Cost of living refers to how expensive it is to live in a certain area. It takes into account typical expenses like housing, food, taxes, healthcare, and transportation. The cost of living is an important factor when deciding where to live, as it directly impacts how far your paycheck will go. Wide variances in cost of living exist across the United States, with some areas being much more affordable than others.
What Exactly Does Cost of Living Include?
Cost of living indices takes many factors into account when calculating an overall score. Some of the most significant expenses are:
- Housing – This includes rent or mortgage payments. Housing costs can vary dramatically between markets.
- Groceries – Prices for food and other supermarket items. Rural areas may have lower costs than urban centers.
- Utilities – Electric, water, garbage collection, and other utility fees. Climate impacts heating/cooling costs.
- Transportation – Gas prices, public transit fares, taxes and fees, and commute times. Dense cities tend to have lower car costs.
- Healthcare – Insurance premiums, co-pays, and out-of-pocket medical expenses. More rural areas often have fewer healthcare options.
- Taxes – Income, property, sales tax rates, and other government levies. Some states have no income tax.
Other costs like childcare, entertainment, and clothing prices may also be included in the cost of living calculations. The goal is to reflect the true day-to-day costs across major spending categories.
What is Considered a Low Cost of Living in the US?
While it’s subjective, a cost of living score 15-20% below the national average is generally considered low. Any area with a score under 85 would be affordable by most standards. Places like Mississippi, Arkansas, Oklahoma, Kansas, Ohio, and Indiana all have scores in the low 80s.
Rural areas also tend to be cheaper than large urban centers. Smaller towns have lower taxes, wages, housing prices, and overall cost structures. However, incomes also tend to be lower, so affordability is still relative.
Which State Has the Lowest Cost of Living in the US?
Mississippi currently has the lowest cost of living score in the United States. The Magnolia State scores just 82.7 on the index, almost 20% under the national benchmark. Mississippi is cheap across all major spending categories:
- Housing scores 68.6, thanks to very low property prices. The median home value is only $122,400 in Mississippi.
- Groceries score 87.9, well under the national grocery index.
- Transportation is cheap at 91.9, thanks to low gas prices and taxes.
- Healthcare is affordable too at 89.3. Median health insurance premiums are $5,282.
- Utilities cost just 88.2 compared to other states.
Low taxes, wages, and real estate values help make Mississippi extremely affordable. Just be aware that incomes also tend to be lower.
What State Has the Highest Cost of Living in the US?
Hawaii has the highest cost of living of any state by a large margin. The Aloha State scores a stunning 192.5, almost double the national benchmark. Several factors make Hawaii extremely expensive:
- Housing – At 318.6, Hawaii’s housing index dwarfs everywhere else. The median home price is $799,500. Rents are sky-high too.
- Groceries – Food costs score 171.7 due to Hawaii’s remote location. Almost everything has to be imported.
- Transportation – Gas prices are elevated, and public transit is poor. Hawaii scores 145.7 for transportation.
- Utilities – Keeping the lights on isn’t cheap either, with electric rates double the national average. Utilities score 182.8.
- Healthcare – As an island state, healthcare options are more limited in Hawaii. Premiums are high, scoring 156.7.
Taxes and miscellaneous costs are also more expensive in the island paradise. Hawaii’s middle class struggles to get by, despite fairly high median incomes. Luxury real estate also caters to the ultra-wealthy.
How Can You Determine the Cost of Living for An Area?
If you’re considering a move, there are resources to look up the cost of living scores:
- The ACCRA Cost of Living Index is a respected metric that compares metro areas and states. They surveyed over 50,000 prices each quarter.
- CNNMoney’s Cost of Living calculator lets you compare two cities side-by-side.
- Salary.com has a Cost of Living Wizard that shows scores down to the zip code.
- BankRate’s Cost of Living calculator is easy to use.
- Relocator Cost of Living Index measures costs in North America, Asia, and Europe. Helpful for international moves.
- Numbeo crowdsources prices globally to estimate local costs. Great for overseas.
- BestPlaces.net lets you drill down on individual cost components like groceries, real estate, utilities, and more.
Remember the cost of living is just one factor in deciding where to live. Opportunity, activities, climate, and personal fit matter too! But understanding affordability will help gauge the overall livability of an area.
5 FAQs about the Cost of Living in the US
1. Why is the cost of living so high in big cities?
Higher salaries and job opportunities attract workers to big metros. This increased demand drives up housing prices, goods, and services. Taxes also fund more amenities.
2. How often are the cost of living indices updated?
Most indices are updated quarterly to keep pace with changing prices. Some aggregate frequently reported price points. Annually is not often enough in most cases.
3. Which costs are most responsible for differences between cities?
By far, housing exerts the biggest impact. A MoneyRates study found it accounts for over 30% of cost variance. Food, utilities, and transportation play big roles too. Healthcare and taxes matter as well.
4. How can I estimate the cost of living on my own?
Choose cities to compare, then research average rents, home prices, typical food costs, utilities, gas prices, and taxes. This will give you a manual estimate. Using reputable indices is easier.
5. Is the cost of living lower in suburbs vs cities?
Often yes, suburbs trade-off amenities and jobs for affordability. But some regions like Silicon Valley have suburbs as pricey as San Francisco. Check multiple zip codes in an area.
The cost of living varies tremendously across the United States, with different states and cities exhibiting wide affordability spectrums. Comparing cost of living indices will determine practical livability and tell you how far your budget will go. While not the only factor, understanding affordability can help find areas matching your needs and financial situation. Use online cost-of-living calculators and check indices before any big move.