What's the Cost of Living in California?

Living in California offers many perks rarely found in the rest of the country: great weather, beautiful landscapes, economic opportunities, rich culture, and many natural wonders. The high quality of life, however, comes with a price. And so, California has one of the highest costs of living in the nation, topped only by Hawaii and New York. In fact, living here is 46% more expensive than in the rest of the country. 

As Golden State residents, we spend more, but we also make more in personal income. According to the U.S. Bureau of Economic Analysis, the median per capita personal income in California is $76,898, which is significantly higher than the national median household income of $64,993. While those in California tend to have higher incomes and more opportunities for career advancement, high housing costs eat away at residents’ ability to build up their savings, making homeownership difficult for many. While it’s recommended that individuals spend no more than 28% of their income on housing, residents in our state spend 94% of their income on housing—42% higher than the average American who spends 52% of their income on housing.

The median rent for a two-bedroom apartment in California is $2,274, which is nearly double the national median of $1,295. A minimum wage worker in California would need to work 104 hours/week to afford a two-bedroom apartment. An individual working 40 hours per week would need to make $39.01 per hour to afford a two-bedroom apartment. 

According to Redfin, the average person would need a salary of $107,000 to afford a mortgage on a typical home in the U.S. The average Californian, however, would need to earn $153,805 to afford a mortgage on a home here. Because of these high housing costs, California has the second-highest poverty rate under the U.S. Census’ Supplemental Poverty Measure (SPM), which takes cost-of-living into account. California’s SPM rate was 15.4%, compared to a national average of 11.2% (three-year average 2018-2020).

California currently has the highest gasoline prices in the country as well, averaging $4.38 per gallon as of December 18, 2022. That’s 39% more than the national average of $3.15. 

A household of four people will spend an average of $10,543 on food in California, that’s $708 higher than the national average which is $9,835. Additionally, California's state tax revenue was 9.6% higher cumulatively in 2020 and 2021 than the fiscal year 2019 extended over the same period, adjusted for inflation—making it the third-highest in the nation and 4.1% higher in the U.S. as a whole. California also has the highest state sales tax rate in the country at 7.25%. Property taxes here, however, are near-average. Californians paid $1,680 per capita in property taxes in 2018 (the last year this data was available)—the 18th-highest in the nation. In comparison, the national average was $1,675 in 2018.

Despite the high cost of living, when asked about their household’s financial situation, nearly three in four Californians say they are satisfied, that satisfaction increasing as their annual income increases.

Known for their creativity and grit, many Californians come up with a variety of solutions for cost-of-living challenges. Here are a few ideas:

Diversifying your income by having a source of money apart from your primary job is a smart strategy for tackling a high cost of living. And side hustles are growing in popularity as well! According to a 2022 survey from Insuranks.com, 93% of working Americans have a side hustle. The most common side hustles? Taking online surveys, selling items online, doing freelance work, and doing a part-time job. The average monthly income from side hustles is $483 per month and 90% of respondents said they enjoyed their side hustle. Some other side-hustle ideas include ​dog walking, teaching yoga, bartending, DJing, working as a personal trainer, and driving for food delivery and ride-share services.

A growing number of Californians have been choosing to leave their cars behind and, instead, do their errands on foot or by bike, or even opting for an e-bike or scooter. Not only is this lifestyle beneficial for the environment as it decreases carbon emissions, but it also allows people to reduce the amount they spend on gas, car payments, maintenance costs, and insurance.

Consider getting a Costco card now to purchase non-perishables in bulk as inflation will likely cause prices of food and goods to rise. Doing so will help you avoid having to pay more for these items in the future.

Gardening is a fun and beneficial activity that can help you get exercise in the outdoors. Additionally, growing, harvesting, and preserving (through canning, freezing, or drying) your own produce is an excellent way to save money. In fact, it's estimated that the average backyard garden yields about $600 worth of food per year.

Energy.gov offers various strategies to reduce energy use and save money, such as using energy-efficient products, advanced power strips for electronics when not in use, daylighting windows and skylights, passive solar design concepts with efficient windows, proper insulation and air sealing of your home, an Energy Star heat pump water heater operated efficiently, reducing "always-on" appliances and unplugging any unused electronics.

Since home prices continue to appreciate year over year, home ownership has long been considered a great way to protect and build your wealth. Looking at the numbers from Robert Shiller, who put together a database of U.S. home prices from 1890 to the present, you’ll see that the total return on investment for housing is .5% above inflation year over year since the end of the 19th century. If where you live is going to end up earning you even a small amount every year, that’s undeniably a better deal than paying someone else’s mortgage—which is essentially what happens when paying rent.

At the Cassity Team, we’re devoted to understanding the situations of individuals at every stage of their homeownership journey. If you’d like to discuss the specifics of your goals, reach out. We love helping people make the right moves.

Ready to make your move to San Diego? Give us a call today at (619) 268-3649 to find out how we can help you achieve your goals.