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This paper proposes a cost effective location management method for location update and paging in heterogeneous wireless systems. The proposed location update method generates dynamic location area (LA) list. It provides accurate and up-to-date location information of each user and their probabilities of visiting each LA and cells within a LA. This list is updated according to user movement. Probable short term traffic in each LA can be forecasted using the probabilistic information in the LA list. The proposed selective paging minimizes call delivery cost. Overall 48%-65% improvement in total cost in location management has been achieved than previous approaches.