Cost of living is defined as the amount of money required to cover necessary expenses to maintain a certain lifestyle standard in a particular place and time. Necessary expenses can include housing, food, taxes, health care, clothing, education, entertainment and transportation.

Cost of living is linked to income and is used to compare the livability of different cities. Because prices vary from one city to the next, cost of living helps you determine how affordable it is to live in a specific city or region.

In 2022, the overall cost of living has increased drastically compared to recent years. Essentials such as food and gasoline have seen massive increases in price, meaning people have to spend more money to maintain the same standard of living as in previous years.

According to the U.S. Bureau of Labor Statistics, the cost of food rose 10.8 percent between April 2021 and April 2022 — the largest rise since 1980. Gas prices have hit a national high of $5 a gallon, and one of the largest portions of many people’s cost of living, rent, has also risen a record amount. Many factors have influenced these rising costs, including production and supply-chain issues caused by the coronavirus pandemic and the war between Russia and Ukraine.

How cost of living is calculated

Typically, cost of living is calculated by comparing the prices of a range of goods and services on which consumers spend their money. Costs are broken down by category, like health care, food and housing, and weighted based on spending patterns and individual budgets. As prices are gathered by location, you can determine the cost of living in one area compared to another.

Housing makes up the largest share of cost of living calculations because it accounts for the largest portion of most Americans’ budgets. According to Bureau of Labor Statistics data from 2020, the most recent available, 30% of Americans’ budgets went toward housing. Transportation, the second biggest category, cost less than half that at 14%.

How to compare the cost of living between two cities

You can easily compare the cost of living between two cities by using a cost of living calculator.

Enter your current city, the city you’re thinking of moving to and your income, and you’ll be able to view the cost of living difference and how much you would need to make in a new city to maintain your current standard of living. The cost of living calculator also breaks down the difference in typical costs between the two locations, including housing, food and other lifestyle costs.

Let’s say you currently live in Joplin, Missouri, and make $60,000 a year. You would need to make $67,396.31 to maintain the same lifestyle in Asheville, North Carolina, which has a 12.33 percent higher cost of living than Joplin. However, based on calculations, typical housing costs are 27 percent lower in Asheville.

You can also use this tool to view specific costs of goods and services between two geographic areas. For instance, ground beef costs $4.74 per pound in the Indianapolis metro area but only $3.32 in metro Miami Beach. Using a cost of living calculator allows you to view specific costs that matter to you. If you have children or plan to in the future, costs like baby food, diapers and child care might be higher on your radar than they are for other individuals. A calculator can also help you research potential destinations if you’re planning a move in the future.

You can sometimes find cost of living statistics on state, county and city government websites. Often, this information is used to promote the area to prospective homebuyers thinking of moving there. For example, Galveston, Texas, includes cost of living information on its city website, as does the state of Pennsylvania.

What is a cost of living adjustment?

As the cost of living changes, wages and benefits also need to change to maintain the same standard of living. The Social Security Administration (SSA) sometimes adjusts benefits to keep up with the increased cost of living. This is known as a cost of living adjustment (COLA) and is assessed annually.

The SSA recently announced a 1.3 percent COLA for 2021, increasing benefits for nearly 64 million Social Security beneficiaries. Some states, like New York, also offer a cost of living adjustment for eligible residents.

Tips to keep up with cost of living increases

The cost of living will almost always increase as inflation eats away at purchasing power and goods become more expensive. However, there are some things you can do to try to keep up.

Of course, earning more income is the obvious way to keep up with increases in the cost of living. If the cost of living rises by 5 percent and you get a 5 percent raise, you’re keeping pace and should be able to maintain the same standard of living.

Failing that, you’ll have to make adjustments elsewhere. For example, you may have to consider adjusting your budget to reduce discretionary expenses, such as vacations.

You can also look for other ways to save money. For example, if you make your next car purchase one that is more fuel-efficient, you can reduce your gas spending and save money on transportation. Switching to public transit could help you save even more.

Another option, which has been made easier for some thanks to the rise of remote work, is to relocate to a location with a lower cost of living. If you can maintain the same salary but move to a cheaper location, you’ll be able to maintain, or even improve, your standard of living.

What is a cost of living index?

A cost of living index lets you compare how much it costs in one area compared to another. By comparing the cost of living in different cities and regions, you can better understand how far your salary can go in different parts of the country.

The U.S. government doesn’t publish an official cost of living index. However, the Bureau of Labor Statistics publishes the Consumer Price Index (CPI), which measures the cost of goods and services changes over time for various geographic areas. Some cost of living indexes use CPI data in their calculations. Several organizations have created their own cost of living index to track and report the cost of living in various regions of the country.

Some of the most-used cost of living indexes include:

With most cost of living indexes, the number 100 represents the national average. Then, cities or regions are assigned a number, either above or below 100, based on how they compare to the national average.

Different indexes track different areas. For example, the MERIC index only lists cost of living data for specific states. According to the 2022 Q1 data, Mississippi has the lowest cost of living among all U.S. states. The C2ER index is frequently used by local and state governments and tracks the cost of living in various U.S. cities. According to the C2ER index, the cost of living in Manhattan, New York, is 139.12 percent higher than in Columbia, South Carolina.

Cost of living vs. inflation

The cost of living and inflation are related concepts — inflation can certainly influence cost of living — but there are essential differences to understand.

The cost of living refers to how much it costs to maintain a certain lifestyle. It can vary based on many factors, such as where you live and your desired standard of living.

Inflation, on the other hand, refers to changes in the purchasing power of a currency. Put another way, it describes the increase in prices of goods and services in an economy overall, rather than in a local area. Inflation increases prices, which in turn can drive increases in the cost of living. Generally speaking, higher inflation will lead to faster increases in the cost of living throughout an economy.

Economists often use the CPI to measure inflation. It measures the cost of a fixed basket of goods and services across an entire economy. The basket of goods includes things like shelter, gasoline, food and clothing.

However, the cost of living can change at a faster or slower rate than inflation or changes in the CPI. Inflation and CPI typically measure changes at a national level, while cost of living is often measured on a more local basis.


  • There are many factors that influence the cost of living. Housing costs are one of the biggest drivers, but the cost of other essentials also play a big role. External factors, like interest rates and consumer confidence, can also play a large role in the price of all sorts of goods, making them major influences on cost of living as well. For example, higher interest rates usually reduce the demand for expensive items like homes and cars. Low consumer confidence also reduces demand, which can in turn reduce prices.
  • The cost of living can vary greatly from one region to another because of differing prices for goods and services in those areas. For example, in many major cities space is at a premium, which leads to high housing costs. Whereas in more rural locations, the abundance of space keeps rents and home prices lower, leading to lower costs of living. In addition, retail prices tend to be higher in major metro areas than they are in less-populated areas.
  • According to data from the Missouri Economic Research and Information Center, Mississippi has the lowest cost of living in the United States. The state with the highest cost of living is Hawaii. In general, states on either coast tend to have higher costs of living than states in between.