Here’s the Six Figure Salary That’s Still Considered ‘Lower Middle Class’ in California
Written by
Cindy Lamothe
Edited by
Zuri Anderson
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California has always had a reputation for sunshine, beaches and sky-high living costs — and lately, the last one seems to be outshining the rest.
According to data from California’s Legislative Analyst’s Office, housing costs have grown substantially in recent years — in some cases, growing at historically rapid rates.
From the gas pump to the grocery store, it feels like every dollar stretches a little thinner in the Golden State. Even with a six-figure income, many Californians are finding that their paycheck doesn’t buy quite the lifestyle you might expect.
So, what exactly does “middle class” look like these days in California? Surprisingly, earning what sounds like a dream salary elsewhere in the country could still land you in the “lower middle class” category here.
Here’s a look at the numbers to show just how far a six-figure income really goes in one of the nation’s most expensive states.
The Illusion of High Income
According to Shanli Liu, finance expert and the managing partner of FreedomFolio, a $120,000 salary in California nowadays buys less security than it did a generation ago.
“This is because wages are not increasing as much as the rent and home prices, which are exploding at multiples of inflation,” Liu explained. “Where employers once offered pensions and cheaper group insurance, I now see households shoulder most of the risk on their own.”
She said this structural shift means that you won’t be able to relax even if you’re earning high.
How the Squeeze Shows Up
As Liu explained, even with “good pay,” families find that childcare, insurance and housing demand payment before retirement savings or emergency funds. And because of this, many six-figure households carry revolving debt, not from luxury purchases but from trying not to miss payments for these bills.
“It might seem counterintuitive to you until you see the data on housing and transportation costs using up half of gross income before taxes,” she noted.
Strategies That Actually Help
“I’d say there’s no immediate solution, but clarity goes a long way,” said Liu.
She recommended creating a “California-adjusted budget,” which means adjusting your expenses as if they were 20 to 30% higher than national averages.
“This ensures more realistic planning,” Liu added. She also urges her clients to automate their retirement contributions at 15% minimum before spending, so their savings aren’t compromised.
Finally, Liu emphasized building a second income stream, even if it’s small.
“Because in high-cost states, the path to survival isn’t just better budgeting, but also diversifying income to keep up with the state’s cost structure,” the expert concluded.
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