What is “cost of living”?

The term “cost of living” refers to the overall amount of money required to cover necessary expenses to maintain a certain lifestyle standard in a particular place, including basics like housing, food, transportation and more.

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. These expenses can include housing, food, transportation, taxes, health care and more. Because prices vary from one city to the next, the cost of living metric helps you determine how affordable it is to live in a specific city or region.

Despite inflation slowing down, the overall cost of living continues to increase. Essentials like groceries have seen notable increases in price recently, 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 (BLS), consumer prices rose 3.2 percent from February 2023 to February 2024, with the cost of food specifically increasing 2.2 percent. And one of the largest portions of many people’s cost of living, rent, has also risen over the past year: Zillow’s Observed Rent Index for February found that asking rents have risen 3.5 percent year-over-year and a huge 29.9 percent since the beginning of the pandemic. Here’s more about the cost of living in 2024.

What is a cost of living index?

A cost of living index helps you understand how much it costs to live 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 U.S. Bureau of Labor Statistics (BLS) 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; besides the CPI, frequently cited 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. For example, according to the C2ER index, Fort Lauderdale, Florida is above average at 117.6, while Dyersburg, Tennessee is below at 89.7.

Hawaii was the state with the highest cost of living in the U.S. for 2023, according to research by the Missouri Economic Research and Information Center. Oklahoma had the lowest.

How cost of living is calculated

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

Cost of living and housing

Housing usually makes up the largest share of cost of living calculations, because it usually accounts for the largest portion of most Americans’ budgets. According to BLS data from its most recent Consumer Expenditures analysis, housing accounted for by far the largest share of annual consumer spending at 33.3 percent. The next largest was transportation at 16.8 percent, followed by food at 12.8 percent, personal insurance and pensions at 12 percent and health care at 8 percent.

Increases in the cost of housing (or “shelter,” as the BLS refers to it) contribute significantly to cost of living. Shelter is consistently one of the largest contributors to the CPI’s all-items increases — in February 2024, shelter inflation rose 5.7 percent, outpacing the overall inflation level of 3.2 percent. And experts expect home prices to rise throughout 2024, meaning the cost of living is likely to continue to go up.

Cost of living vs. inflation

Inflation and cost of living are related concepts — the one can certainly influence the other — 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. 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 set of goods and services, including things like shelter, gasoline, food and clothing. Your personal cost of living may rise or fall faster than the CPI or inflation, however, due to factors including your location and the goods and services that make up your personal consumption.

Cost of living adjustments (COLAs)

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, or COLA, and is assessed annually. The SSA recently announced a 3.2 percent COLA for 2024, increasing benefits for more than 66 million Social Security beneficiaries.

Comparing the cost of living between two cities

You can easily compare the cost of living in one city to another by using Bankrate’s cost of living calculator. This tool can help you research potential destinations if you’re planning a move in the future: Enter your current home city, the city you’re thinking of moving to and your income, and you’ll be able to view the cost of living difference, as well as how much you would need to make in the 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 average rent and home prices.

Let’s say you currently live in Joplin, Missouri, and make $60,000 a year. You would need to make around $20,000 more, $80,925, to maintain the same lifestyle in Chicago, which has a 34.88 percent higher cost of living. However, if you were moving from Joplin to, say, St. Louis, you would only need to make $3,345 more, because the cost of living in St. Louis is only 5.58 percent higher.

You can also use the calculator to view specific costs of goods and services between two geographic areas. For instance, bread costs $4.27 in the metro Washington, D.C. area but only $3.76 in Indianapolis. Using a cost of living calculator allows you to view specific costs that matter to you — for example, if you have children, costs like baby food, diapers and child care might be higher on your radar. You can also sometimes find cost of living statistics on state, county and city government websites.

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.

  • Earn more income: Easier said than done, of course, but 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. Wise investing can also help.
  • Examine your spending: 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.
  • Look for other ways to save money: For example, switching to public transit for your commute every day — or even just a couple days a week — will help you save a lot on gasoline costs.
  • Move to a less expensive city: Thanks to the rise of remote work, relocating away from your office has become easier. 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.


  • 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, lower mortgage interest rates can help increase how much home buyers can afford, helping to push up prices, and the impact of those high prices then ripples across the rest of the economy.
  • 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 relative 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, Oklahoma 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, and urban areas tend to be more expensive than rural areas.

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