Whether you move to New York, Texas, Florida, or Minnesota, you’ll encounter vastly different lifestyles in each U.S. state. The cost of living index also varies quite a bit by state and is a major factor in determining where to live. This may be especially true if you’re an immigrant who wants to stretch your dollar so you can support friends or family in your home country.
Higher-cost locations may have higher-paying jobs, while more affordable states could have fewer employment opportunities. At Remitly, we know that this reality has kept many working professionals tied to major U.S. cities or more expensive states.
However, with a dramatic shift toward remote work around the world, leaving your current city and relocating to a more affordable locale has become easier. Before you decide on a new location, let’s look at how to calculate the cost of living by state in the U.S.
How cost of living differs from state to state
You may dream about the bustling streets of New York or the California coast, but before you make the move, consider what that move will cost.
The World Population Review published the “Cost of Living Index by State 2024,” offering an inside look into the states with the highest and lowest cost of living.
The cost-of-living index helps you understand the percentage difference in the cost of living between two locations. Typically, 100 represents the U.S. average.
For example, if one state has a cost-of-living index of 85, it is 15% below the country’s average. If another state has an index of 133, the cost of living is 33% higher than the average.
Based on the World Population Review report, here is a basic cost-of-living comparison highlighting 10 U.S. states.
| States with the lowest cost of living | |
|---|---|
| Mississippi | |
| Oklahoma | |
| Kansas | |
| Missouri | |
| Alabama | |
Most states with a lower cost of living are in the South and Midwest, though exceptions exist. Here are the five states with the lowest cost of living as of the time of this writing:
Mississippi
With a cost-of-living index of 85.3, Mississippi has the lowest cost of living in the country (16.7% lower than the national average). This is largely because of the state’s housing index, which is just 66.3. The living wage is just $41,361 a year, or about $19.98 an hour, for a single adult with no children.
Oklahoma
This state has a cost-of-living index of 86.0 with low housing costs. The living wage in Oklahoma is about $40,211 a year, or $19.33 an hour.
Kansas
The housing cost index is just 69.4 in Kansas, resulting in a cost-of-living index of 87.7. The living wage is around $42,337 a year, or $20.35 an hour.
Missouri
Ranking fourth, Missouri boasts a cost-of-living index of 88.4 and a housing index of 77.2. To earn a living wage in the state, a person must make at least $20.20 per hour or $42,024 per year.
Alabama
Alabama has the fifth-lowest cost of living with an 88.8 cost-of-living index. In 2023, Alabama ranked second, but a sharp rise in housing prices has increased the overall cost of living. The living wage is $41,911 a year, or $20.15 an hour.
| States with the highest cost of living | |
|---|---|
| Hawaii | |
| Massachusetts | |
| California | |
| New York | |
| Alaska | |
States with the highest cost of living tend to be on the U.S. coasts. Here are the five with the highest costs of living:
Massachusetts
Due to its booming economy and abundant job prospects, Massachusetts is a highly sought-after place to live. However, the cost-of-living index is among the highest at 148.4, and the living wage is also much higher at $58,009 a year, or $27.89 an hour.
California
California has a cost-of-living index of 134.5, largely because of the state’s housing index of 186.5. The state’s living wage is $56,825 a year, or $27.32 an hour.
New York
The cost-of-living index in New York is one of the highest at 125.1. Here, utilities, transportation, and groceries cost more than the national average, resulting in a living wage of $55,878 a year, or $26.86 an hour.
Alaska
Ranking fifth, Alaska’s cost-of-living index is 124.40. Unlike other states, its high cost of living comes primarily from groceries and healthcare, which have indices of 127.40 and 149.80, respectively. To earn a living wage in Alaska, a person must make at least $23.26 per hour or $48,375 per year.
Of course, where you live in a state will also make a difference, as the cost of living is typically highest in city centers and goes down as you move further away. For example, housing and food costs are generally higher in Oklahoma City than in the rest of the state.
What is cost of living?
Cost of living is the amount of money you need to sustain a certain standard of living. It includes the price of goods, housing, energy, public transportation, childcare, health care, food, and more.
The cost of living and the quality of life in the U.S. vary significantly from state to state. Where you decide to call “home” could make all the difference between enjoying a comfortable life and living paycheck to paycheck.
So, while an American dollar bill may look the same no matter where you go in the U.S., its value can drastically differ depending on where you spend it.
What contributes to cost of living?
Many factors help determine the cost of living in a particular geographic area. Let’s explore them.
Housing costs
As mentioned, rental and home prices determine where a state ranks on the cost-of-living index. A booming housing market spurred by high demand will raise prices and make it more expensive to live in a state.
Homeowners and renter’s insurance rates also impact housing costs. In some places, the effects of climate change have led to soaring premiums and a resulting rise in housing costs.
Healthcare costs
Healthcare costs include things like health insurance premiums, co-pays for doctor’s visits, and out-of-pocket expenses. You can expect higher fees in areas with a limited number of healthcare providers.
The general age of the population also impacts healthcare costs, as older adults typically require more care and have additional expenses.
Food costs
Food expenses include how much it costs to purchase groceries and what food prices are charged in various types of restaurants. During periods of inflation, the cost of purchasing food rises often, increasing the cost of living.
Transportation expenses
Transportation costs include the price of gasoline to fuel vehicles and fares for taxi cabs, ride-sharing, and public transportation.
A few things contribute to gasoline-related transportation costs, such as how many depots there are, how accessible the supply is, and how much competition there is between gas stations.
How much people pay for auto insurance also factors into transportation costs.
Taxes
Speaking of taxes, how much people pay the government also affects the cost of living. Generally, states with low taxes have a lower cost of living. However, these states may not have as many social safety nets and support programs for residents.
Tax data that influences the cost of living goes beyond income taxes. Property tax, sales tax, and goods-specific taxes like gasoline taxes will all affect the cost of living.
Utility and Energy costs
Utilities are basic necessities that people can’t go without, and the going rates for them will impact the cost of living. Things like electricity, water, gas, sewage, cable television, Internet service, and garbage removal fall under the utility category.
Regarding electricity costs, North Dakota ranks the lowest at 10.74¢ per kilowatt hour. Hawaii pays the most at 43.53¢.
Childcare costs
Single parents often must pay for childcare in order to work, and the cost of living in many places can lead to married people and partners who have children together, both working and using childcare services. How much these services cost will impact the cost of living in the area.
When determining overall costs, researchers examine the cost of daycare for infants, toddlers, and older children, as well as how much it costs to hire nannies.
Education costs
Education costs mainly focus on how much it costs to attend two-year and four-year private and public colleges within a state.
Costs of other basic necessities
How much a person needs to spend for other basic expenses, such as clothing, entertainment, recreation, and cell phone service, will also help determine the cost of living.
How to calculate the cost of living
The U.S. government doesn’t create an official cost-of-living index. However, several organizations, like the Council for Community and Economic Research (C2ER), track the cost-of-living data in different areas.
This means there isn’t a standard cost-of-living calculation. However, several resources can teach you how to calculate the cost of living in different U.S. cities or give you access to ready-made data collected and analyzed by economists.
How to calculate the cost of living in a state or city depends on the cost of many goods and services, ranging from food prices to health care bills. These living expenses are totaled and averaged to create what’s known as the cost-of-living index.
For example, fuel expenses are usually higher in New York than Mississippi. As of writing, the regular fuel price per gallon was $3.31 in New York, whereas in Mississippi, it was $2.86. This will contribute to a higher cost-of-living index in New York.
The 2024 Cost of Living Calculator from Best Places shows how each basic need influences a city’s cost of living. When comparing New York City to Chicago, Illinois, the index is 168.6 (NYC) versus 107.4 (Chicago).
This means living expenses are lower if you live in Chicago based on things like the affordability of mortgage payments, property taxes, groceries, and transportation.
USA Today published the value of a dollar in each state using data from the Bureau of Economic Analysis. In California, the value of a dollar is $0.87, while in Mississippi, the value of a dollar spikes to $1.16.
Understanding the value of a dollar can help you learn how to calculate the cost of living and create a budget plan to manage your personal finances to maintain a decent standard of living.
Here are some resources to give you a better handle on the cost of living index for each U.S. state.
- The Economic Policy Institute offers a Family Budget Calculator. This helps families determine the cost of living adjustment in various U.S. cities.
- The C2ER Cost of Living Index will help you compare living expenses in different areas. For example, according to COLI’s third-quarter 2022 report, Manhattan, New York, had the highest cost of living (more than twice the national average), while Harlingen, Texas, had a lower cost of living (more than 20% below the national average).
- The Massachusetts Institute of Technology offers a Living Wage Calculator for every U.S. state, county, and metropolitan area.
How cost of living impacts your budget
Your average income and budget will determine where you can live comfortably.
For example, in Jefferson City, Missouri, the median 2021 household income was $56,781. You’ll likely be able to live within your means there if your income is at this level or higher.
However, if you were to move to San Francisco, the median 2021 household income was $126,187. Then, your income would need to be at least that to afford the city’s living expenses.
Once you understand the average cost of living in your current (or future) locale, you can budget your personal finances accordingly.
The Credit Counselling Society provides a budget breakdown for your monthly costs. Although your categories may differ, they recommend the following guidelines when creating a cost-of-living budget:
- Housing (35%)
- Utilities (5%)
- Transportation (15%-20%)
- Food (10%-20%)
- Medical (3%)
- Personal (5%-10%)
- Debt payments (5%-15%)
- Savings (5%-10%)
- Clothing (3%-5%)
Create a spreadsheet or utilize one of the many online budgeting tools or apps to visualize your budget better.
Cost of living FAQs
Have lingering questions about the cost of living? Read on for answers.
What does median household income mean?
Median household income is a term used to compare how much people make in one place versus another. Fifty percent of the households in a place earn the median household income or more, while the remaining fifty percent make less than the median household income.
The U.S. national median household income was $74,580 per year in 2022. That means half of all households made $74,580 or more, and half made less.
It’s important not to confuse the median household income with the average household income. To determine the average, you add up all incomes and divide by the number of residents.
What does a living wage mean?
The living wage is how much a person needs to earn to lead a comfortable lifestyle and not be in poverty. The cost of living and the living wage go hand in hand, as the more a person needs to spend on things like housing costs, the more income they will need to maintain a lifestyle.
What does the minimum wage mean?
The minimum wage is the lowest amount employers can pay employees under federal and state laws. In most cases, the minimum wage is less than the living wage.
What is the Consumer Price Index?
Published by the U.S. Bureau of Labor Statistics, the Consumer Price Index or CPI is a measure of how much a group of basic essentials costs to purchase. Monitoring the change in the CPI over time is one way that people track inflation and the cost of living.
What is the effect of living in a state with a high cost vs. a low cost of living as a remote worker?
If you relocate from somewhere with higher costs for essential expenses to an area with a low cost of living and continue to earn your current income, you will likely have more disposable income left over after you have paid for things like housing expenses.
You’ll then be free to put the money you would have spent on living costs toward other things like savings, investing, opening a business, or paying down debt.
How do I know the true cost of living for a particular location?
To determine the cost of living in a certain location, the best approach is to examine a few different cost-of-living indexes published by a variety of media outlets, research institutes, and websites.
By comparing one index to those produced by other media outlets, you can get a feel for how accurate the information is.
Because cost of living variations occur over time, be sure that the information you’re using is current.
How can I compare the cost of living in two different cities?
Some cost-of-living comparison calculator apps allow you to enter the names of two cities and compare them side by side. Check out the tools from Bankrate and NerdWallet to get started.