Can you live on $18 dollars an hour? Is it a good pay in 2024? This is a question many individuals across the United States and the world are grappling with, especially as minimum wage rates are subject to constant change and the cost of living rises. Whether you’re contemplating a job that pays $18 per hour, already working for this wage, or simply curious about its viability in today’s economy, it’s important to break down how much $18 an hour actually translates to and how far it can go.
For context, $18 an hour equates to a gross annual income of $37,440 if you work full-time. But the question remains: is this enough to cover your living expenses, let alone build savings and enjoy a reasonable standard of living?
In this article, we’ll dive into the real financial picture behind earning $18 an hour in 2024, analyze how this compares to federal minimum wage, explore the differences depending on location, and help you understand whether this wage is livable for you in your specific situation.
What Does $18 an Hour Mean?
Before evaluating whether $18 an hour is enough, it’s crucial to understand how this breaks down over time.
Annual Salary
If you work full-time, meaning 40 hours per week, 52 weeks a year, $18 an hour results in:
- $18 per hour × 40 hours/week × 52 weeks/year = $37,440/year
This is your gross income before any deductions. While this might sound like a decent amount of money, your net income (take-home pay after taxes) will be significantly lower due to federal and state tax deductions.
Monthly, Weekly, and Daily Breakdown
To understand how $18 an hour plays out on a more regular basis, let’s break it down by monthly income, weekly income, and daily income:
- Weekly Income: $18/hour × 40 hours/week = $720/week
- Monthly Income: $720/week × 4.33 weeks/month = $3,117.60/month
- Daily Income: $18/hour × 8 hours/day = $144/day
These are the gross earnings before any deductions. But as mentioned earlier, after accounting for federal and state taxes, your take-home pay will be less.
After-Tax Income
Assuming an average tax rate of 25% for federal and state taxes, your after-tax income would be as follows:
- Weekly Income After Tax: $720 × 75% = $540
- Monthly Income After Tax: $3,117.60 × 75% = $2,338.20
- Annual Income After Tax: $37,440 × 75% = $28,080
As a freelancer or self-employed individual, you may need to set aside an even larger percentage of your income (often 30-35%) for taxes, as you’re responsible for both the employee and employer portions of FICA taxes.
Is $18 an Hour Enough in 2024?
Minimum Wage Comparison
In 2024, the federal minimum wage in the United States remains at $7.25 per hour. This means $18 an hour is more than double the federal minimum wage. However, it’s important to note that the minimum wage laws vary widely by state, county, and city. In certain areas, like San Francisco or New York City, the cost of living is so high that $18 an hour may barely cover essential living costs. Conversely, in areas like South Dakota or Mississippi, this wage might allow for a much more comfortable lifestyle.
For instance, in Santa Ana, California, local ordinances require a higher minimum wage rate, with the regular city minimum wage for employers exceeding $18 an hour. Thus, in such high-cost areas, even $18 an hour may feel stretched thin due to high housing costs and other living expenses.
Living Wage vs. Minimum Wage
A living wage is different from a minimum wage. While the federal minimum wage remains at $7.25, a living wage takes into account the local cost of living, including housing, food, utilities, healthcare, and transportation costs. For example:
- In San Francisco, the minimum wage ordinance requires a higher wage rate to match the high cost of living, where $18 an hour might only cover rent or food expenses.
- In other places, like Rhode Island or South Dakota, $18 an hour may surpass the lowest living wage, allowing you to cover a larger portion of your living expenses and even save some money.
Thus, whether $18 an hour is a good pay depends heavily on where you live and your family size. In lower-cost areas, $18 may stretch further, but in high-cost metropolitan areas, it may feel inadequate.
Family Size and Expenses
A single adult might find $18 an hour a comfortable wage, especially if they have low monthly expenses. However, if you have a family of 4, childcare costs, healthcare expenses, and other responsibilities may make it difficult to live solely on $18 an hour. For example:
- Childcare costs in places like Cook County, Illinois, can range from $500 to $1,500 a month, which might eat into a significant portion of a family’s budget.
- Food costs, especially with a larger family, might also increase. According to the U.S. Bureau of Labor Statistics, food expenditures make up a significant portion of household budgets, and a family of four might spend $800 or more per month on groceries.
Therefore, it’s not just about the wage rate but also about the family size and other external factors like healthcare and student loan repayments.
Cost of Living: Local Variation
Let’s look at specific regions to compare how far $18 an hour can go:
- In Santa Fe County, New Mexico, with a monthly wage of approximately $2,338 after taxes, a single adult can rent an apartment, cover food, utilities, and have some discretionary income.
- However, in San Francisco, where housing costs are sky-high, $18 an hour might only afford a room rental or a shared living situation. The cost of living there is significantly higher, with the average rent for a one-bedroom apartment reaching upwards of $3,000 per month.
Budgeting on $18 an Hour: How to Make It Work
While $18 an hour might not allow for luxury living in expensive areas, it is possible to live comfortably with careful budgeting. Here’s a breakdown of a sample budget for someone making $18 per hour:
Example Budget for $18 an Hour
Assuming your monthly take-home pay is $2,338.20, here’s a reasonable budget:
- Housing (30% of income): $935
- Transportation (Car payment, insurance, gas): $400
- Utilities (Electricity, phone, internet): $200
- Food (Groceries, dining out): $250
- Insurance (Health, car, etc.): $200
- Savings (15% of income): $350
- Discretionary Spending (Entertainment, shopping): $100
- Miscellaneous (Unexpected expenses): $103.20
In total, this budget leaves room for the essential expenses while allowing for some savings and a little discretionary spending. However, the ability to live on $18 per hour depends on individual circumstances. Cutting back on areas like dining out, transportation, or opting for a more affordable living situation can make a huge difference.
Additional Ways to Maximize Income
To further stretch $18 an hour, consider:
- Living with roommates to reduce rent and utilities.
- Using public transportation instead of owning a car, which can save thousands annually.
- Meal prepping and reducing dining out to save money on food.
- Side gigs like dog walking, tutoring, or freelance work to boost income.
With a dual-income household, two people each earning $18 per hour can significantly increase the household’s combined income, allowing for greater flexibility and financial security.
Minimum Wage Increases: The Future of $18 an Hour
In 2024, many states and cities are increasing minimum wages to keep up with inflation and rising consumer prices. For example:
- Montgomery County, Maryland, has a minimum wage ordinance that sets a higher minimum wage for large employers, meaning workers earning $18 an hour may actually be earning above the average for their area.
- The state of California has enacted statewide minimum wage laws, with future increases scheduled to ensure that the lowest minimum wage keeps up with the cost of living.
As more states implement minimum wage increases, the wage of $18 per hour could become increasingly common, allowing workers to better meet their living wage requirements.
Conclusion
Can you live on $18 dollars an hour in 2024? Is it a good pay? The answer varies depending on where you live, your family size, and your overall budgeting skills. While $18 an hour is above the federal minimum wage, it may still be challenging to live on this wage in high-cost areas like San Francisco, New York, or Santa Ana.
For those living in areas with a lower cost of living, $18 an hour can provide a comfortable standard of living. Ultimately, the key to making this wage work lies in smart budgeting, reducing expenses, and perhaps supplementing your income with side gigs or freelance work.
With continued minimum wage increases and smart financial strategies, it’s possible to not only survive on $18 an hour but also thrive in 2024.
Also Read: Ways to Drastically Cut Household Expenses
FAQs
After taxes, $18 an hour typically results in about $28,080 annually, assuming a 25% tax rate.
It depends on where you live. In areas like South Dakota, $18 an hour can cover rent. In San Francisco, however, it may only afford a shared apartment or a room rental.
A livable wage varies by location but typically factors in the cost of living for housing, food, utilities, healthcare, and transportation.
The federal minimum wage remains at $7.25 an hour in 2024, although many states and cities have implemented higher local minimum wage laws.
