The current federal minimum wage in the U.S. has been stagnating at $7.25 per hour since 2009. Most people agree that it’s time for an update. Recently, serious attempts to raise the federal minimum wage to $15 per hour have been made. This has brought several questions to the forefront:
How much is $15 per hour in a year?
Is $15 per hour enough to support a family?
How do I live on $15 per hour?
The answers to these questions aren’t simple. They vary based on things like location, household size, and expenses. They’re important nonetheless, though. In this article, we’ll be breaking down what $15 per hour looks like in several different ways to try and answer these questions and more.
$15 Per Hour Is How Much A Year?
What $15 per hour means for a person’s annual income depends entirely on how many hours they work in a year. That depends on whether they’re a full-time or part-time employee.
For the following breakdowns, we’ve defined a part-time employee as someone who works 16 hours per week – the national average for part-time weekly hours. We’ve defined a full-time employee as someone who works 40 hours per week. It’s also important to note that there are 261 working days in a single calendar year.
The annual income of a part-time employee earning $15 per hour can be calculated using following the formula: hourly wage ($15) x hours worked in a day (3.2) x days worked annually (261). The result is $12,528.
Once again, the annual income of a full-time employee earning $15 per hour can be calculated as: hourly wage ($15) x hours worked in a day (8) x days worked annually (261). The result is $31,320 in pre-tax income.
How much is taxes for $15 per hour?
Wait! There are still taxes to pay!
Someone making between $9,701 and $39,475 annually will fall into the 12% marginal income tax bracket at the federal level. That translates to an effective federal income tax rate of 6.62% for a full-time employee earning $31,320 annually – or $2,073 in federal income taxes.
On top of federal income taxes, most states levy additional income taxes. There’s a huge amount of variety between rates. Currently, nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) don’t tax income at all. On average, though, someone making $31,320 annually should expect to pay state income tax at an effective rate somewhere between 0% and 5%. That means paying anywhere between $0 and $1,566 in state income taxes.
All told, our full-time employee’s take-home pay will be somewhere between $27,681 and $29,247. That represents a sizable drop in actual earnings:
- Hourly: $13.25 to $14
- Daily: $106 to $112
- Weekly: $530 to $560
- Monthly: $2,120 to $2,240
What Companies Pay At Least $15 Per Hour?
Even though there isn’t a federally mandated $15 per hour minimum wage, many companies are beginning to offer this level of compensation to their lowest-paid employees.
- Amazon: $15 per hour.
- Bank of America: $20 per hour.
- Best Buy: $15 per hour.
- Cigna: $16 per hour.
- Chipotle: $15 per hour.
- Costco: $16 per hour.
- Google: $15 per hour.
- Starbucks: $15 per hour.
- Target: $15 per hour.
- Walmart: $15 per hour.
Which States have a Minimum Wage of $15 Per Hour?
As of 2022, California is the only state that has a minimum wage of $15 per hour. This minimum wage applies to any company with 26 or more employees.
The following states are on track to reach $15 per hour in the next few years:
- Connecticut (June 1, 2023)
- Delaware (January 1, 2025)
- Florida (September 30, 2026)
- Hawaii ($18 by 2028)
- Illinois (January 1, 2025)
- Maryland (2025)
- Massachusetts (January 1, 2023)
- New Jersey (2024)
- Rhode Island (January 1, 2025)
- Virginia (January 1, 2026)
Note that Washing D.C. has also reached $15 per hour minimum wage in 2021.
Is $15 Per Hour Enough to Live on?
One of the main driving forces behind the push for a $15 per hour minimum wage is the fact that the minimum wage has failed to keep up with the rising cost of living in the US. In other words, the minimum wage is not a liveable wage.
For those that aren’t aware, a living wage approximates what a family unit would need to earn per hour (pre-tax) to secure adequate food, shelter, healthcare, and comfort for themselves. This figure varies from greatly state to state (and city to city, if you want to get specific) and based on what size family unit you’re considering. To assess whether $15 per hour is enough, let’s look at two different kinds of family units:
For single working adults, the District of Columbia has the highest living wage in the U.S. at $20.21 per hour and South Dakota has the lowest at $12.61 per hour. The average across the U.S. is $14.85 – fairly close to $15 per hour!
When you add children into the mix the story it’s a different story. For a family of four (two working adults and two children), the District of Columbia still has the highest living wage at $25.90 per hour and Tennessee has the lowest at $17.82 per hour. This time the average living wage for a family of four is $21 per hour (per adult).
Where does this leave us? Well, depending on where a person lives, how many children they have, and how many working adults are in their household, $15 per hour might be enough. There are many cases where it wouldn’t be, though.
The best thing you can do to live on $15 per hour for a small family is to live in a state that has a lower cost of living.
How To Live On $15 Per Hour?
While living wage calculations are a useful tool, they aren’t a perfect predictor of anyone’s ability to live on a certain amount of money. While some expenses like food, utilities, and housing are necessary, the specific amounts aren’t always set in stone. In addition, there are a ton of unnecessary expenses that can affect a person’s overall income needs.
If you want to live on $15 per hour, there are a few relatively easy ways to get your expenses in order:
- Creating a budget
- Adopt a saver’s mindset
We’ll go over both points in greater detail in the sections to come!
Sample Budget For $15 Per Hour
Unsurprisingly, creating a budget is a prerequisite for sticking to a budget. Sticking to a budget is the best way to live comfortably within your means.
To make things clear, we’ll be looking at examples throughout this how-to. They’ll all be based on an imaginary, full-time employee earning $15 per hour. We’ll call him… I don’t know… Jeff!
Take Stock of Necessary Expenses
The most important part of any budgeting exercise is working out how much you’re spending and on what. Start by making a list of necessary expenses. Next to each item, write down how much the expense costs you annually.
Savings should also be included as a necessary expense here. As a rule of thumb, you should aim to save 10% of your take-home pay. For someone making $15 per hour that’s around $2,500 per year.
Here’s an example of a necessary expense list created by Jeff:
- Housing – $10,000
- Food – $4,000
- Health Insurance – $6,000
- Transportation – $1,000
- Utilities – $1,500
- Taxes – $3,000
- Savings – $2,500
- Total – $28,000
Note that taxes are included for visualization purposes, but generally, taxes will automatically be withheld from your paycheck for you by your employer.
Calculate Available Funds
Once you have a total for your necessary expenses, subtract it from your annual income to determine the amount of money you have left-over. If we continue with the example from above, Jeff will get:
- $31,320 – $28,000 = $3,320
We’ll set this number aside for now and come back to it later!
Prioritize Unnecessary Expenses
The next step is ranking your unnecessary expenses in order of priority (i.e., how important they are to you). This part can be pretty difficult because it’s hard to rank the relative importance of things that are incredibly different. How on earth do you decide if the expense of your gym membership is a higher priority than the expense of your cinema club card?
The UEC framework can be a big help in these situations:
- Utility: How long will you keep getting value out of each expense?
- Enjoyment: How much do you enjoy the things or experiences you’re getting for your money?
- Cost: Finally, how much do they cost?
Based on your answers to these questions you should be able to make a relatively accurate list of your unnecessary expenses in order of importance. Again, write out the cost next to each item. Jeff’s list looks something like this:
- Travel- $2,500
- Gym Membership – $250
- Restaurants – $500
- Bars – $300
- Movies – $200
- Netflix – $80
- Total – $3,830
Calculate The Difference
Now it’s time to calculate the difference between your available funds and your total unnecessary expenses. This is the step where you find out whether you’re living above, within, or below your means.
If you end up with a positive result here… great! You could keep living exactly as you are, or you could continue on with the budgeting process and put even more into savings or investments. If you end up with a negative result… it’s time to rethink some expenses!
When we do this step with Jeff’s numbers we get:
- $3,320 – $3,830 = -$510
Uh oh! Jeff is in the red! In other words, his unnecessary expenses exceed his available funds. He’ll need to rethink his spending habits if he wants to live on $15 per hour.
Rethink Your Spending
This next stage of the budgeting process is all about restructuring your list of unnecessary expenses (beginning with the least important) until you’ve made up the difference calculated in the previous step.
Some expenses you might need to make a binary ‘yes’ or ‘no’ decision about. Others you might be able to take a more nuanced approach where you focus on reduction. In both cases, make sure you weigh the costs and benefits in your head before making the decision.
Returning to our example, Jeff needs to make up $510 to create a sustainable budget for himself. He might decide that he doesn’t get enough enjoyment from his Netflix subscription to justify keeping it (+$80). He might also decide to go to half as many movies (+$100). Finally, he might decide that he’ll cut his restaurant and bar expenditures by 50% by inviting friends over to his house more often (+400). With these small decisions, Jeff is $70 in the green!
Sticking To the Plan
The final step in any budgeting exercise is sticking within the limits you set yourself. This is always the most difficult part.
One thing that will make your life much easier in this regard is a budgeting app or service.
There are plenty of great free and paid options out there that will help you stick to your $15 per budget.
Adopting A Saver’s Mentality
Aside from budgeting, adopting a saver’s mentality is one of the best ways to live your best life on $15 per hour. This means avoiding unnecessary debt (like credit card or student loans), saving as much as possible, and spending consciously.
By making conscious choices about your money, you’ll be able to save up for the things that do give you a lot of utility and enjoyment. You’ll also feel a sense of pride knowing that you’re putting a little bit away for a rainy day every month.
Adopting a saver’s mentality essentially means that you’re always on the lookout for ways to save money. If you find a cheaper utility provider, make the switch! If a discount food wholesaler opens up in town, try to shop there as much there as possible! The goal is to start getting a similar sense of satisfaction from saving money as you do from spending it. That might sound far-fetched, but financial security is one of the most reliable predictors of life satisfaction.
Living on $15 per hour can be challenging, especially if you have kids or live in an expensive area. It is possible with careful planning and a little bit of self-discipline, though.
Creating a budget that focuses on limiting unnecessary expenses will help you live your best life with less money to spend. By making conscious choices about how you spend your funds, saving as much as possible, and avoiding debt, you’ll have the freedom to enjoy what matters most in your life without worrying too much about finances.