When people are considering relocating to a different state, and they’re weighing the pros and cons of doing so, you’ll often hear them refer to the cost of living. According to the Bureau of Economic Analysis, there are eight categories of necessary expenses, which make up the cost of living in any given location.
These are:
• Apparel
• Education
• Housing
• Food
• Medical
• Recreational
• Transportation
• Other goods and services
Each category has its own specific expenses. For example, housing includes the cost of your rent or mortgage, insurance, utilities, and maintenance.
How Is Cost of Living Calculated?
The cost of living is an index, so that means it gives you an average of what you might spend in a given area in a particular category. It can be calculated by taking a representative sample and figuring out how much those items cost within that sample.
On a personal level, while you might be able to get an idea of how much it costs to live in a particular place based on the cost of living calculations, it’s also very personal. Your family size and lifestyle play a big role.
One of the biggest factors, when looking at a particular location and its cost of living, is housing costs, whether that’s rent or mortgage payments. Other housing costs include homeowners association fees, household maintenance, property taxes and the cost of utilities.
In 2020, we started seeing a pretty big relocation from places with a higher cost of living to places with one that’s lower.
In the past, people often found that even if they lived somewhere with a higher cost of living, it balanced out because they made more money as well. Now, with more remote work opportunities, some people are shunning that concept, and they’re working from home in cheaper places.
Which States Have the Lowest Cost of Living?
The states that have the lowest cost of living include:
• Mississippi: Of all 50 states, Mississippi has the lowest cost of living, with an index of 84.8. The national average is considered 100. The state has the lowest housing costs in the country, and the average home price is $128,000. The average rent for a two-bedroom apartment is $795 a month.
• Oklahoma: Oklahoma is the second-lowest cost of living in the U.S. The median home value is around $130,000 and the average cost of a two-bedroom apartment is around $879 a month.
• Arkansas: Coming in third is Arkansas. The cost-of-living index is 87.8, and transportation, housing, and health care costs are all lower than national averages. It’s estimated that to live comfortably in the state you would only need to make around $44,571 for a family.
Other states with a low cost of living are Kansas, Missouri, Georgia, Alabama, New Mexico, Tennessee, and Indiana, rounding out the top 10.
So what about the most expensive places to live?
States with the Highest Cost of Living
Hawaii, based on cost-of-living measures, is the most expensive state to live in the country. It has a cost of living index of more than 196, with a grocery cost index of 167.7 and a housing index of 336.3.
The average home price in Hawaii is more than 1.158 million, and the utility index is the highest in the country. If you live in Hawaii, you might have an average monthly energy bill of $388.
General goods, such as food, are also more expensive than anywhere in the U.S. because they have to be shipped to Hawaii.
Washington D.C. is the second-most expensive place to live in the U.S., with a median home value of $628,900. At the same time, D.C. does have one of the highest median household incomes in the country.
The state with the third-highest cost of living is California, with an index of 138.5. Both housing and transportation are much higher than the national average. Some cities are more expensive than others, including San Francisco and Los Angeles.
Oregon and New York complete the top five most expensive states to live in the U.S.
