$18 an Hour Is How Much a Year: Is It Enough?

A happy young employee in the cheese section of a specialty grocery store offering a customer a sample of cheese.
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Wages across the country are on the rise, according to the August jobs report by the U.S. Bureau of Labor Statistics, despite fewer hirings occurring. If you’re one of the millions of Americans enjoying a pay increase or looking for a new job, you may have to weigh salaried pay against hourly wages. Here’s a helpful guide to calculating your annual gross income from your hourly wage.

For the sake of this article, we will calculate the earnings of someone making 18 dollars an hour. Exactly how much is 18 dollars an hour per year?

Multiply your hours per week by the number of weeks per year you are working to get the total number of hours worked in a year. For example, take 40 hours per week, multiplied by 52 for the number of weeks in a year, which equals 2,080, the number of hours worked. Then multiply this number by the hourly wage, which is $18 in this case. Thus, an individual working 2,080 hours annually and earning $18 per hour will make $37,440 a year.

What $18 an Hour Looks Like

More From Your Money

Thinking of it on an hourly basis, some people might think $18 is enough. However, it is essential to calculate your annual earnings, subtract the tax and find the net income to determine if $18 an hour really is enough to meet your needs.

Let’s break down this amount:

  • $144 per eight-hour day
  • $720 per five-day week
  • $3,120 per month

Annual Income After Taxes

The amount you pay in taxes depends on the state you work in. Some states do not charge income tax, while others do. Even if you do not have to pay income tax in your state, you will be charged federal taxes, Medicare and social security tax.

The federal income tax for individuals has multiple brackets, depending on your filing status and income. The overall rates range from 10% to 37%. The federal tax system is based on a progressive tax code, so will tax wages according to earnings.

For Example

If you make $37,000 per year, your federal tax bill will be $987.50, which is 10% of the first $9,875 you earn, plus $3,255, which is 12% of the rest, totaling $4,242.50. This results in an effective federal tax rate of about 11.4%.

After subtracting this from your annual income, you are left with $32,754.5 to spend per year.

Is $18 an Hour a Good Wage?

Now that you know what your annual income will be if you earn 18 dollars an hour, it is time to address the real question: is $18 an hour enough?

Back in 2020, the median income in the U.S. was $78,500 per family. In 2021, the median income increased to $79,900.

Considering this data, if you are only bringing $37,000 home every year, you are significantly below the national median per family. However, many families have more than one working member, and $74,000 is just short of that median. For frugal people who don’t have any dependents, $18 an hour may be enough.

Is $18 an Hour Enough To Live On?

Here are some factors that determine if your current income is enough to sustain you:

  • The number of dependents in your family
  • The cost of living in your state
  • Your lifestyle, such as where you shop, how often you eat out, etc.
  • Transportation costs
  • Savings
  • Loan repayments

More From Your Money

Keeping all these factors in mind, $18 might be sufficient for some and meager for others. For instance, if you have to repay an installment on personal or student loans every month, that will eat up a chunk of your income, reducing the portion of your budget you can actually use at home.

Similarly, if you eat out frequently, you would have to keep a fraction of your money aside for dining out. More importantly, more dependents in the family mean higher bills, more groceries, more school supplies and a generally higher cost of living, especially for a family with only one working member.

If you have all these responsibilities, $18 an hour might not be a livable wage for you. But if you live alone and have a modest lifestyle, you may be able to live fairly comfortably on $18 an hour.

How To Budget $37,440

Before we get into this, let us preface this section by saying that these calculations are ideal for people who do not have any debt. If you are paying off any loans or mortgages, you need to designate a fraction of your income for that.

Having said that, if you earn $37,440 a year, you can budget it as such:

  • 50% on basic expenses
  • 20% savings
  • 20% on fun, entertainment, subscriptions, eating out, shopping, etc.
  • 10% on miscellaneous, e.g., repairs and maintenance around the house, insurance, etc.

This may be challenging for some. If you have different needs, you may need to cut down spending in some areas, and put it to use elsewhere.

If your basic expenses take up more than 50% of your income, saving may not be realistic.

At the end of the day, the important thing is to make sure you allocate a certain percentage to each expenditure and avoid overspending. If you underspend a particular month, put that extra money into your piggy bank.

Tips To Live on $18 an Hour

Living on $18 an hour might not be the easiest thing to pull off, depending on your individual circumstances. But if you take some careful steps or make changes to your lifestyle, you will not have to worry every time you check your bank balance.

3 Things You Can Do Now:

  • Stick to your budget. Many people make the mistake of deviating from their budget, which becomes a habit. Do not fall down this rabbit hole. If you saved 5% of your basic expenses a specific month, that does not mean you ought to eat out an extra night. Put that money into savings for a rainy day.
  • Side hustles help. It is not always possible to start a side hustle if you are working a full-time job. However, you can always try to look for less time-consuming ways to earn passive income.
  • Keep an eye out for discounts. Whether it is groceries, clothes, or any other item, shop smart. Try to shop for new clothes on sale or consider thrifting. As for groceries, many stores offer coupons and discounts. You can also get cash back rewards from grocery shopping on your credit cards. More importantly, opt for free grocery pickup since that means you will not enter the store and risk making impulse purchases.

Final Words

As someone living alone in a state with a low cost of living, $18 an hour should be sufficient for you. However, if you have more dependents in the family and live in states like California or New York, living on $18 an hour would be tough.

At least now you know how much money you’ll make in a year so you can make informed decisions about your employment opportunities and long-term budget.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

Scott Jeffries is a seasoned technology professional based in Florida. He writes on the topics of business, technology, digital marketing and personal finance. After earning his bachelor’s in Management Information Systems with a minor in Business, Scott spent 15 years working in technology. He's helped startups to Fortune 100 companies bring software products to life. When he's not writing or building software, Scott can be found reading or spending time outside with his kids.

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