Is a $20K Per Year Salary Good?

If you just got a job offer with a base pay of 20k, you might wonder whether it is a decent starting salary. For such a wage, you are right to be worried. In this guide, let me help you answer the question; is a 20k salary good?

Is a $20k Salary Good?

No, a $20k salary is not good and will be inadequate for most people in the United States, whether living alone or as a family. This amount is more than three times lower than the average American household income of more than $70,784, according to the U.S. Census Bureau.

Man shaking hands with a woman in agreement

If you earn $20,000 annually, you will probably struggle financially and cannot take care of essential expenses like monthly rent and other bills. You will only have a little extra cash to save or spend on luxuries like expensive restaurant food or a car. This means you will need extra sources of income or consider making a salary counteroffer

How to Determine if $20K Is a Good Salary

$20,000 per year is undoubtedly a low income that will tie you down financially. However, several factors will determine how much you can survive on this salary. These include:

  • Federal income taxes
  • Your dependants
  • Cost of living in your area
  • Your debt situation
  • Your spending habits

Let’s quickly go through these factors and look at how they can affect your ability to live off of a $20k paycheck.

Federal Income Taxes

Depending on the income taxes you will pay in your state or city, the original $20,000 will come down by several dollars. For example, if you file as a single person, you will fall into the 12% income tax bracket with a $20k annual salary.

This means that you will be paying around $2,400 in taxes. If you consider other additional taxes in your state or city, your might receive less than $17,000 net income in your bank account.

Your Dependants

This amount will still be inadequate if you live alone and have no dependents. However, you might survive for a little longer compared to if you have a family of more than three people.

Considering that the median household income in the U.S. is close to $80,000, you can see how devastatingly lower a $20,000 annual income is for a family. This way it makes sense to negotiate higher pay depending on your job. 

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Cost of Living in Your Area

Some states are more expensive to live in than others. For instance, if you live in a big city with high living standards, you might be unable to afford to pay rent and cover other expenses like food and utilities.

However, if you are in a rural area or a less popular city, you might be able to pull through for longer with this kind of money. However, you might still struggle with basic needs, even with a tight monthly budget.

Your Debt Situation

The amount of debt you have will significantly inform whether or not you can live off $20k. For instance, if you have credit card loans that are due or overdue, you might have to sacrifice some of the money you have to pay them off.

While paying your debt is generally good for long-term financial goals to build your wealth, it means that you will need more money to spend on personal expenses like food and rent.

Your Spending Habits

With a $20,000 annual salary, your only option would be to lead a religiously frugal life. However, if you decide to spend your money without following a good monthly budget, you will be broke within a week of getting paid.

So, if you cannot earn more money, you might have to limit your spending to settle your expenses and live a more forgiving life.

How to Live on a $20,000 Salary

As I mentioned, a $20k annual salary is well below the national average. This means that you will have to make some sacrifices to live a decent life and afford essential expenses.

That said, there are several strategies that you can use to manage this pay more efficiently. For instance, you can:

  • Strictly work with a budget
  • Cut down unnecessary costs
  • Avoid bad debt
  • Live with friends or family
  • Shop in bulk
Laughing businesswoman working in office with laptop

Work With a Budget

For such low pay, you will definitely need a monthly budget to help you manage your money better. If you need help figuring out where to start, you can use budgeting tools or methods such as the 50/30/20 budget rule.

You will need to prioritize basic expenses that you can’t do without. These include rent, food, and basic utilities. You can put it towards your savings or debt if you have extra money.

Cut Down Unnecessary Costs

Cutting down on things you don’t absolutely need will help you save money you can direct toward other expenses. For instance, you can avoid things like restaurant food and online subscriptions.

Instead, you can put the cash towards an emergency fund or retirement savings. You should also avoid things that cost more than you can take on. 

For example, instead of buying a brand new car (which comes with extra expenses like gas and car insurance), you can use public transport until you are financially stable.

Avoid Bad Debt

If you earn only $20k per year, debt will be inescapable. However, you can try and avoid payday or high-interest loans that put more financial burden on you. What’s more, you should only take a loan when it is absolutely necessary.

For instance, I wouldn’t recommend taking a loan to buy a car or a new house. There are always cheaper alternatives, especially when it comes to housing.

Live With Friends or Family

Any person living alone on a $20,000 annual pay will likely have it hard. You can reduce the financial burden by living with a friend or a family member.

Dollar bills placed neatly on a row on top of data sheets and near a calculator and laptop

This way, you can share some expenses and hopefully have something left for your savings or emergency fund.

Shop in Bulk

You can save a few bucks by shopping in bulk. For instance, you can get groceries for a whole week instead of buying daily. According to financial experts, consumers can save an average of 25% when they shop in bulk.

However, not all products you buy in bulk will help you double up your savings. You can start by buying non-perishable groceries in bulk and then gradually test other products to see what results in more savings.

Related Questions

How Much Rent Can You Afford if You Earn $20K per Year?

You can afford up to $500 monthly on rent if you earn $20k per year. This is based on the 30% rule, which recommends not spending more than 30% of your gross yearly income on rent. 30% of $20,000 is around $6,000 per year, which translates to $500 per month.

Is $20K a Good Salary for One Person?

On average, even for one person, there might be a better salary than $20k. However, if you live alone and have good financial discipline, you might be able to manage this pay well. You might need more to save for a rainy day or toward your retirement savings.

What Are the Best Place to Live With a $20K Salary?

The cheapest places to live with a $20k salary include:

Charlotte, North Carolina
Columbus, Georgia
Mobile, Alabama
Tallahassee, Florida
Norfolk, Virginia
Jackson, Mississippi
Nashville, Tennessee

Final Thoughts

$20k per year is way lower than the average American wage. It is even lower if you earn per month, per week, or per hour. So, obviously, you will struggle and might need to look for alternative sources of income. However, if you are financially disciplined when you start working and don’t live beyond your means, you might be able to pull through. 

Jared Bauman is the owner and editor of He has started and sold several companies, along with owning several investment properties. His interest in personal finance started as a young kid, developed through his entrepreneurial ventures and real estate investments, and continue through his conversations with friends and colleagues.

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