Whether you decide to move to Vermont or Texas, each U.S. state offers its own unique lifestyle and culture. Some people are drawn to California’s beaches, while others seek the stunning landscapes and lighthouses of Maine. Cost of living is often a factor, as well.

Higher-cost locations may have higher-paying jobs, while more affordable states could have fewer employment opportunities. This reality has kept many working professionals tied to major cities or more expensive states. However, with a dramatic shift toward remote work around the world, relocating to a more affordable locale has become easier.

Are you considering such a move? Let’s take a closer look at the cost of living around the United States.

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What is “Cost of Living”?

Cost of living is the amount of money you need to sustain a certain standard of living that includes the price of housing, energy, transportation, childcare, healthcare, food, and more.

The cost of living in the U.S. varies 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.

How to Calculate Cost of Living

There isn’t an official “cost-of-living index” created by the U.S. government. However, there are several organizations that track cost-of-living data in different regions.

This means there isn’t a standard “cost-of-living calculation.”

The cost of living in a state or city depends on the cost of many goods and services, ranging from housing to health care. These costs are totaled and averaged. This is what’s known as the cost-of-living index. 

For example, fuel expenses are usually higher in New York than in Mississippi. As of writing, the regular fuel price per gallon was $3 in New York, whereas in Mississippi, it was $2.7. This will contribute to a higher cost-of-living index in New York.

This table shows you how each basic need influences a city’s overall cost of living. When comparing New York City to Chicago, Illinois, the index is 187.2 (NYC) versus 106.9 (Chicago). 

This means it’s cheaper to live in Chicago based on things like the affordability of housing, 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 $0.88, while in Mississippi, the value of a dollar spikes to $1.16. Understanding the value of a dollar can help you create a financial plan that works for you.

Here are some resources to give you a better handle on the cost of living by U.S. state.

  • The Economic Policy Institute offers a Family Budget Calculator. This helps families determine the cost of living in various locations.
  • The C2ER Cost of Living Index will help you compare living expenses. According to a 2019 report, Manhattan, New York, had the highest cost of living (more than twice the national average) while Harlingen, Texas, had the lowest (nearly 25% below the national average).
  • Best Places offers a 2021 Cost of Living Calculator, allowing you to compare cities across the United States.

Related reading: 

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 2021,” 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

Most states with a low cost of living are in the South and Midwest, though of course, exceptions exist. 

  • Mississippi—With a cost-of-living index of 84.8, Mississippi has the lowest cost of living in the country (15.2% lower than the national average). This is largely because of the state’s housing index, which is just 66.7. The living wage is just $46,000.
  • Oklahoma—This state has a cost-of-living index of 86.8 with low housing costs. A two-bedroom apartment costs an average of $879 per month, making the living wage in Oklahoma around $47,000.
  • Arkansas—With a cost-of-living index of 87.9, the living wage in Arkansas is approximately $45,000. This state’s housing, healthcare, and transportation costs are particularly low compared to other parts of the country.
  • Kansas—The housing cost index is just 71.8 in Kansas, resulting in a cost-of-living index of 87.9. The living wage is around $48,000.
  • Missouri—Missouri has the second-lowest housing index in the country (71.6), with the average home value being around $159,000. The living wage is approximately $46,000.

States with the highest cost of living

States with the highest cost of living tend to be located on the U.S. coasts. Consider these five (though technically not a state, the District of Columbia was included in the report).

  • Hawaii—On the opposite side of the spectrum, Hawaii has a cost-of-living index of 196.3 and a housing index of 336.3. Because it’s an island, groceries are also very expensive, resulting in a liveable wage of $61,000.
  • The District of Columbia—In D.C., a two-bedroom apartment costs an average of $2,776 per month. With a cost-of-living index of 161.1, the living wage is $67,000 — the highest in the country.
  • California—No surprise here. California has a cost-of-living index of 138.5, largely because of the state’s transportation index of 132.4. In California, gas prices are the highest in the country. The housing index is 196.5 but is even higher in California cities such as Los Angeles and San Francisco. The living wage is $57,000.
  • Oregon—The cost-of-living index in Oregon is 134.6 in part due to high gas prices and expensive real estate. Around cities like Portland, there is a high demand for houses but low supply, raising the average price of a home. The living wage is $52,000.
  • New York—The cost-of-living index in New York is 133.7. A two-bedroom apartment in New York City costs a whopping $3,675 in monthly rent, on average. Utilities, transportation, and groceries also cost more than the national average, resulting in a living wage of $59,000.

Of course, where you live in the state will also make a difference, as the cost of living is typically highest in cities with large populations. Other costly states include Massachusetts, Maryland, Alaska, New Jersey, and Connecticut.

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 2019 household income was $52,253. You’ll likely be able to live within your means there if your income is at this mark or higher. 

However, if you were to move to San Francisco, the median 2019 household income was $112,449. Thus, your income would need to be at least that to afford the city’s cost of living.

Once you understand the average cost of living in your current (or future) locale, you can budget accordingly. 

The Credit Counselling Society offers an excellent resource that covers 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%)

To better visualize your budget, create a spreadsheet or utilize one of the many online budgeting tools or apps. We cover a few favorites in this guide

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