How Much Do I Have to Earn Per Hour to Afford the Cost of Living?

Even if you live frugally, there are some expenses that just can’t be avoided as an adult. There’s the food you need to eat. The mortgage or rent for the roof you live under. The car payments, public transportation tickets, or bike costs that you need to get to where you need to go. As you think about the current state of your finances, you have to consider whether you earn enough per hour to afford this cost of living. 

So how much salary does your hourly pay actually work out to (or vice versa)? And how does that compare to the cost of living? Using an hourly to salary calculator and other information that’s available online, you can figure out if you’re in a good position for affording your lifestyle or whether you need to make some changes.

What Is the Cost of Living?

You may have heard people talking (or complaining) about the rising cost of living. In 2022, the World Economic Forum published an article about how rising inflation has put the United States on the brink of a cost of living crisis. Another article from the World Economic Forum discussed how the cost of living crisis is pushing millions into poverty.

“Cost of living” refers to the amount of money someone needs to pay for their basic expenses. These expenses include groceries, housing, healthcare, transportation, and more. The calculation of cost of living depends heavily on location with numbers varying not only between countries but also cities within the same country. 

Cities with the Highest and Lowest Cost of Living

Depending on which survey or source you’re looking at, you may find different rankings for which cities have the highest and lowest cost of living. These rankings also shift from year to year.

Hong Kong, Singapore, Zurich, Geneva, and New York City all often rank near the top as the most expensive. At the bottom with the most affordable places in the world to live in, you’ll see cities like Bangalore, Lahore, Karachi, and Ankara.

Hourly Pay vs. Salary

Depending on what your job is and what kind of employee you’re classified as, you may get hourly pay or a salary. With hourly pay, you get an agreed-upon amount of money for every hour you work. With salary, you get fixed payments determined by an agreed-upon annual amount. 

The benefit of getting hourly pay is that if you need more money, you may be able to clock extra hours to earn a bigger paycheck. With salary, it’s possible that you end up working longer hours without earning anything extra. The benefit of getting a salary is that you’ll get consistent earnings so you can budget more easily. With hourly, on the other hand, it’s possible that your hours can get cut if the business you work for isn’t doing so well.

How Much Salary is X Dollars an Hour?

Sometimes it’s more useful to understand how much you make in terms of an annual salary compared to an hourly rate, and vice versa. You don’t need to whip out the pen and paper—an easy way to figure this out is to use an hourly to salary calculator.

With an hourly to salary calculator, you can input what your hourly rate is, how many hours per week you work, how many work days you have per week, and how many holidays or vacation days you have per year. Then, you can clearly see how much you make not only in a year but also in a month, week, and day. 

Examples of Hourly to Salary Conversion

Let’s look at a few examples. Say you make $12 an hour at your job and you work a standard 40-hour work week, split over five days. Then let’s assume you have 10 holidays per year (the U.S. government recognizes 10 holidays a year—other countries have more or less) and 14 vacation days. Using the calculator, that means that your yearly salary would be $22,723. Your monthly salary would be $1,894. 

As another example, we can check how much you would make if your hourly rate was actually $25/hour but all of the other factors stayed the same. In that case, your yearly salary comes out to $47,340 and your monthly salary totals $3,945. 

How Much Do I Need to Afford My Basic Needs?

When calculating how much you have to earn to afford your basic needs, it’s critical that you factor in the cost of living. A certain hourly pay is going to take you much further in a city like Hickory, North Carolina (which was named the most affordable place to live in the U.S. in 2023-2024 by the U.S. News & World Report) than San Diego, California (which was named the most expensive place in the same ranking). 

If you’re looking for a new job or you’re thinking of moving to a new city or country, it’s a smart idea to compare your hourly wage or salary with the cost of living. That way you can determine whether or not you can afford your basic needs before you make that life-changing decision.

Can an Hourly Wage Support Your Cost of Living?

Let’s take a closer look at how your life could differ by earning the same wage in different cities, using US dollars as the currency for easy comparison.

As mentioned in the other example, most people work 40 hours per week, five days a week, with 10 holidays per year and 14 vacation days per year. Now, let’s say your a young family of two adults and two young children to better understand the cost of living. How much would they need to earn per hour in order to afford the cost of living?

We’ll focus on two locations within the United States: Denver and Sacramento, using data from the Atlanta Federal Reserve’s Cost of Living Database.

In Denver, Colorado, the cost of living for this family composition breaks down as follows:

Food: $9,158
Child Care: $36,344
Health Insurance: $13,610
Rent: $16,440
Utilities: $2,584
Transportation: $8,290
Other: $5,995

These expenses amount to a total of $93,403 per year, excluding taxes. To cover basic needs, including taxes, the family would need an annual income of $112,389. This means that an hourly wage equivalent of $59.60, or just about $30/each working adult would be required. Because the minimum wage in Denver is $17.29 as of 2023, this means that these parents would not be able to afford the cost of living if they were to work minimum wage jobs, unless they were able to work more than 50 hours a week.

Now, let’s shift our focus to Sacramento, California, where the breakdown of expenses for the same family composition is as follows:

Food: $9,158
Child Care: $33,138
Health Insurance: $16,354
Rent: $12,844
Utilities: $2,584
Transportation: $9,722
Other: $5,962

These expenses add up to a total of $91,002 per year, not including taxes. Considering the total taxes of $23,463, the family would need an annual income of $114,465 to cover basic needs. This translates to an hourly wage equivalent of $60.70, or around $30/each working adult. Because the minimum wage in Sacramento is $15.50, like Denver, both working adults would not be able to make ends meet on minimum wage jobs here, either.

It’s important to note that these calculations include basic expenses and taxes but do not account for additional savings or discretionary spending. But, as we can see from these examples, even with the same earnings, the cost of living can vary significantly based on the location within the United States. Take into account other factors, like inflation, housing supply, medical expenses, student loan debts, and more, it’s easy to see why families who work still may have a hard time getting by on their hourly wage.

The Bottom Line with Your Living Expenses

In order to avoid finding yourself in the stressful situation of being unable to afford life’s necessities, take the time to figure out what your hourly pay/salary is and then compare that to the cost of living where you currently reside or want to reside. With these numbers in mind, you can make smarter financial situations for your family and future.