San Franciscan's story
City living can be cheap. Sure, housing is expensive. But one can save on most everything else. Food is cheaper than elsewhere; there is lots of competition, and many small shops, which sell for far less than the supermarkets.
Entertainment is very often free, and there is lots of it. San Francisco has many neighborhoods, each with its own flavor, and by using many, one can feel very entertained.
Cities have lots of politicos; those who like civic affairs can serve on citizen committees and involve themselves in civic affairs.
San Francisco is so beautiful that opportunities for experiencing beauty are limitless. Museums have their free days. Clothes? I spend no more than $100 per year buying mostly at garage sales and second hand stores. While I'm hardly a sharp dresser, I have expensive brand shirts, high quality shoes, and certainly plenty of clothes; too much.
Travel: the need is perhaps less due to the variety in San Francisco itself, and because we live near a major airport, we probably pay less to travel, and can take advantage of last minute opportunities.
Healthcare is just not cheap anywhere. But SF has a Healthy San Francisco plan that 90+ percent like (an amazing phenomenon in a city where I didn't think 90% could agree that the sun rose in the east).
SF has public transit, BART to take to Berkeley and other places. More entertainment: the beach, the zoo, endless coffee shops, lots of parks including Golden Gate Park, free concerts such as Hardly Strictly Bluegrass, free shows such as the Blue Angels during Fleet Week, many farmers' markets, and walking this amazing city.
My health club? $13.50 per month, as part of a group, for me and my wife. So while real estate and rent are dear, there's lots of value to be had.
And I didn't even mention all the offers, from free bagels to cheap ice cream to loss leaders advertised at local markets every week. Consider city living, despite the entry cost of real estate/rent.