Eye-Popping Salary: Study Finds You Need Six Figures to Live Well in California

MJP –

Living happily in California just got pricier. According to GoBankingRates, a whopping $143,220 annual salary is the minimum needed to enjoy life in the Golden State in 2024.

This figure comes from data combining California’s cost-of-living index and findings from a Purdue University study, which pegged $105,000 as the ideal income for life satisfaction in North America. The study also highlighted thresholds for “life evaluation” ($95,000) and “emotional well-being” ($60,000–$75,000) globally.

California ranked among the costliest states, reflecting its high expenses and lifestyle demands. The research also provided unemployment data, painting a fuller picture of economic realities, the study found.

California, often celebrated for its sunshine, beaches, and vibrant culture, also carries a hefty price tag for those who call it home. A recent study has highlighted just how costly it is to live comfortably in the Golden State, revealing that a six-figure annual salary is now essential to maintain a decent standard of living. For many, the cost of housing, utilities, transportation, and everyday expenses has become so inflated that earning anything less than $100,000 per year may not provide the financial freedom needed to live happily in the state.

The Six-Figure Benchmark

The findings of the study, conducted by a team of economists and housing experts, show that the cost of living in California has surged to levels that make it increasingly difficult for average workers to make ends meet. While the “six-figure salary” benchmark might sound like a high goal, the reality is that it’s the bare minimum for those living in some of California’s largest cities.

In major metropolitan areas like Los Angeles, San Francisco, and San Diego, the study estimates that individuals and families need at least $100,000 to $120,000 per year to cover basic living expenses, including rent, utilities, food, healthcare, and transportation. While the exact figure can vary depending on location and lifestyle, the general conclusion is clear: six figures are no longer a luxury, but rather a necessity in many parts of the state.

Housing: The Biggest Hurdle

At the heart of California’s astronomical cost of living is the state’s housing market, which has become infamous for its sky-high rents and home prices. According to the study, housing expenses account for the bulk of the budget for most Californians, with many spending 40% to 50% of their income just to secure a place to live.

In cities like San Francisco and Los Angeles, the median rent for a one-bedroom apartment is well above $2,500 per month, with some areas pushing close to $4,000 or more. For those looking to buy a home, the median price for a house in California has reached nearly $800,000 statewide, with major cities seeing prices well into the millions.

The soaring cost of housing has led to an increase in rent-burdened households, defined as those who spend more than 30% of their income on housing. The California Housing Partnership reports that more than 50% of renters in the state are rent-burdened, a staggering statistic that underscores the financial strain many residents face.

Living Expenses Beyond Housing

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While housing may be the most significant financial challenge, it’s far from the only cost driving up the need for a high salary in California. Other key expenses, such as healthcare, transportation, and food, have also seen significant increases in recent years.

• Healthcare: With premiums for health insurance plans continuing to rise, especially for individuals purchasing insurance through the state’s health exchange, many Californians find themselves paying hundreds of dollars per month just to maintain coverage. High out-of-pocket costs for medical services, prescriptions, and co-pays further add to the burden.
• Transportation: With many Californians still dependent on cars due to the state’s sprawling layout, gas prices and car maintenance are considerable ongoing expenses. A typical monthly car payment can range from $300 to $500, and with gas prices regularly surpassing $4 per gallon, driving costs can easily exceed $1,000 a month.
• Food: California is known for its diverse food culture, but dining out and grocery bills are among the highest in the nation. The average cost of groceries for a family of four has surpassed $1,000 per month, and dining out at restaurants can easily add to the monthly expenses.

The Impact on Middle-Class and Low-Income Families

For many middle-class families, the six-figure salary benchmark represents a barrier to maintaining a decent standard of living. While $100,000 a year may seem like a substantial income in other parts of the country, in California, it’s often just enough to cover basic expenses with little room for savings or discretionary spending.

In particular, low- and middle-income households are finding it increasingly difficult to save for long-term goals, such as retirement or homeownership, due to high living costs. Many residents are forced to make difficult choices, such as reducing healthcare coverage, postponing home purchases, or cutting back on essentials like childcare and education.

The study highlights that, for many workers in California, the dream of homeownership has become increasingly out of reach. With wages failing to keep pace with the rising cost of living, many residents are left struggling to stay afloat, despite working full-time or multiple jobs.

Regional Variations in Cost of Living

While the overall trend points to the need for six figures in many parts of California, the cost of living can vary dramatically between regions. Areas like Silicon Valley and San Francisco are among the most expensive in the nation, where even high earners find it challenging to afford a modest lifestyle. However, more affordable areas like the Central Valley or Inland Empire might require lower salaries to live comfortably, though they still may require a significant income for families to thrive.

Some regions of California, especially those that are less densely populated, have seen a slight decrease in living costs due to the pandemic-induced migration of people moving out of cities. However, the overall housing shortage and the demand for housing in urban areas continue to push prices upward statewide.

Is the Six-Figure Salary Sustainable?

As California’s cost of living continues to outpace inflation, the question arises: Is the six-figure salary sustainable for most residents? While high salaries in tech and finance may seem like a solution, many workers in lower-wage industries—such as service, education, and healthcare—find it increasingly difficult to keep up with the rising costs of living.

State leaders are aware of the widening disparity and are taking steps to address the issue. California has launched initiatives to build more affordable housing, increase the minimum wage, and improve access to healthcare, but the pace of these changes has been slow. Advocates for affordable housing argue that California needs to focus more on creating affordable rental units and expanding housing subsidies to support low- and middle-income families.

Conclusion

California’s six-figure salary requirement is a clear reflection of the rising costs and deepening inequality in the state. For many, the dream of living comfortably in the Golden State is becoming increasingly difficult to achieve without a hefty paycheck.

While the situation is far from simple, it underscores the need for targeted policy changes to address California’s affordable housing crisis and ensure that residents, regardless of income, can live comfortably and securely in the state. Until then, the high salary threshold remains a harsh reality for many who call California home.