What does “cost of living” mean?
Think of cost of living as a snapshot of how far your income goes in one place versus another. In some cities, $2,500 a month might cover rent, groceries and a car payment. In others, that might barely cover housing. It’s a practical way to set realistic expectations when budgeting, job hunting or planning a move.
How is cost of living calculated?
Most cost-of-living indexes compare a selection of major spending categories to show how affordable (or expensive) one place is over another.
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Curious what life might cost in a new city? Our Cost-of-Living Calculator may help.
What’s included in cost-of-living estimates?
A common misconception is that housing is the only cost that matters—but that’s just one part of the equation. A true cost-of-living comparison takes into account all the major expenses that impact your daily life. It varies depending on the source, but here’s what typically gets factored in:
- Housing: Rent or mortgage payments, property taxes and homeowners or renters insurance.
- Groceries: Basic food and household items like milk, meat, produce and cleaning supplies.
- Utilities: Monthly bills for electricity, natural gas, water, garbage collection, phone, internet and cable service.
- Transportation: Car payments, gas, insurance or public transit fares.
- Healthcare: Out-of-pocket expenses for medical care, insurance premiums, prescriptions and routine care.
- Taxes: Local and state income, property and sales tax rates—all of which can impact take-home pay and everyday expenses.
Other categories that may be included are:
- Childcare and education: Daycare, school fees and college tuition.
- Miscellaneous/personal spending: Clothing, entertainment, dining and other flexible personal expenses.
Who calculates cost of living?
Cost-of-living comparisons are compiled by several trusted organizations—some government, some academic and some designed with consumers in mind. Each one offers a different perspective on everyday costs across the U.S. Here’s a quick guide to some of the most reliable tools:
- Bureau of Labor Statistics: Tracks national price trends through the Consumer Price Index—a key measure of inflation and cost-of-living changes over time.
- Council for Community and Economic Research: Publishes the Cost of Living Index, which compares prices in more than 250 U.S. cities across more than 60 categories like housing, groceries and utilities.
- MIT Living Wage Calculator: Estimates the income needed to meet basic expenses by location and household size.
- Bureau of Economic Analysis: Provides Regional Price Parities, which show how prices vary from state to state and city to city, helping you compare purchasing power across regions.
Cost of living by state (2025 data)
One of the easiest ways to compare costs across the country is by using the Cost of Living Index, published by the Council for Community and Economic Research. Each location receives a score based on how its prices stack up against the national average, which is set at 100.
- A score above 100 means the area is more expensive than average.
- A score below 100 means it’s more affordable.
This index takes into account everyday expenses like housing, groceries, transportation and healthcare, giving you a well-rounded view of local costs.
Cost-of-living trends
When you zoom out and look at the national picture, some clear patterns emerge. The Northeast and West Coast are typically the most expensive, driven by high housing costs, local taxes and elevated wages in dense urban centers. The Midwest and South tend to be more budget-friendly, thanks to lower housing costs and generally modest tax rates. Sunbelt states like Florida, Texas and Tennessee often land just above the national average, offering a mix of affordability and strong job growth—especially in areas that don’t charge state income tax.
Highest cost of living states
The states with the highest cost of living include Hawaii, Alaska, California, Massachusetts, New York, and Washington, D.C. Hawaii regularly tops the list, with prices for housing and groceries well above average; housing costs alone are more than double the national median. In California and New York, high housing demand, income taxes and expensive services drive up the overall cost of living. For example, California’s state income tax tops out at 13.3%, the highest in the country.
Lowest cost of living states
The best states for cost of living—like West Virginia, Oklahoma and Kansas— consistently rank among the most affordable. These states offer housing prices 20-30% below the national median and lower costs for essentials like food, utilities and healthcare. Oklahoma also has no state-level property tax, and both Oklahoma and West Virginia boast relatively low income tax rates, helping stretch take-home pay further.
States With the Highest Cost of Living
| Rank | State | Index # |
|---|---|---|
| 1 | Hawaii | 182.3 |
| 2 | Massachusetts | 145.1 |
| 3 | California | 141.6 |
| 4 | District of Columbia | 135.2 |
| 5 | Alaska | 127.3 |
States with the lowest cost of living
| Rank | State | Index # |
|---|---|---|
| 1 | Oklahoma | 85.5 |
| 2 | Mississippi | 87.3 |
| 3 | Alabama | 87.6 |
| 4 | Missouri | 88 |
| 5 | West Virginia | 88.6 |
Comparing cost of living by city
Cost of living can vary just as much between cities as it does between states—sometimes even more. Large metro areas like New York City and San Francisco routinely rank among the most expensive in the country, driven by sky-high rent, steep taxes and pricey everyday essentials. In contrast, rapidly growing cities like Austin and Tampa offer more affordable living, thanks to lower housing costs and no state income tax.
Cost of living examples: NYC vs. Austin
| Expense Category | New York City | Austin |
|---|---|---|
| Rent | $4110.30 | $2046.24 |
| Basic utilities | $182.32 | $173.55 |
| Income taxes | State income tax up to 10.9% | No state income tax |
Even within the same state, the cost of living can vary a lot. For example, moving from Albany to NYC or Fresno to San Francisco could raise your expenses by 30 to 80%. That’s why it pays to compare individual metro areas—not just states—so you can get clear idea of how far your budget might go in different areas.
How Location Affects Affordability
It’s not just about how much you earn—it’s how far your money goes. A $60,000 salary might comfortably cover the essentials in San Antonio but fall short in San Francisco. That’s why understanding the cost of living is key when evaluating job offers or planning a move.
With more people working remotely, many are choosing to live in lower-cost cities while keeping higher-paying jobs in expensive metro areas—gaining more space, savings and overall quality of life.
What affects cost of living the most?
Housing tops the list. Rent or mortgage payments make up the largest portion of a household budget. For example, average monthly rent in San Jose is around $3,000—more than double the roughly $1,200 average in Cincinnati.
Taxes are another major expense. States like Texas, Florida and Alaska don’t tax income, but they often make up for it with higher property or sales taxes. In contrast, residents of New York and California may pay an additional 9-10% in state income taxes. Healthcare and childcare costs also vary widely by region. For young families, childcare alone can add thousands of dollars per year.
Broad economic factors like inflation and supply chain disruptions can also impact everyday costs. For instance, gas prices in California recently surged to nearly $4.70 a gallon due to refinery delays—far above the national average. Even as national inflation trends ease, local challenges can continue to push prices higher.
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How far will your money go in a new city? Whether you’re switching jobs, planning to retire, or thinking about a move, see how your salary stacks up in some cities in the U.S.
