Maybe you’ve just come across a job ad or been offered a job that costs $25 an hour and it’s time to analyze the numbers. $25 an hour is how much a year? What about per month, week and day?
TL;DR: If you came up with $25 an hour just because of the short answer, how much is a year? Short answer: $52000 before taxes.
How much do you have left after taxes? Is $25 an hour as a freelancer any different than being a W-2 employee for a company? Let’s dive into these questions and more information on how well you could do with a $25 an hour job.
Let’s say you work full-time, which is 8 hours a day, 5 days a week, 52 weeks a year (including paid vacation time). We can use a simple multiplication to calculate how $25/hour adds up over each period:
Daily: $25 x 8 hours = $200 per day Weekly: $200 per day x 5 days = $1000 per week a year
These are all gross figures, meaning you earn before taxes are deducted. Your specific tax rates will vary depending on where you live, whether you file jointly or individually, what deductions you qualify for, and so on. 25% is generally a good guideline for federal and state taxes.
Using that 25% number, we can multiply our previous numbers by the remaining 75% to find out what after-tax take-home salary you can expect if you make $25 an hour:
Daily: $200 x 75% = $150 to go. Weekly: $1,000 x 75% = $750 to take home
You can use a US tax calculator to get a more accurate estimate of how much tax to expect. Note that if you’re making $25 an hour as a freelancer, you’re paying even more because you’re responsible for all your FICA taxes instead of having an employer handle them. Personally, I usually put 1/3 of my income aside for this. (Learn more about self-employment taxes from the IRS here.)
Is $25 an hour good?
Is $25 an hour a decent, livable wage in the 2023s? The answer here is both simple and complicated: It depends.
The biggest factor is simply where you live. If you are a digital nomad living in Thailand and earning $25, you can live in luxury in a penthouse apartment. If you live in the American Midwest, you can probably afford a mortgage on a decent house. But if you live in a city like New York or San Francisco, you can probably get a closet with six roommates for $25 an hour.
Let’s look at an example monthly budget for someone who makes $25 an hour. Since housing is one of the biggest expenses, let’s start there and use the rule of thumb that you shouldn’t spend more than 30% of your gross monthly income on housing. We’re also budgeting for 15% in savings – you can always save more than that if you can, but think of saving and investing as a priority, not just ‘what I have left after spending’. This is money you pay your future self to make your life better!
Monthly Net Income: $3247
Depending on where you live, that kind of budget may seem extremely doable, or it may feel like there’s not much wiggle room. Affording and saving everything becomes much easier when you have a two-income household. Two people each working full-time and making $25 an hour have a net take-home of $6495, which is a pretty solid amount to live off in most places!
What do people who live on $25 an hour say?
There are mixed opinions on Reddit threads:
“I make about $25/hr. People making $25/hr are typically on a career path to earning 6 figures, which is $50+/hr. is equivalent to. The only way to achieve this goal is to be allowed through the gate and out over the ceiling by people on the other side doing 6 figures. Befriending these.. people is considered “out of game” and you either fully assimilate or hate yourself.
At $25/hr you can live well if you budget well. But many stay where they want to be, discarding their achievements and striving for that Instagram lifestyle.
Also, many people are unaware of the benefits that have been bestowed on them despite their best efforts (being born into wealth, etc.), so they think anyone who hasn’t reached their level is lazy or unworthy by comparison.” – said Killax_.
“I’m making 25 an hour and I feel like I can barely survive. We all deserve a lot more.” – Full Metal Mycologist.
“$25/hr would be life changing money for me. Like buying the groceries I want instead of buying what I can afford to transform my life.” – Added TwoSecondsToMidnight.
Want to extend that $25 hourly wage as much as possible so you can live well and increase your savings rate? It is absolutely possible if you are determined enough! Check out these 72 tips to save money.
If you can only cut your budget so far and can’t find a job that pays more than $25 an hour, consider supplementing your work with part-time evening or weekend jobs. This can be as simple as taking polls on Swagbucks while you watch TV, or having Rover walk dogs on Saturday mornings, or even starting your own business. Check out 114 side hustle ideas here!
TL;DR: If you came up with $25 an hour just because of the short answer, how much is a year? Answer: $52000 before taxes.