If California Costs $130K a Year, How Do People Afford To Live There?

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Living in California has always carried a certain allure, with ocean views, endless sunshine, innovative industries and world-class entertainment. But that dream comes with a steep price tag. 

According to the MIT Living Wage Calculator, a single working adult with two children in California would need to earn $64.17 per hour just to meet basic living needs — that’s $133,474 per year at a standard 40-hour work week. If a family unit has two working adults and two kids, it makes it a bit easier, but the household would still need to bring in more than $130,000 to get by.

This figure isn’t about luxury or keeping up with Silicon Valley millionaires, it simply covers basic necessities like housing, food, transportation, healthcare and other essential bills. It doesn’t include any savings, debt repayment or discretionary spending.

So, how does anyone afford to live in the Golden State?

It Depends on the Household

If both parents are working in a two-adult, two-child household, the required income per adult drops to $34.55 per hour, or about $71,864 annually per person. That makes the combined household income roughly $143,728.

However, that scenario assumes both adults are working full time and childcare is somehow covered, which isn’t always realistic. Factor in paid childcare, a major cost in California, at $700 per month — or $8,400 a year for younger children and babies — and you’re nearly back to needing six figures per person.

These Numbers Only Cover ‘Needs,’ Not Financial Health

What many people misunderstand when running the numbers is that a “living wage” doesn’t include savings, retirement contributions, emergency funds or paying off debt. It’s the bare minimum required to survive, not to thrive.

Using the 50/30/20 budgeting rule, a commonly used framework for financial planning, we can extrapolate what a truly comfortable income might look like.

With the 50/30/20 budget:

• 50% of your income goes to needs (housing, bills, groceries)
• 30% to wants (dining out, entertainment, travel)
• 20% to savings and debt repayment

If 50% of your income needs to cover just the basics, as MIT’s tool calculates, then you’d actually need to double that income to afford wants and savings comfortably. That puts the true “financially stable” income for a single parent with two kids closer to $260,000 per year.

Even with two working parents, the household would still need approximately $143,000 just to meet its needs, suggesting a true comfort zone closer to $280,000 annually.

Los Angeles Is the 10th-Most Expensive City in the World

To add even more context, Mercer’s 2024 Cost of Living Report ranks Los Angeles as the 10th-most expensive city globally, just behind London and New York. That global comparison highlights just how much wages must stretch in California’s metro areas.

So, How Do Californians Afford It?

For many, the answer lies in a combination of:

• Roommates or multigenerational housing
• Relocating inland to more affordable cities like Fresno or Bakersfield
• Side hustles or gig work to supplement income
• Government assistance, subsidies or childcare support programs
• Tight budgeting and in many cases, going without savings

Location Is Everything

Housing costs in California are more than double the national average. Combined with a limited housing supply, this results in 44% of Californians renting their homes, compared to just 35% nationwide, according to the Public Policy Institute of California.

For context, the median home sale prices in some of California’s most expensive cities, San Francisco, San Diego and Los Angeles, are all well above $900,000. Specifically, San Francisco’s median home price is $1.45 million, San Diego’s is $949,000 and parts of Los Angeles average $941,000. These steep prices demand sky-high incomes, often well above $130,000 per year.

However, other regions of the state are considerably more affordable. For example, homes in Sacramento have a median sale price of around $475,000. In the Central Valley, cities like Bakersfield ($385,000 median home price), Fresno ($399,000) and Stockton ($450,000) offer significantly lower costs. Even high-desert communities like Lancaster provide more accessible rents and property values, often less than half the cost of California’s coastal markets.

If remote work is an option, many are choosing to live inland or in smaller towns while still earning metro-level salaries.

Roommates Aren’t Just for College

While we’ve already covered the high cost of buying a home, rent is another major expense in California. For example, the median rent for a one-bedroom apartment in Los Angeles is around $2,500 per month, or nearly $30,000 per year.

To manage these costs, many residents turn to strategies like living with roommates, house hacking (renting out rooms in properties they own) or multigenerational living with family.

Side Hustles and Gig Work Help Bridge the Gap

Californians are no strangers to side hustles. From Uber and DoorDash to freelance design and online tutoring, many residents supplement their primary income with gig work. In high-cost cities, this extra income isn’t just a bonus, it’s a necessity.

Even earning an additional $500-$1,000 per month can make the difference between getting by and going under.

Strategic Budgeting and Frugal Living

High earners aren’t always wealthy, especially in a state where even $130K can vanish quickly. Budgeting apps, financial planning and disciplined saving are critical. Many Californians budget aggressively, limit nonessential spending and take advantage of public resources, like regional transit passes, state healthcare programs and food subsidies, to make ends meet.

Golden State, Golden Price

Living comfortably in California, not just surviving, often requires far more than what most would consider a middle-class income. For many families, $130,000 a year is the floor, not the ceiling. Still, the dream of living in the Golden State isn’t out of reach.

Plenty of people earning less find ways to make it work through frugal living, smart budgeting, shared housing and side hustles. Yes, California is expensive but with the right strategy and sacrifices, it’s still possible to build a life here.

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