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5 Reasons California is Cheaper Than It Appears Print E-mail
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Personal Finance - Education
Written by Omie Ismail   
Thursday, 24 June 2010 04:18
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5 Reasons California is Cheaper Than It Appears
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I heard it again the other day:

"There's no way I could afford to live in California, It's WAY too expensive."

It's true, California is one expensive place. Even with the crash in real estate, things in the Golden State are far from being cheap. When I used to recruit people from Californiaoutside of California, there was always that moment of truth where a candidate would have to come to grips with the sticker shock of housing prices. If they were leaving behind a nice family home on a good size lot in Northern Virginia or Chicago, they realized that an exact replacement would  fetch $2 million anywhere within 30 miles of the coast line. Once they survived the housing shell shock, they would face the prospect of  forking over 8% or 9% of their income to the state. But for all of its expense, there are factors and policies that lighten the burden of living in California and make it less deserving than its ultra costly image. Here's 5 ways California is a bit cheaper than it appears.

1) Low Property Taxes:

Three decades ago, California passed Proposition 13 which limited annual increases of property taxes to a mere 2%. What that means for anyone living in the Golden State is that once you buy a home, you've locked in your taxes for as long as you own it. After 35 years of homeownership not only will you have paid off your mortgage but at most, your taxes will have doubled. And with an average rate of about 1.15%, the amount of taxation one of those million dollar homes can actually be quite reasonable. Ask someone in New York State, where the property taxes on a $400,000 home can run well into the 5 figures and where many retired people are forced to sell their homes due to the ridiculous tax burden. For Californians that have owned their home for a number of years, property taxes often add up to a very small percentage of their income.

2) No Heat, Little A/C:

Heating your home in much of California is entirely optional. There will be the ocassional cold spell where you have to remember how to turn on the heater but if you don't mind wearing a sweater, you'd be hard pressed to run up an annual gas bill over $300. Compare that to the Northeast where heating with oil might cost you $1,500 to $2,000 a year. Air-conditioning is very dependent on how far your live from the coast, but then again, so is the price of housing. If you live in the interior where A/C is vital, the price of your house drops significantly to levels on par with the rest of the country. The heat in California is dry and once the sun goes down, the temperature drops quickly leading to cool night breezes. The fact is that millions of people in California hardly use any heat or air conditioning and those that do usually live in areas away from the coast where housing is far cheaper. When you take into consideration that utilities are paid for with after tax dollars, the money you save in heating and air conditioning can cover a good chunk of the tax deductible interest on that expensive house. 

3) Great Cheap Local Vacations:

When I lived in the Midwest, people would always talk about their winter vacation. Florida, the Caribbean, Mexico, or maybe California. They'd long for the February break after enduring months of endless clouds and sub-freezing temperatures. Even modest vacations for a family of four can easily run $5,000 to any warm weather spot in the dead of winter when you factor in airfare, lodging, food, and transportation. In the winter in California, you can warm by taking a day trip the desert, head to the beach on a good day, or go up to the mountains to ski in some of the best conditions in the country. In the summer, the choices are about the same, head to the Coast, do some camping in the mountains, or dunk yourself in a pool in the desert. The key is that there's no airfare, no rental car, and lodging bargains abound. After traveling for many years to the typical spots, one year my wife and I decided that we would vacation in San Diego, a mere 120 miles away. We had such a good time, we realized that we would rather vacation there than nearly any place in America. For those of you that like National Parks, the choices are endless. If you don't have the need to travel to Europe or the Far East, you can cut your vacation expenses by at least half.

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