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Your credit score is one of your most valuable assets, and it’s important to take action if you notice that yours is dropping. Many credit card issuers now offer customers free credit monitoring, and there are other ways to check your credit score without paying.

Let’s dive in.

Reasons Why Your Credit Score Can Drop

There are several factors that affect your credit score. Here’s a look at some common scenarios:

Late or Missing Payments

When it comes to determining your FICO score — a type of credit scoring model used in 90% of lending decisions in the U.S. — your payment history matters. A lot. It’s the largest factor in FICO’s credit scoring formula. Missed or late payments can cause your score to drop by as much as 180 points and could remain on your credit reports for up to seven years. Signing up for autopay is one way to help ensure your bills are paid on time.

Credit Utilization Increased

Credit utilization refers to how much of your credit you’re using, and it can indicate to potential lenders how well you manage your finances. It’s also the second-largest factor in your FICO credit score. The general rule of thumb is not to use more than 30% of the credit available to you. If your credit utilization rate is higher than that, you may see a drop in your credit score.

If you need help keeping tabs on where your money is going, consider using online tools like a money tracker. Besides monitoring spending, it can also provide insights on your finances.

Recent Application for a Mortgage, Loan, or Credit Card

Applications for new credit may only make up 10% of your FICO credit score, but that can still have an impact. That’s because lenders often pull a hard inquiry when you apply for credit, which may cause your score to fall slightly. The good news is, the dip is usually temporary.

A Credit Limit Decreased

If your credit limit decreases, that means you have less available credit. And this can cause your credit utilization rate — or debt-to-credit ratio — to increase. Why does that matter? Your credit utilization rate is one of the factors lenders consider when you apply for credit. In general, lenders consider a debt-to-credit ratio of 30% or below as “excellent.”

You Closed a Credit Card

You may want to think twice before closing a credit card, especially if it’s one you’ve had in good standing for a while. When you close a credit card, your total credit line decreases and your debt-to-credit ratio may increase. This could temporarily lower your credit score.

Inaccurate Information on Your Credit Report

Need another reason to routinely keep a close eye on your credit report? Having inaccurate information — say, defaults on loans you don’t have — could potentially hurt your credit. If you spot a credit report error, be sure to dispute it (more on that below).

Recommended: Does Checking Your Credit Score Lower Your Rating?

Major Event Such as Foreclosure or Bankruptcy

Having your home foreclosed or filing for bankruptcy are major issues that have the potential to damage your credit score for several years. For instance, Chapter 13 bankruptcy stays on your credit report for seven years, while Chapter 7 bankruptcy stays on for 10 years. Meanwhile, a foreclosure remains on your report for seven years.

Check Your Credit Report

If you’ve noticed a significant drop in your credit score, it’s worth looking over your credit report. Typically, your credit report updates every 30 to 45 days and includes key information about your credit history such as:

•   Your history of on-time and delinquent payments

•   How often you’ve applied for credit

•   How many accounts you have open and closed

•   Any accounts that are in collections

Every 12 months, you can get a free copy of your credit report from each of the three major credit reporting companies at AnnualCreditReport.com. Be sure to carefully review reports from all three companies, as there may be some differences between what’s reported with Transunion vs. Equifax vs. Experian.

Another option? Signing up for credit score monitoring, which can offer score updates and financial insights.

Dispute Credit Report Information You Believe to Be Incorrect

If you find information on your credit report that’s not accurate, you have the right to dispute it. And the good news is, doing so won’t negatively affect your credit score.

To get the ball rolling on resolving errors, you’ll need to file a formal dispute with the credit reporting company. You can contact them online or by mail or phone. The Consumer Financial Protection Bureau (CFPB) also offers helpful tips on how to file a dispute .

Take Actions to Build Your Credit

Is your credit score not where you want it to be? There are things you can do to help improve it.

One helpful step to take is to pay all of your bills when they’re due, as consistent, on-time payments can significantly raise your credit score over time. Automating your finances is one way to help ensure you don’t miss a due date. It’s also a good idea to focus on catching up past-due accounts so they’re current.

Another step to consider is to limit your credit utilization ratio so your credit balances aren’t too high in relation to your credit limit. You can explore setting up balance alerts that alert you when you’re nearing the recommended 30% credit utilization ratio. You may also want to consider paying your credit card bill more frequently, say, twice a month instead of once a month.

A third strategy is to pay off what you owe. Having a debt repayment plan in place can help, and there are several approaches to consider. Two common ones are the snowball method (where you pay off debts in order from the smallest balance to the largest) and the avalanche method (where you pay off accounts in order from the highest interest rate to the lowest).

What Is a Good or Bad Credit Score?

FICO credit scores run the gamut from 300 to 850, so where does a “good” credit score fall? While there’s no one magic number, most lenders consider scores between 670 and 739 “good.” If your FICO score is between 740 to 799, it’s classified as “very good”; 800 and higher is “exceptional.”

What about scores below 670? If yours falls in the 580 to 669 range, it’s considered “fair.” That means it’s below the average score of consumers, though you may not have issues getting a lender to approve you for a loan. A score of 580 or less is considered “poor,” and could signal to lenders that you’re a risky borrower.

Credit Score Tips

Since paying your bills on time factors heavily into your credit score, you should take steps toward preventing late payments. One good way to do that is to enable auto-pay on your credit cards and other loans.

You can also reduce your credit utilization by trying to minimize the outstanding balances reported to the credit bureaus. For example, if you make payments just before your statement closing date, the lower balance is reported, which reduces your credit utilization.

The Takeaway

Your credit score is invaluable. Lenders use it as they review your applications for credit, as do landlords, prospective employers, and utility providers. So it’s crucial to keep track of your credit score and take action when it falls.

If your score takes a noticeable dip, the first step is to find out why your credit score fell. This may involve carefully checking your credit reports and disputing errors with the credit reporting company. Next, it’s a good idea to take steps to improve your score, which can include paying bills on time, paying off debt, and limiting your credit utilization ratio.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Should I be worried if my credit score dropped?

Changes in a credit score are normal. That said, if yours dropped significantly, and you don’t know why, then you should consider reviewing your credit report and disputing any inaccuracies. However, if the drop is small and expected, then there’s no reason for concern. For example, if you applied for a new credit card, you might see your credit score temporarily drop a bit.

How long does it take to recover from credit score drop?

It all depends on the size of the drop and the cause. If you have higher credit utilization, for instance, your score will likely recover when your utilization ratio drops. But if you have a record of delinquent payments or a default, it can take much longer to recover. And with major events, such as bankruptcy or foreclosure, it may take many years until your credit score fully recovers.

Why is my credit score going down when I pay my bills on time?

While your payment history is the most important factor in your credit score, it’s not the only one. If you are paying your bills on time, your credit score could still drop if your credit utilization is increasing or you have a short credit history.

Photo credit: iStock/Pekic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Thinking about job hunting in California? You may wonder how much you can expect to earn. While pay depends on a number of factors, the average annual salary in California is $73,220. That’s according to a 2024 analysis of Bureau of Labor Statistics (BLS) data conducted by Forbes. By comparison, the average annual salary in the U.S. is $63,795 — nearly $10,000 less.

Let’s take a closer look at how pay in California varies by age, location, and profession.

Average Salary in California by Age in 2024

Average income by age in California tends to increase as you get older and gain more experience. For instance, workers age 24 and younger earn an average of $44,205 a year, according to data from the U.S. Census Bureau. Pay jumps up to an average of $90,138 a year for workers aged 25 to 44, and $98,785 a year for those age 45 to 64. Employees who are 65 and older earn an average of $60,832 a year.

These numbers make sense, as many people reach their peak earning years in their late 40s to late 50s. And after turning 65, many Americans choose to either retire, work fewer hours, or switch to a less-demanding job. No matter where you are in your professional journey, a money tracker can help you monitor your spending and saving.

Recommended: Average U.S. Salary by State

Average Salary in California by City in 2024

Income varies from state to state and even city by city. A budget planner app is one way to stay on top of your finances and make progress toward your financial goals. Knowing which areas tend to pay more can help, too. Just keep in mind those same places may also have a higher cost of living.

Here are the 10 cities in California with the highest average salaries, according to ZipRecruiter.

Average Salary in California by County

Wages in California can change by county. Let’s see what an average salary is in 10 different counties in California, based on 2022 data from the BLS.

Examples of the Highest-Paying Jobs in California

Depending on your line of work and your living expenses, you may find you can earn a comfortable salary in California. According to Zippia.com, the top 10 highest-paying jobs in California pay on average between $199,736 and over $235,100 per year.

Some of the most lucrative positions in the state are in health care, including hospital physician, primary care pediatrician, orthodontist, psychiatrist, and medical director.

Recommended: What Is a Six-Figure Salary?

The Takeaway

When it comes to earning potential, you may find you can make more in California than you would in some other states. A typical worker in the Golden State makes an average of $73,220 a year, which is nearly $10,000 more than the national average salary. But income can change based on such factors as your age and level of experience, where you live, and the type of work you do.

Remember that salary is just one piece of your overall financial situation. To get a more complete picture of your overall financial well-being, it helps to calculate your net worth.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What is a good average salary in California?

A “good” salary in California depends on several factors, including where you live and whether you’re supporting other people. For example, to live comfortably in any major city, including those in California, a single adult needs to earn $96,500 or more a year. Meanwhile, a family of four should earn at least $235,000 a year, according to SmartAsset.

What is the average gross salary in California?

The average yearly salary in California is $73,220. This is nearly $10,000 higher than the average salary for the entire country, which is $63,795.

What is the average income per person in California?

The average income per capita in California is $45,591, according to incomebyzipcode.com. This is based on the most recent 2022 Census data. The average income per person will be lower than the average income because per capita income accounts for every person, even ones who are not working full time.

What is a livable wage in California?

In order to earn a livable wage in California, a single adult will need to make at least $56,825 a year, according to MIT’s Living Wage Calculator. The livable wage for a family of four with two working adults and two children is $138,357. A livable wage is the income needed to cover necessities, including food, housing, taxes, transportation, childcare, and healthcare.

Photo credit: iStock/milan2099

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q224-1839814-V1

Have you just received a salary offer and now wonder, “Is $75K a good salary for a single person?”

In many cases, that salary can offer a comfortable lifestyle and plenty of opportunities to save. But if you live in an expensive area or have a lot of debt, you may find that living on $75,000 a year requires more careful planning and budgeting.

Let’s take a closer look.

Is $75K a Year a Good Salary?

If you make $75,000 a year, you’re earning more than half of all workers in the U.S. And in fact, many people would probably consider the salary as good pay.

After all, a $75,000 salary works out to around $6,250 per month, $1,442.31 per week, or $36.06 an hour. This may easily cover your expenses — depending on your situation. If you live in a high-cost area, you may find that you’d be more comfortable earning more.

Need help monitoring where your money is going each month? Online tools like a money tracker can help.

Median Household Income in the US by State

When we talk about median household income, we’re referring to an income level that half of households earn more than and half earn less. As of 2022 — the most recent data available from the U.S. Census Bureau — the median annual salary in the U.S. is $74,580. Individuals may make more or less depending on where they live, their age, the type of work they do, and other factors. Here’s a look at the median household annual income in every state:

Related: Average US Salary by State

Average Cost of Living in the US by State in 2024

The cost of living is the amount of money needed to cover basic living expenses, such as housing, food, taxes, and health care. Here’s what you need to know about the average cost of living in the U.S. by state:

Source: Bureau of Economic Analysis

Can You Live on $75K a Year?

While there’s an average pay in the U.S., there’s no one-size-fits-all salary needed for a single person to live comfortably. As the charts above show, $75,000 can go further in some areas than others. Regardless of what you make, it helps to understand how much money you’re taking home — and how much you’re spending — each month. Creating a budget and tracking all of your expenses can make it easier to keep tabs on your finances.

How Can You Budget for a $75K Salary?

There is no shortage of options when it comes to creating a budget. One of the most popular methods is the 50/30/20 budget. Essentially, this approach involves allocating:

•   50% of your after-tax dollars to necessities, including groceries, housing, utilities, transportation, insurance, child care expenses, minimum debt payments, and more.

•   30% to “wants,” such as going out to eat, gifts, travel, and entertainment.

•   20% on savings and additional debt payments (beyond the minimum payments).

Prefer something more straightforward? Consider a line-item budget, where you keep track of monthly expenditures so they don’t exceed spending targets. Another option: using an online budget planner to keep finances organized.

How Can You Maximize a $75K Salary?

Budgeting, putting every dollar you can into savings, and paying off debt can all help you get the most out of every paycheck. But those aren’t the only ways to maximize a $75,000 salary.

One strategy is to enroll in your company’s 401(k) plan. Some employers even offer matching contributions, meaning they’ll mirror your contribution to your retirement, often up to a certain percentage.

Another avenue to explore? Setting up autopay for recurring bills, which helps prevent missed payments and late fees. While you’re at it, you may also want to automate your savings so you don’t have to remember to move money between your accounts on payday.

What Kind of Quality of Life Can You Have With a $75K Salary?

Can you have a good quality of life with an annual salary of $75,000? For many people, the answer is yes. With that kind of income, you may find it easier to make ends meet and make progress toward your financial goals. But keep in mind that “quality of life” is subjective, and the amount needed to live comfortably can vary from person to person.

Recommended: 25 Highest-Paying Jobs in the U.S.

Is $75,000 a Year Considered Rich?

It depends on who you ask. A 2023 Bankrate survey showed that Americans do not feel rich with a salary of $75,000. Rather, respondents said they’d need to earn an average of $233,000 per year to feel financially secure and $483,000 per year to feel rich.

That said, a $75,000 salary can feel like a fortune to one person but not to the next. Whether you feel financially secure with that salary may also depend on your living expenses, whether you live within or below your means, and other factors.

Is $75K a Year Considered Middle Class?

There’s no single definition of “middle class.” According to the Pew Research Center, middle class households have an income that’s between two-thirds and twice the U.S. median household income of $70,784. (A $75,000 salary falls easily within this range.)

A 2023 Washington Post poll reported that Americans consider a $75,000 to $100,000 salary range as middle class. Respondents said being middle class involved such things as:

•   Having a secure job

•   Having health insurance

•   Ability to save money for the future

•   Affording an emergency $1,000 bill without incurring debt

•   Ability to pay all bills on time

•   Ability to retire comfortably

Recommended: What Is a Six-Figure Salary?

Examples of Jobs That Pay $75,000 a Year

There are plenty of jobs that pay $75,000 per year, and some don’t require a degree. Let’s take a look at examples of positions that typically pay $75,000 or more.

•   Network administrator: Network administrators manage technical systems and networks.

•   Broker: Brokers mediate sales processes, particularly in real estate.

•   Quality assurance manager: Quality assurance managers establish quality standards, resolve concerns, and identify system and procedural needs.

•   Junior software engineer: A junior software engineer assists in developing and deploying computer software.

•   Dental hygienist: Dental hygienists perform cleanings, inspect teeth and gums, and educate patients on oral health.

•   Radiation therapist: Radiation therapists run machinery, perform X-rays, counsel patients, and more.

•   Clinical nurse: Clinical nurses work with patients and medications, and manage medical records.

The Takeaway

Is $75,000 a year a good salary for an individual in 2024? How about as an entry-level salary? In general, yes. A $75k salary is more than what half of U.S. workers earn, and depending on where you live and your expenses, may be more than enough to live comfortably.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Can I live comfortably making $75k a year?

Depending on your expenses, you should be able to comfortably make a $75,000 salary work in many areas of the country.

What can I afford with a $75k salary?

Many lenders use the 28/36 rule to help borrowers understand how much to use to repay a mortgage and other debts. Experts suggest spending no more than 28% of your income on housing expenses and no more than 36% on total debt payments. Consider using this rule as you make decisions about how large of a house to purchase or how much debt you’re willing to take on.

How much is $75k a year hourly?

A salary of $75,000 works out to $36.06 hourly.

How much is $75k a year monthly?

A salary of $75,000 is $6,250 per month.

How much is $75k a year daily?

A salary of $75,000 works out to $288.46 daily.

Photo credit: iStock/fizkes

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q224-1841143-V1

Is $40,000 a year considered a “good” salary for an individual? The answer depends on a number of factors, including your lifestyle, location, and expenses. A single person living in a smaller town may be able to live more comfortably on $40k a year than, say, a family that calls a pricey city home.

External forces also play a role. For instance, inflation continues to steadily rise, and that can impact whether a single person is able to get by on their income.

Let’s put a $40,000 annual salary into perspective.

Is $40K a Good Salary?

Earning more than the average worker is one way to determine whether a salary is “good.” With that in mind, how does a $40,000 salary stack up? As of 2024, it falls below the average annual salary in the U.S., which, according to the Bureau of Labor Statistics (BLS), is $59,228.

But keep in mind financial needs differ from person to person. Earning $40,000 a year may be considered a good entry-level salary and could be more than enough for someone with low monthly expenses. Adding another income to the mix also makes a difference. For example, if your spouse or partner also earns $40,000, your household income would be $80,000. That’s higher than the national average household income of $74,755.

No matter what your income is, it’s a good idea to keep tabs on your spending and saving. Tools like a money tracker can help make the job easier and provide valuable insights on your finances.

Recommended: U.S. Average Income by Age

Median Income in the U.S. by State in 2024

The median income of a state can provide a snapshot into what it costs to live and work there, as the BLS data in the chart below shows. Interested in a more lucrative career? You may want to look into the highest-paying jobs by state.

Average Cost of Living in the U.S. by State in 2024

Generally speaking, half of your salary probably goes toward necessities like food, housing, healthcare, and taxes. If you want to see your money go farther, you may need to put down roots in an area with a lower cost of living. Let’s take a look at the average cost of living in each state.

How to Live on $40,000 a Year

While an annual salary of $40,000 is below the national average, there are ways that you can make the income work for you. One way to approach your spending is to follow the 50/30/20 rule, which recommends earmarking 50% of your money for needs, 30% for wants, and 20% for savings.

But depending on your monthly expenses and lifestyle, you may need to make some sacrifices to live comfortably on $40,000 a year. Fortunately, there are plenty of ways to lower expenses. Some examples include meal planning, looking for free or cheap entertainment, and sharing your housing costs with a roommate.

How to Budget for a $40K Salary

Tracking where your money goes can go a long way toward helping you stretch a $40,000 salary. Online tools like a budget planner app provide a high-level overview of your financial habits so you can identify areas where you can cut back, if needed.

While there’s no one-size-fits-all approach to budgeting, there are some things you’ll want to do at the outset. A good place to start? Setting your short- and long-term financial goals. Next, calculate how much money you’re bringing in each month — and where it’s going. (Reviewing recent financial statements can be useful at this stage.)

Once you have a good understanding of your financial picture, select a budgeting method — and then follow it. Remember, a budget isn’t written in stone, so plan on reviewing and adjusting yours regularly to ensure it still fits you.

How to Maximize a $40K Salary

If you’re making $40,000 a year, one question you may have is how to get the most out of every dollar you earn. There are different approaches to explore. A common one is to try living below your means, which is getting by on less money than you earn each month. Whatever is left over can be put in savings or invested.

Another strategy is to sock away as much as possible for your retirement savings. Find out if your employer offers a 401(k) matching program (many do), and consider contributing enough to get the match.

You may also want to explore ways to lower your tax bill, such as making charitable contributions, contributing to an HSA, or taking advantage of certain credits. A tax professional can help you decide which option makes sense for you.

Can You Have a Good Quality of Life on a $40,000 a Year Salary?

Recent research suggests there’s a link between income and happiness. But that doesn’t mean an individual earning $40,000 a year can’t have a good quality of life. In fact, a single person may find that such a salary can indeed provide a comfortable life. Affordable housing, reasonable living expenses, a low debt-to-income ratio, and a solid savings plan can all help lower financial stress and allow you to focus on the people and activities that matter to you.

Is $40,000 a Year Considered Rich?

A $40,000 annual salary may not be most people’s definition of rich. But there are situations where that can feel like a substantial sum.

For example, a young adult living at home might be able to make $40,000 go very far, so long as she doesn’t need to reimburse her family for things like housing, health insurance, food, or other major living expenses. In that scenario, earning $40,000 would be more than enough to cover meals out, occasional vacations, and maybe even a few luxury goods.

Is $40K a Year Considered Middle Class?

There are different ways to define “middle class”; income and net worth are two of them. According to Census Bureau data, a middle-class household in the U.S. makes between $58,201 and $94,000 a year. A $40,000 salary is classified as lower-middle class, which is defined as households that earn between $30,001 and $58,020 a year.

The numbers change when you consider class through the lens of net worth. Census Bureau data defines “middle class” as households with a net worth of $145,000. Curious about how much you’re “worth”? A net worth calculator by age table can show you how you compare to your peers.

Recommended: How to Calculate Your Net Worth and Wealth: The Ultimate Guide

Examples of Jobs that Make $40,000 a Year

Looking to make a career move? There are plenty of jobs — including ones for introverts — that pay around $40,000 a year. Here are 10 to consider, per Indeed.com:

•   Kindergarten teacher

•   Reporter

•   Junior copywriter

•   Firefighter

•   Events manager

•   Admissions counselor

•   Loan processor

•   Customer service representative

•   Project coordinator

•   Property manager

The Takeaway

Is $40K a good salary? Though not exactly a six-figure salary, earning $40,000 a year may provide a single person with enough to live, depending on their location, expenses, and lifestyle. It may also be a reasonable salary for young adults at the start of their careers. By carefully budgeting your income, you can stretch $40,000 a year farther than you might have thought.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Can I live comfortably making $40K a year?

It’s possible for a single person to make it on a $40,000 a year salary. Having an affordable place to live, reasonable monthly expenses, and a low debt-to-income ratio can help create a more comfortable life.

What can I afford with a $40K salary?

The amount of disposable income you have each month depends largely on your cost of living. You may find a $40,000 annual salary goes farther in an affordable area than it would in a pricey location.

How much is $40K a year hourly?

A $40,000 annual salary works out to an hourly rate of $19.23. This is higher than the federal minimum wage of $7.25 per hour.

How much is $40K a year monthly?

If you earn $40,000 a year, your monthly pay comes out to $3,333.

How much is $40K a year daily?

A $40K annual salary comes out to $153.85 per day, assuming you work 40 hours per week.

Photo credit: iStock/Lyndon Stratford

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Having children brings many joys. But for women, it can also have a financial dark side. Becoming a mother often results in a loss of pay and opportunities for career advancement, a phenomenon known as the motherhood penalty. In fact, women experience a 60% decrease in income compared to men in the decade after their first child is born, according to PricewaterhouseCoopers’ 2023 Women in Work Index.

Many factors contribute to the motherhood penalty, and not every woman experiences it in the same way. Understanding the motherhood penalty can help women — and their families — sidestep this financial setback.

How Does the Motherhood Penalty Work?

If you want to avoid the motherhood penalty and keep your budget on track, it pays to know your enemy. According to a 2023 article published in the scientific journal PNAS, women’s diminished earnings after the birth of a child is driven by both a reduction in employment and by lower earnings for those who remain employed. Let’s look at each of these factors.

Despite the fact that women today have achieved historic levels of education and are working at senior levels in the corporate world, they are still more likely than men to cut back on their working hours or stop working altogether after a baby is born. Some women may choose jobs that allow for more flexibility in hours even if those roles pay less.

Discrimination is a more insidious factor: Women make up nearly half of all U.S. workers and do the bulk of consumer spending, yet some hiring managers still believe that women’s earnings are not as critical as men’s for household support. (A quick look at any parent’s money tracker app would reveal just how untrue this stereotype is.) When two women are similarly qualified for a job, the one without children tends to earn more than the one who has kids. And when men and women hold similar positions, fatherhood seems to confer a salary advantage in many occupations.

Recommended: The Highest-Paying Jobs in the US

Why the Motherhood Penalty Matters

Dual-income households have been the norm among married couples for decades, and most households composed of married couples with children have two working parents, according to 2023 data from the Bureau of Labor Statistics. Families with two healthy incomes are most likely to be able to afford a home, and to be able to cover other large expenses, including the cost of kids. (A 2022 report from the Brookings Institution suggests that the average middle-income family today will spend more than $310,000 to raise a child to age 17.)

But the motherhood penalty takes an especially hard toll on families led by women. According to the 2023 Census, 21% of U.S. children are growing up in a household led by a single mother, who often has no other source of income than her own earnings. The motherhood penalty may contribute to the fact that nearly 30% of single-parent families are living below the federal poverty level.

Factors Contributing to the Motherhood Penalty

As noted above, the unspoken ideas that women belong at home caring for their children, or that women are not vital contributors to their family finances, continue to be a driver of the motherhood penalty. This is despite the fact that households where two parents work outside the home is now the norm in the U.S.

But there is another troubling scenario. Women may leave their job because childcare costs more than they earn. The cost of caring for an infant in a childcare center averages $15,417 per year per child. In big cities, the number climbs even higher: Washington, D.C. averages $24,243, for example. And even when women don’t stop working, they may scale back their hours, or take more flexible but less well-paid positions.

The motherhood penalty is unfair, and one additional factor adds to the unfairness: In households with two working parents, where each parent earns roughly the same amount, women still spend more time on caregiving responsibilities than men do — 12.2 hours per week on average, compared with 9 hours for men, according to a 2023 Pew Research Center report. Women also spend 4.6 hours doing housework to men’s 2 hours. Women’s work may be valued less, but as the old saying goes, it’s never done.

Recommended: Pros and Cons of Salary vs Hourly Pay

Tips to Avoid the Motherhood Penalty

So what can women do to safeguard their finances from the motherhood penalty?

Consider your career choice. Women can begin to protect their financial future while they are still contemplating a career path. Some research suggests that the motherhood penalty disappears for mothers who work in business and post-secondary education. And in STEM careers, and fields such as medicine and law, mothers actually appear to earn more than women who don’t have kids.

Stand up for fair earnings. Exercise your right to be fairly compensated with every step you take in the working world. Applying for a job? Do your research to learn what is a good entry-level salary. Offered a position? Learn how to ask for a signing bonus — with unemployment relatively low, employers in industries from retail to engineering may pay you to come on board.

Change jobs. Women may be less likely to change jobs after becoming mothers, as switching jobs can be stressful and time off is often allotted based on seniority. Yet changing jobs is one way to bump up your salary. When you do switch, make sure you understand what is a competitive pay rate. A growing number of states, including California, Colorado, and New York, have passed pay transparency laws that require employers to post salary ranges when they advertise job openings.

Don’t share your status. It’s unlikely that you’ll be asked during a job interview if you have caregiving responsibilities, as doing so may violate federal and state laws. But many women casually disclose that they are parents during the interview process without thinking twice about it. Avoid talking about your personal life when interviewing for a job and consider that many employers examine applicants’ social media feeds during their screening process.

Advocate for fair pay and families. Research suggests that moms in women-dominated and low-paid professions face the greatest motherhood penalty. To help promote equitable pay that can sustain families, you can support raising the minimum wage. Lifting your voice in favor of government support for affordable childcare and for mandatory paid parental/caregiver leave can also help ensure that women who want to stay in the workforce after having a child can afford to do so.

The Takeaway

Despite the fact that women are working outside the home in historic numbers, the motherhood penalty still exacts a perilous price for many women and their families. Acknowledging that women are financially penalized for becoming parents is a first step in fighting back against the stereotyping and discrimination that is often at the root of this problem.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What is meant by the motherhood penalty?

The motherhood penalty refers to the fact that women’s earnings suffer after they have children, sometimes due to discrimination in hiring or the awarding of promotions, and sometimes because women scale back on work or stop working altogether after having a child.

How does the motherhood penalty affect a woman’s career?

The motherhood penalty results in lower earnings, and because future earnings are often based on current salary, the diminishment in income often persists as a woman progresses up the ladder.

How can I avoid the motherhood penalty?

A primary way to avoid the motherhood penalty is to know your worth. Do your research on salary before taking a job, and reevaluate your salary at least yearly by looking at comparable positions.

Photo credit: iStock/Pekic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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