 12.55% of your $45,000 salary that you’ll pay out in tax, so you can expect to take home $39,351.84 in wages.

Is $45,000 a year good in comparison to other Americans?

Maybe it shouldn’t be important, but it’s only human nature that makes us want to compare our earnings to other people.

Is $45,000 a year good in comparison to other typical American employees?

Recent research suggests so, with the average hourly earnings during May 2021 across all employees coming in at $11.29.

This is substantially less than the $21.63 per hour you’d receive on a $45,000 salary.

Is $45,000 a year a good salary for a comfortable lifestyle?

Even though we’ve seen that $45,000 is a reasonably good salary, the type of lifestyle you can afford will depend on how many people you need to support with it.

Is $45,000 a good salary for a single person? Yes, absolutely.

If you don’t have children or a spouse to support, then your salary is likely to provide you with a comfortable lifestyle.

However, single people may also be committed to higher rent or mortgage payments if there’s no one to split the bills with, so that’s worth considering too.

If you’re a recent graduate who is starting out on a $45,000 salary but is still living at home with your parents, then you should be able to set aside a significant chunk of money each month to place into your savings for the future.

If you’re saving up for your own place, for further education or just a gap year trip around the world, then this should quickly accumulate so long as you’ve picked the right saving strategy.

If you’re supporting a family though, with one or more children then you might find $45,000 a tighter salary to live off.

The USDA issued a report on ‘Expenditure on Children by Families’ which revealed that babies born in 2015 will cost an average of $233,610 to raise by the time they reach 17 years old.

For a middle-income family, you could expect to spend around $12,980 per child per year. So if you have two children, then that’s almost half your salary taken up.

How to maximize your $45,000 salary

Whatever your domestic situation, everyone can benefit from learning some simple strategies to maximize the amount that they earn.

The first job when putting together a budget for your monthly expenses, is to pay yourself first.

That’s right. Putting away 15% or even 20% of your monthly pay packet will enable you to save for the future and ultimately commit to positive financial habits.

Once you’ve put aside your savings, the rest of your wages can be portioned out into your necessary outgoings and your luxury expenses.

The first of these categories will cover housing costs such as your rent or mortgage – this will usually be your greatest cost.

You also need to factor in how much you spend on transport, whether that be car loans, gas and insurance, or the cost of public transport.

Other necessary bills include your gas, electricity and water supply as well as broadband, mobile phone and even subscriptions such as cable. And of course food!

Even with your necessary outgoings, there’s always room to reduce some of these costs.

You might shop around to find a cheaper car insurance quote, or move to a less expensive apartment to make more room in your monthly budget.

Ideally, this category shouldn’t take up more than 50% of your budget.

The remainder, which is around 30% if you’re counting, can be spent on luxury expenses such as eating out, beauty treatments or splashing out on clothes or accessories that you just HAVE to have.

Feel free to browse the rest of our extensive collection of personal finance articles.