california budget

Living in California on a Budget: A Realistic Budgeting Guide

Sunny beaches, breathtaking redwood trees, Hollywood: These thoughts might seem like a West Coast dream. Those dreams also might come to a halt if you look at the cost of living in California’s most popular areas. The average monthly rent for a San Francisco apartment, for example, is more than $3,200. If you fantasize about a Golden State life but want to keep your finances in check, living in California on a budget is indeed possible. This guide will show you how.

Can You Live Cheaply in California?

With the right budget and adequate planning, you can live comfortably in California. Yes, the Golden State does have one of the highest cost-of-living estimates in the U.S. However, it’s also home to several affordable cities with their fair share of attractions, great neighborhoods, and stunning views.

How Much Do You Need to Make to Afford Living in California?

On average, California’s annual cost of living falls between $29,824 for one person. For a family with two working parents, that number increases to $75,952. 

That said, California’s cost of living varies largely based on location. On the lower end of the scale is Modoc County in the northeast corner of the state. A single adult living there would need an annual income of at least $19,533 to cover basic expenses. A family with two working parents would need an income of at least $55,032 to cover the same expenses.

California’s county with the highest cost of living is San Francisco. A single adult should plan to spend at least $44,481 annually there. A family with two working parents might spend at least $110,984. 

As you plan your California budget, know that not all of your salary will go toward your California lifestyle. Part of your salary will go toward paying taxes.

Creating a Budget for California

To help you gauge whether you can afford to live in California, you should determine how much your expenses cost. Similarly, you should allocate your earnings to help track and control your spending. This way, you can properly distribute your wages to what’s most important before spending money on nice-to-haves. Below are nine items that your budget should include to ensure you’re covering the basics.

1. Taxes

In 2020, the average full-time employee had a tax rate of 22.4 percent. Your tax rate comprises your federal income tax rates as well as your state and municipality’s rates. California residents must pay state income tax that varies based on an individual’s income bracket. Property owners also pay property tax that averages a rate of 0.73 percent. This rate is lower than the national average of 1.07 percent.

2. Emergency Funds

A major car repair, dental procedure, plumbing emergency, or even a job loss: These are all examples of unexpected expenses. Setting up an emergency fund can help you stay afloat amid these stressful situations.

Financial experts recommend putting about 10 percent of your monthly earnings toward your emergency fund. You should continue adding to this fund until you’ve saved enough money to cover between three and six months of your basic living expenses. This way, if needed, you can still live comfortably during (and after) an emergency.

3. Long-Term Savings

While you might earn enough money to cover your expenses now, you’ll eventually want to make some sort of big purchase or begin investing. You can use a savings account, an investment account, or a 401(k) plan through your employer to set aside some funds for these financial goals. Many financial advisors say you should save 20 percent of your monthly income to put into your savings.

4. Housing or Rent

Whether you plan to own or rent your California home, housing will likely be one of the biggest expenses in your budget. A oft-quoted rule of thumb is to keep your rent under 30 percent of your monthly gross income or your mortgage under 28 percent. Keep these percentages in mind as you’re looking for houses to own or places to rent. This way, as you determine which areas and homes fit your needs, you stay within budget.

5. Utilities

Proper housing entails fully accessible electricity, water, and internet along with trash collection in some areas. Utility costs can vary significantly, but the average monthly cost for electricity in all states is about $114. The average monthly costs for water, internet, and trash collection are, respectively, $71, $60, and $14. If you’re renting, your landlord will often cover your water and trash costs. 

You should also factor other monthly subscriptions into your utility budget. These subscriptions can include cable, streaming, or anything else that comes to mind.

6. Insurance

If you have to pay for your own health insurance, you can find a plan that fits your needs in the national insurance marketplace. In 2020, the average premium for an individual healthcare plan was $456 per month. However, the cost of plans can vary depending on the benefits they offer.

Additionally, you’ll likely need insurance for your car and home (this is true whether you own or rent). These plans’ premiums can also vary widely, but the monthly cost of car insurance averaged about $133 in 2021. Homeowners insurance averaged about $109 per month, and renters insurance was typically around $15 per month.

7. Transportation Costs

If you’ve taken out a loan to buy a car, you’ll have to factor monthly payments into your budget. On average, monthly payments are $563 for new vehicles and $397 for used vehicles. Monthly payments on leased vehicles average about $450 per month. 

As of December 19, 2021, the average price of gas in California is about $4.67. The average Californian drives about 1,044 miles every month, and most cars get about 24.2 miles per gallon. Divide the latter by the former, and you’ll see that the average Californian uses 43.14 gallons of gas per month. When you multiply this number by the average gas pierce, you’ll see that you might spend about $201.46 on gas per month.

In addition to filling up your car, you’ll need to budget for maintenance. While these expenses vary depending on your vehicle’s model and age, AAA recommends setting aside at least $66 per month.

If you prefer to take advantage of public transportation, many areas in California have transit systems, but their availability and efficiency widely vary by area. For example, the San Francisco Bay area has one of the state’s best transit systems. You can get a monthly train pass for $106. Systems in Los Angeles, however, are far less efficient. Monthly passes for this area are about $100.

8. Food

Many financial experts recommend you spend no more than 10 to 15 percent of your income on food. This amount includes money spent on grocery shopping, eating out at restaurants, and ordering delivery. To help keep a handle on your spending, consider making a detailed grocery list before you go to the store. That way, you can spend less time strolling down the aisles and making spontaneous purchases you don’t really need.

9. Discretionary Expenses

This part of your budget includes any miscellaneous items or extra activities that aren’t basic needs. Vacations, a gym membership, shopping trips, and anything else that doesn’t fall into the above categories belong here. Financial experts say discretionary spending shouldn’t be more than 30 percent of your budget.

7 Most Affordable Places to Live in California

Here are seven of California’s most affordable places to live and a few reasons to add each one to your list of choices.

1. Eureka

Located in northern California, Eureka is one of the cheapest places to live in the state. This port city of just over 26,000 people is best known for its Victorian architecture and eclectic shops. The average household income is $62,953, and has a low monthly rent, between $700 and $900 depending on the estimate. Compared to many other cities in California, living in Eureka can be quite affordable. To live comfortably in this city, you’ll need a monthly income of at least $2,491.50.

2. Oxnard

Located about 40 minutes south of Santa Barbara, Oxnard has about 208,100 residents and is Ventura County’s most populous city. Oxnard’s median household income is about $72,843. This city’s median rent is $1,593 per month for rentals, and the median home price is $775,000. To become an Oxnard resident, you’ll want to bring in at least $2,200 per month.

3. Redlands

A city in San Bernardino County, Redlands has a population of nearly 72,000. About 60 miles east of downtown Los Angeles, Redlands offers several attractions ranging from national parks to breweries. On average, residents in this city bring home about $103,196 each year.

The cost of living in Redlands is less than the median cost of living in California. The average one-bedroom rental costs $1,501 per month. A single adult wanting to move to Redlands will need to make $3,013.25 per month to afford their expenses.

4. Chico

Chico is a city about 90 miles north of Sacramento. With more than 121,000 residents, Chico is known for its large craft beer scene. In recent years, the median cost of renting a home in Chico has been $1,087. People living in the city average salaries of about $2,649 per month, while the cost of living is just $1,895 per month.

5. Temecula

If you’re looking to live in southern California, Temecula might be a great option. Known as the region’s wine country, Temecula offers its nearly 114,000 residents more than 40 wineries. The median income in Temecula is $96,183 per year. Rental units have an average monthly cost of $2,188. The cost of utilities in Temecula is 11 percent less than the state and national averages. To comfortably afford living in this city, you’ll need a monthly salary of at least $3,146.

6. Clovis

With over 109,000 residents, Clovis is known as the “Gateway to the Sierra.” This Fresno County city is a family-friendly town with a host of restaurants and art galleries. Its historic downtown and surrounding areas boast the state’s highest number of antique shops per square mile. 

On average, Clovis residents make $96,614 annually. One-bedroom rentals cost an average of $1,078 per month, and the median home value is $284,200. The cost of living in Clovis is about $3,015 per month, which is below the state average.

7. Vacaville

A city in northern Solano County, Vacaville is about 35 miles from Sacramento and 55 miles from San Francisco. This small historic town has a population of just over 102,000. It offers residents an affordable alternative to living in the Bay Area.

Renting a one-bedroom space will cost you about $1,750 per month, while the median price of homes in this area is $354,600. Vacaville’s cost of living is $2,839 per month, and the average monthly salary for Vacaville residents is $3,879.

Making Smart Moves

You don’t have to feel anxious at the thought of living comfortably in California. There are several fun cities in the Golden State where you can keep your cost of living near or below the national average. And with a structured budget, you can properly save for a big move to a California city of your choice. To help you add some additional cash to your moving fund, check out MoneyMash’s list of ways to quickly make money.