Is $20 an Hour a Good Hourly Rate


Most people start their working career earning an hourly wage. A large portion of the world population continues working hourly for the remainder of their career. Professionals are often salaried, but there are other professionals who bill by the hour.

So, what’s a good hourly rate?

Any annual income can be broken down into a monthly, weekly, or hourly rate. Hourly rates can range wildly, with low income earners bringing in minimum wage and highly skilled or educated workers making hundreds per hour.  

Comparatively speaking, for a full-time employee, $20 per hour falls toward the lower American middle class. However, $20 per hour is more than what many Americans bring home, so it can be classified as a “good” hourly rate.   

Studies and numbers vary, but it is safe to say that the national average household salary of $66,665 per year comes out to approximately $32.00 per hour at 40 hours per week.

How Much Does $20 per Hour Make per Year

For a full time employee, $20 per hour at 40 hours per week is $800 weekly. Taking that number and multiplying it by 52 weeks of the year produces $41,600, which is a gross monthly income of $3,466.  After taxes this breaks down into $35,131 per year, or a net monthly income of $2,927.

So how do we rate this? For one, workers without a high school diploma bring in about $619 per week, while those with a high school diploma (and no college) earn about $781 per week. These would be approximately $15 to $19 per hour, respectively. These range from $32,188 per year to $40,612 per year.

Bumping up to some college (and college degrees to post-graduate degrees), a person’s income greatly increases. Earners with a bachelor’s degree bring in an average salary of roughly $67,860 per year, which is $32 per hour.

Those earning professional or a doctorate degrees jump in income to approximately $98,000 per year, or $47 per hour. Someone earning a law degree or medical license may make several hundred thousand dollars per year, with hourly rates in the $200-850 range.

However, at this level, professionals often work in “billable hours,” meaning they spend time on the job working administrative functions for which they are not billing their premium rate. For example, an Orthopedic surgeon, the highest paid medical doctor in the country, earns about $511,000 per year, which would be $245 per hour in a 40-hour work week. However, such professionals often do not work the same amount of hours every week, so this is really just an estimate. 

Is $20 Per Hour a Lot of Money

A person’s financial situation, including a look at their credit score and existing debts, plays a big role in their ability to sustain a living on $20 per hour. Someone with a net monthly income of $3,000 may be able to purchase a modest home, a vehicle, and enjoy a relatively comfortable lifestyle. Consider: 9.2% of the world population lives below the poverty line on less than $1.90 per day.

A person earning $3,000 after taxes per month is living off of approximately $100 per day. To the 9.2% of people below the poverty line, the $20 per hour earner is rich!

Location greatly impacts the answer to whether $20 per hour is a lot of money. Several cities and states in the United States are well known for a tremendously high cost of living, with Boston, New York City, and San Francisco being prime examples. While Texas, Arizona, Montana, and Pennsylvania are examples of states with moderately priced real estate, West Virginia, Arkansas, Oklahoma, and Indiana are states with much lower home prices.

Of course, the higher priced metropolitan areas do have their lower-income areas. And it’s no secret that many lower-income earners are “priced out” of certain areas simply due to the demand for higher-paid professionals in those areas.

So if you’re just starting out, do your research to see which states and cities can keep you employed at $20 per hour and have manageable cost of living prices.  

What Can I Buy with a $20 Per Hour Job?

This depends on the size of your household and your discipline when it comes to spending. Remember, monthly living expenses for a single person in the United States range from $3,000 to $5,000. Let’s look at a scenario where you and your $20 per hour are “pushing it” a bit with money.

If you’re single with no dependents (and provided you don’t rack up thousands in credit card debts or other wasteful purchases), $3,000 per month can pay for a mortgage on a home, but anything over $200,000-250,000 may be pushing it too much. For instance, assuming an average credit score and low debt payments, a mortgage payment on a $300k home with a 30-year fixed note would be about $1,896.

That leaves the $20 per hour earner with about $1,000 to spend after their mortgage is paid, which isn’t going to be enough. A $20 per hour this person should purchase a home less than $200,000 in order to increase their disposable income after the mortgage is paid to closer to $2,000.

A brand new car such as the 2022 Hyundai Sonata comes in $24,150. Assuming the $20 per hour earner has a good credit score and not much more debt than the mortgage payment (hopefully less than 20-25% of their gross monthly income), they should be able to score a decent interest rate and have a manageable monthly payment around $450.

Once you and your $20 per hour have secured your home and wheels, you should still have no trouble buying groceries, paying for utilities like water, sewer, trash, and your personal needs such as clothing, grooming, and hygiene. You can probably even afford your favorite streaming services, movie nights, and some travel on your hard-earned vacations.

But remember, unless you are furthering your education or building seniority, your income is not likely to climb very fast. So, it may be better to maximize what you can save and invest with your $20 per hour. Perhaps buy a home that is $150k instead of $200k. Maybe seek out a car that is less than $20k, and throw some of that leftover cash at investments, an emergency fund, and some interest-bearing savings accounts.

Recommended Financial Geek Article: 9 Quick Ways to Save Up for a Down-Payment

$20 Per Hour is a Good Hourly Rate

If you make $20 per hour, you’re making slightly below the national average income. From a global perspective, you’re relatively well-off. Of course, all is relative, so even though $20 per hour is good money, an earner at this rate will still need to budget accordingly.

Geek, out.

Noel

Noel is the founder and main contributor for his blog - Noel's passion for personal finance has helped him amass over 600k readers to his Financial Geek blog.

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