When most people talk about ‘moving’ and ‘California’ in the same breath, they are considering moving out of the state. We all know about the high taxes and inflated real estate values in the Golden State but there’s a reason why 38 million people call it home. It’s a beautiful place with a diverse population and extremely temperate climate. I should know, I’ve spent all 26 years of my life in this state(except for 3.5 months in college).
Still, the top tax rate in California is a whopping 10.3%, one of the highest rates in the nation. That’s probably why no ‘income tax states’ like Florida, Texas and Nevada are so popular among retirees. But this designation can be a little deceiving since states often make up for the lack of income tax by raising property tax or sales taxes. Texas, for example, has the third highest property tax in the country. The cost of higher fuel taxes, sales taxes and other taxes could amount to higher than expected overall taxes in these no income tax states.
I’ve never read an article about how you would save money by moving to California so I’d like to provide some counter arguments to the theory that moving out of the state is always a prudent financial move.
Family & Friends Are Nearby
Since I grew up in California, all of my friends and family are nearby. Most are in Los Angeles(2 hours away), but it’s nice to be able to go home whenever I want and see everyone. A 2 hour drive is a lot more doable than a cross country flight.
I have a few friends out here that only get to visit their family around Christmas-time and are forced to pay exorbitant airline ticket prices and travel during the holidays. Meanwhile, I can go home for major holidays, birthdays, Father’s/Mother’s day, etc and it will only cost me $50 or less in gas.
California is a Vacation
I’ve lived in San Diego for 10 years now, and every summer around early June an influx of ‘Zonies come into town(Arizona residents). They drive in with their lifted trucks, hordes of people and take over the beach front properties from June-July. I don’t really blame them though, since the temperature in Arizona can get up to 110 degrees in the summer and San Diego is only a 6-7 hour drive.
So while other people treat California as their summer vacation destination, we’re spoiled to live here all year round. We don’t need to take a vacation to escape the heat. I think many people still do, but if you’re content with your lifestyle, you can save money by already living in a vacation destination.
Everything Can Be Free
Since I’ve never lived anywhere other than California, I’m not 100% sure about how it works out there but I assume that outdoor activities are nearly impossible or a lot more expensive during the middle of a snowy winter. The nice thing about living in California is that the weather rarely prohibits you from doing anything.
I like doing a lot of free outdoor activities like playing basketball, beach volleyball, hiking and snorkeling. Since the weather can be just as nice in the winter as it is in the summer, I don’t need to coup myself up in a sweaty gym during the winter months. I can still participate in everything I love to do year round and it’s all free.
On the surface, it might not seem like you would save money by moving to California. As soon as people see the higher tax rates, relative to some other states, they tend to scoff at moving back to California. But I’m here to tell you there are plenty of hidden costs out there and it doesn’t cost much more to move to California.
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If you’re looking to move back to California(or even out of it!), I found a great website where you can compare reputable moving companies at MovingRelocation.com. You can quickly and easily pull up multiple quotes and save yourself some time and money.
I agree with all of it! I moved to California about 40 years ago from New York and love it. There was and is a lot of opportunity in California to start businesses or invest in real estate. High prices should not scare people off. It also means there are more renters who cannot afford to buy real estate. I achieved financial independence thanks to income property.
That’s a great point about the opportunities available in places like California. I never thought about real estate that way, but it makes sense. Anyone can buy a property out in the midwest and rent it out, but here, properties are so damn expensive you can buy one and jack up the rent. That’s what I just did! haha
You make a good point Harry, with property taxes being so high in Texas. On the other had I was in L.A. in 2008 for a conference and I’ll have to say things were not cheap but when it comes to the city things are never cheap.
I think whenever you plan to move anywhere it’s good look at all the taxes you might have to pay before you move.
I’ve traveled all over the US and I think the every day cost of living doesn’t vary too much between cities. A lot of my experience comes from comparing the price of beer at a bar though haha. Either way, the one huge difference is the real estate cost here compared to other places. If you can get over that hump, the cost of living is pretty close IMO.
Thank you for this! Love this article. People think states like Texas are so cheap to live in when they’re not really, especially in cities like Austin that have the high property taxes and the high cost of living that rivals that of larger coastal cities. I grew up in Texas and have spent the past 6 years living in New York City and yes, you pay more in rent here (and we even pay a city earnings tax to boot). But the access I have to public transit and amazing social services (THREE amazing library systems and lots of great park spaces are only the beginning of what is offered) plus the availability of many jobs in non-profit and TV post production (what I and my fiancee work in) make the higher rent worth while (although we are in a rent-stabilized place which means that rent increases are controlled by the city, another perk).
Rent control! Yes, love it haha. I’ve never lived anywhere other than California so it’s hard for me to be 100% sure but I’m glad at least one person agrees with me. That’s actually a great point about public transportation too, we don’t have that in CA(well not a very good system). I spend $100 a month on insurance, $2-300 on gas and more on maintenance. When you don’t need a car, you save a ton of money!
Check out this article I just read on FS about living in NYC on a 100k salary. Is it doable?! haha
http://www.financialsamurai.com/2013/07/05/how-do-people-to-live-a-comfortable-life-making-less-than-100000-in-expensive-cities-like-new-york/
Interesting article. I disagree with his belief that it’s hard to live on $100k gross salary though. You can easily find a one bedroom for half the rent he gives in a nice area of Brooklyn or Queens (and even cheaper in the Bronx or Staten Island).
My fiancee and I do live in an outer boro, in Brooklyn in a less trendy neighborhood so our rent is cheap for NYC standards ($1,350 for a small two-bedroom with lease ending in June 2015) so it’s totally possible.
I understand a person’s desire to “impress the ladies” by having fancy digs in a trendy area of Manhattan, but finance person would know that their total “need” costs shouldn’t exceed 60% of their take-home pay.
Like your original comment about living somewhere expensive but having lower overall costs (not having to fly home for holidays, having affordable ways for entertainment nearby, having access to cheaper products because of being a major port city, etc) can actually make the expensive city break even with the cheap city.
$1,350 for a two bedroom! That’s cheaper than San Diego haha. Yea I was ok with pretty much everything except the apartment at $3,300 a month. First of all, I think he’s getting ripped off since like you say you can find cheaper elsewhere(confirmed this with you and another NYC resident).
You shouldn’t be spending that much of your gross income on an apartment and complaining about it. Share a 2 bedroom or even a 3 bedroom while you’re at it. It’s also a good idea to move in with your significant other maybe? That’s a great way to cut down on living expenses.
https://yourpfpro.com/does-it-make-financial-sense-to-move-in-with-your-boyfriend-or-girlfriend/
Sorry, I keep giving you links to read haha
Finally, a pro California article! Nice.
A lot of stuff is free indeed given the outdoors and weather. I’m happy with prop 13 too which can only raise property taxes by rate of an inflation index.
Key is to not make money! Then no taxes baby! 🙂
Thanks Sam. I’m working on not making money, leaving my job in 2 weeks. Tried to get laid off, but no go haha.
Unless you snowboard/ski, you don’t really have to worry about costly winter clothes, either. 🙂
That’s a good point. Although, I really like wearing nice overcoats/jackets but I never can since it’s always too warm haha.
You’re welcome for the inspiration
You da man!
I think that if you are thrifty and frugal enough you can definitely save money living anywhere. I find that when I know a lot of people somewhere, though, I do tend to spend a lot more. I think it’s all of the get togethers and events.
Yea that’s true. When I visited New York, everyone is so close to each other living in the city and there are so many great restaurants, cafes, bars it’s so easy to just meet up and have a quick drink which can get pretty expensive. It’s fun but expensive ha.
Funny how we all have different scales, for me 10% tax is a bargain, I used to pay around 22% between gross and net for social contributions, then another 25% or so in income tax later and 19.6% in GST. 6-7 hour drive you can cross the country, driving 3 hours is “far”. As per saving by living in CA, when you spend $800K on a house, compared to $150K for the same property in Houston, the taxes get relative.
Well the 10% is only for state tax. Add on another 25-30% for federal tax and now you’re paying quite a bit.
I’ve lived in California most all my life and most of my family and my wife’s family lives in the area. Housing, especially near the coast, is more expensive, but as you pointed out, property tax can be much less than other states, especially if you’ve been grandfathered in by Prop 13. Also, don’t forget that in order to retain high-quality workers, many companies pay more in high-cost-of-living areas. Say your job pays $80k in Texas and it pays $120k in California. The cost of consumables is not that different, so the person in California will be able to save more money throughout their career.
That’s a good point, I think the real price difference between the coast and the middle of the country is housing. Like you say, the cost of consumption is not a whole lot different. It’s definitely tough to watch those hgtv shows where they show awesome 300k properties and I paid the same for a 2 bed/2ba condo haha.