Deciding whether to live on your own is a big decision, and figuring out if the money works only adds to the stress. Depending on who you are, $20 per hour can seem like a lot of money or not very much, but is it enough to live on?
As a general rule, making $20 per hour working full-time is enough to live on your own. With it, you can pay for rent, food, and transportation while having a little left over to save and spend as you see fit.
Let’s break down some numbers so you can make the best decision for your situation.
How Much Is $20 an Hour Monthly and Annually?
Assuming a 40-hour work week, $20 per hour comes out to roughly $40,000 per year or $3,333 per month. It’s a little more if you work 40 hours every week and don’t take any unpaid time off, but it’s a good start with numbers that are easy to remember.
But that’s before taxes. While taxes vary by state, this article makes it easy to know how much your federal taxes are ($3000ish). To err on the side of caution, we’ll assume after all taxes, you’ll keep $30,000 per year or $2500 per month as your take-home income. It should be a bit more than that, so if you can make it work on a smaller budget, everything else will be a nice bonus.
I know these numbers aren’t super exact for my number-crunching experts out there, but they’re an excellent starting point, and everyone’s situation will be a little different, so being a bit conservative here will only serve us well.
Can I Actually Find a Place to Rent Making $20 an Hour?
Things may get a bit dicey here as some great financial voices like Ramit Sethi, author of I Will Teach You to Be Rich recommends spending less than 30% of your take-home income on housing (i.e. rent and utilities).
Using our previous number of $2500 per month, that gives you $750 per month to work with. While that may be doable with roommates, it’s very difficult to find a studio for that price in most parts of the country.
That being said, we’ll assume a $1000 mark for rent and utilities (including internet and parking) to give padding and offset any unexpected setbacks you may face. While that’s 40% instead of 30%, it’s workable for the rest of the budget. If you can get those costs closer to the $750 mark, awesome! If not, no sweat; I’ve got you covered.
If you’re interested in how to budget for an apartment and how the pricing is set up, here’s an article for you.
Factor in Transportation Costs When Budgeting
It’s worth taking a look at transportation costs while looking for a place to rent as the location of your new place can have costs outside of rent and utilities.
If you find a place 15 miles from your work that’s only $30 per month cheaper than one 5 miles from your work, you’ll not only save time at the more expensive place, but it’ll actually be easier on your bank account, too.
Since American transportation is dominated by cars, you likely have one that you have to pay insurance for. I’m going to assume $150 per month for car insurance. Again, that’s probably a bit high, but if you have a newer car or live in a more “dangerous” area, that could make it higher.
You’ll have to also figure out gas costs, which could be another $150. Adding another $50 per month in maintenance (oil changes, small repairs, etc.) brings you to $350 per month, assuming you don’t have a car payment.
If that sounds like a lot (because it is), you can always sacrifice by taking public transportation or biking where you need to go. That’s not a great solution for everyone, but if you can save $300 per month (there’s still some cost associated with alternative transportation methods) on transportation, you can spend a little more on a nicer place in a better location.
The key thing to remember is to use your money to serve you best, not how everyone expects you to use it. If you can live without a car and use that money on other things that you’ll enjoy more, that’s totally cool.
Pay Attention to Other Fixed Costs (Like Food)
With over half of your money accounted for if you spend the full allotted $1350 on housing and transportation as outlined above, you’re probably starting to feel a tightening in your chest or stomach.
That’s okay because you’re almost through with your living expenses, food being the biggest one left. If you can keep groceries to around $250, that leaves you $900 per month for subscriptions, savings, investment (start small, and gradually increase it to 10%), debt payoff, entertainment, etc.
For subscriptions, only keep the ones you actually use and love. If you don’t love it, cut it and put that money towards something you do love, like a hobby, a nice restaurant, or an unforgettable experience.
Something to note is that if you have a large debt payment every month, it may be better to stay with your parents a bit longer to pay off enough most if not all of that debt. Taking the $1000 per month that you could spend on rent and applying it instead to debt can put you in a really great spot financially.
The life experience you get from living on your own is invaluable, so don’t live at home forever thinking that it’s a great long-term solution.
Use Your Money to Do What You Love
Now that you know how much money you have to work with and some general principles to live off of it, figure out how to adjust it to do what you love.
If you like having nice dinners out, set aside money for that. If you prefer spending that money on books, that’s great, too! If you want to buy all the in app-purchases that a game you love has, that’s your call.
If money’s a stressful chore, then you’re never going to feel like it’s enough. You could convince yourself that you don’t have enough to live on your own making $40 per pour instead of 20. But if you use what you have well, it can feel abundant and life-giving.
Making $20 per hour is likely enough to live on your own; now go use that money to bring joy to your life!