Many jobs nowadays pay around $20 an hour, even part-time and freelance jobs.
Of course, the actual rate depends on your country as well as the industry itself. Still, it pays (no pun intended) to know how much you would be making annually, so you can budget properly.
With that in mind, how much money would you be making in a year if you earn $20 an hour? Assuming you have a 40-hour work week, you would be working a total of 2,080 hours a year. So, $20 an hour equals $41,600 a year before you consider taxes, overtime, holidays, etc.
$20 an Hour: Annual breakdown
The math behind this is quite straightforward.
If you work the standard 40 hours per week, then you just need to multiply $20 by 40 hours. You get $800 per week. Multiply that by the number of weeks in a year, which is 52, and you get $41,600 a year.
(20 x 40) x 52 = $41’600
Of course, this is just an estimate. There are different factors that influence your annual income. That can be unpaid leaves, overtime, maternity leaves, commission, and of course taxes.
$20 an Hour is How Much a Year After Taxes
This is where the answer is “it depends”.
It depends on your location and situation. How much you pay here depends on what is applicable.
Taxes do not always mean a bad thing, however. Sure, you have to pay your income tax, but it can be lower if any tax exemption or deduction applies.
Check the Federal Income Tax tables as well as your local tax legislation if you are not from the US to determine how much you need to pay.
Let’s assume you are from the United States.
According to the IRS, the standard deduction for single filing status is $12,950 for 2022.
Subtract that from the $41,600 of your income and your taxable income is $28,650.
If you make $41,600 a year, then your taxable income is in the 12% bracket according to the 2022 federal tax rate.
Therefore, $10,275 of your taxable income will be taxed at 10%, and you pay $1,027.5. The rest of the $18,375 will be taxed at 12%, meaning $2,205.
After all the federal taxes aside, your annual income is $38,267.5. But that is not the only tax obligation you need to fulfill.
There is also FICA to think about. That includes Social Security and Medicare.
Then, there are taxes at the state and local levels. The rates vary depending on your location, but you can expect your final income to be somewhere around $32,000.
I take in many factors when making these calculations. Unfortunately, some of these factors may not apply to your situation, so consider the figures above a rough estimate.
The biggest influencer here is the state and local taxes, which depend on where you live.
Unfortunately, the government is not going to figure it out for you. Therefore, you need to understand the U.S. tax system and consider what applies to your situation.
To give you an idea, here is a list of some states and their tax cuts and how much you would earn at the end of the day. We are going with the rate of $20 an hour annual salary.
| States | Federal Income Tax | State Income Tax | FICA | Total Income Taxes | Take-Home Pay |
| Alabama | 7.90% ($3,287) | 4.09% ($1,701) | 7.65% ($3,182) | 19.64% ($8,170) | $33,430 |
| Alaska | 7.90% ($3,287) | 0.00%($0) | 7.65% ($3,182) | 15.55% ($6,469) | $35,131 |
| California | 7.90% ($3,287) | 2.32% ($967) | 7.65% ($3,182) | 17.88% ($7,436) | $34,164 |
| Florida | 7.90% ($3,287) | 0.00%($0) | 7.65% ($3,182) | 15.55% ($6,469) | $35,131 |
| Iowa | 7.90% ($3,287) | 3.72% ($1,546) | 7.65% ($3,182) | 19.44% ($8,087) | $33,513 |
| Massachusetts | 7.90% ($3,287) | 4.47% ($1,860) | 7.65% ($3,182) | 20.02% ($8,329) | $33,271 |
| Missouri | 7.90% ($3,287) | 2.89% ($1,202) | 7.65% ($3,182) | 18.44% ($7,672) | $33,706 |
| Nevada | 7.90% ($3,287) | 0.00%($0) | 7.65% ($3,182) | 15.55% ($6,469) | $35,131 |
| New Jersey | 7.90% ($3,287) | 1.80%($751) | 7.65% ($3,182) | 17.36% ($7,220) | $34,380 |
| New York | 7.90% ($3,287) | 4.26% ($1,770) | 7.65% ($3,182) | 19.81% ($8,240) | $33,360 |
Keep in mind that the above is just a rough estimate, as other factors can increase or decrease the take-home amount.
If you want a quick and rough estimate for your situation, just assume that 25% to 30% of your income will go into tax.
$20 an Hour is How Much a Month After Taxes
If you have a full-time job and make $20 an hour, then you would earn $3,200 a month.
This is assuming you work 40 hours every week, or 160 hours a month. Going with the rough 25% tax estimate, you would get $2,400 a month on a $20 per hour rate.
$20 an Hour is How Much a Week After Taxes
Again, assuming you work 40 hours a week. Multiply $20 by 40 and you get $800 as your weekly income. After the 25% tax cut, your take-home money is $600.
$20 an Hour is How Much Biweekly After Taxes
Every two weeks, $20 an hour is $1,600 biweekly. After taxes, you should have roughly $1,200. This is assuming the 25% tax deduction.
20$ per Hour Part Time Salary
Your salary for $20 an hour on a part-time job depends on the actual hours you work.
Suppose you work only 20 hours a week, or 1,040 hours a year, then you would earn $20,800 a year before taxes.
After taxes, you are looking at around $15,600.
Is 20 Dollars an Hour Good?
Before you lose yourself in the numbers, take a step back and look at the whole picture.
The question is whether $20/hour is enough. $20 an hour is $41,600 a year without considering taxes.
In the first quarter of 2022 alone, the median personal income was $1,037 a week for US workers (Source: Bureau of Labor Statistics). That translates to $53,924 a year.
So, if you happen to earn $41,600 a year, your income would be below the national average. To give you an idea, if you have a job that only pays $20 an hour, then you can only afford a mortgage on a home that is worth less than $200,000.
However, many Americans made it work on that budget.
Whether $20 an hour is good enough depends on where you live and your lifestyle. Unless you live in some of the most expensive cities in the U.S. (New York City or San Francisco, etc.), chances are that you can get by with that much.
How to Budget with $20/hour Yearly Salary
With all the figures in mind, the question becomes, “How do I budget on a $20 per hour wage?” I will tell you how.
Take your income, after tax of course, and allocate it into 3 different groups.
50% of your money is on your “needs”, 30% on “wants”, and the remaining 20% goes into “savings“.
50% on Needs
What are “needs” in this case?
These are the bills that you need to pay, as well as some other things you need for survival.
In other words, the things that you cannot live without. These include rent or mortgage payments, insurance, groceries, car payments, etc. These are must-haves.
The trick is to understand what counts as a “need”. HBO, Netflix, Starbucks, and dining out are nice-to-haves, not “needs”.
Half of your income after taxes should be everything you need to cover your obligations and needs.
This takes precedence over any other category, so you can be flexible here as needed. For instance, if you need to spend over 50%, you can.
However, you need to cut down on “wants” or try to change your lifestyle to accommodate the budget. That means, buying a smaller home or a more affordable vehicle. Consider taking public transportation or carpooling, as well as cooking at home.
Of course, this should be a last resort. Sometimes, the root of your budgeting woes comes down to a simple misunderstanding between “needs” and “wants”.
30% on Wants
“Wants” cover everything that you spend your money on that is not essential.
They are nice to have, but not important for your survival. That includes the new handbag, smartphone, movie, dinner out, vacations, and superfast internet connection.
Now, one might argue that having a reliable internet connection is a necessity, and it should fall under the “need” category. In some cases, that would be correct.
Those who work from home need a reliable internet connection. However, they can probably make do with slightly slower connections. Sure, it would slow things down a bit, but they spend far less money on the internet.
Anything in the “wants” category is optional. If there is an alternative, it is a “want”.
For instance, a gym membership might seem like a “need” since you want to stay healthy. However, you can work out at home instead.
Instead of eating out, cook at home. You do not need to see the sport in person when you can just enjoy the same thing on TV.
“Wants” also extend to alternatives to your “needs”.
For instance, buying an expensive steak instead of a cheap burger also counts toward your “want”. Choosing to spend money on cable TV when you could be using an antenna for free also falls in this category.
In short, wants are the little extra things you spend money on to make your life more entertaining and enjoyable.
20% on Savings
The remaining 20% of your income should go toward savings and investments.
That means, putting your money toward an emergency fund in a savings account, making IRA contributions to a mutual fund account, and investing in the stock market.
You need to have at least 3 months in emergency savings in case you lose your job or when something bad happens unexpectedly. That is the minimum amount.
You can go further to 6 months or even a year. From there, you can focus on saving up for retirement and other financial goals down the line.
It is also worth pointing out that should you dip into your emergency fund for whatever reasons, the first thing you need to do when you start to earn again is to replenish the emergency fund.
Also, savings can go into repaying your debt. Indeed, minimum payments are part of the “needs” category, but any extra money you could spare to reduce the future interest and principal counts toward saving.
If you can afford something, buy it outright instead of paying in increments. The latter might seem like a more attractive option since you can get the goods or services without spending too much money immediately, but the amount you pay down the line monthly or weekly will add up.
If you do the calculations, you will realize that you end up paying more for the product compared to paying everything upfront.
How to Make More than $20 an Hour Salary
Many people can get by with just $20 an hour. Here are a few tips on how you can make the most of your budget.
1. Start a Side Hustle
Reducing your spending and saving more of your income make sense. But! It has limitations.
You need to come up with new ways to make more money. Your typical 40-hour work week might not be enough to cover all your expenses.
Your financial situation will not become better if you don’t find a way, how to increase your income.
And starting a side hustle is one of the most effective ways to do it.
Think about your expertise in something that you could turn to value.
What do you find joy in doing? How can you monetize it?
Thanks to the infrastructure internet has created, starting an online business has never been easier.
There are many ideas you could consider starting your own independent business.
From e-commerce, online courses, book sales, digital marketing or blogging.
This is a good way to go from financially struggling to independent if you do it right.
2. Save Money
It sounds easier than it is. The key here is to make saving money more fun.
The best way to do this is to have other people holding you accountable. Participating in some sort of no-spend challenge with your friend or family member for the month.
Perhaps challenging them not to go to Target for a week or a month is a good example.
3. Learn in Demand Skills
Sometimes, the solution is to change your career.
Of course, this is not a small change by any means. Therefore, consider this one of the few last resorts.
Although, if you are struggling financially, then chances are that your current career path is not the way to go. But before you jump ship, you need to know what is on the other side first.
That means, understanding what skills are in demand first. Here, you need to do a bit of digging.
Ideally, you get a job that you find pleasure in doing for a long time. At the very least, the job should be something you can tolerate without sapping your happiness.
4. Cut Down Living Expenses
Live below your means. The biggest obstacle to your budgeting is differentiating between your “wants” and “needs”.
If you take a step back and look at it, you start to find that many of your “needs” are actually “wants”.
Yes, it would make life more difficult for you, but it is not like you can afford everything in the first place. You need to make do and cut down on living expenses.
Drop the coffee, switch to slower internet, do not buy new electronic gadgets, drop all those entertainment subscriptions, etc.
Conclusion
How much $20 an hour is to you depends on where you live. In the United States, it is hardly ideal and you might need to get creative with your budget. Sometimes, a career change is the solution to turning around your financial situation.
But if you can get creative with your side hustle, you can make more than $20 an hour. Who knows? Maybe your side hustle can become your new business.
