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Cost Of Living: What It Is And How To Calculate It

March 11, 2024 7-minute read

Author: Kevin Graham


Thinking of moving to a new city? Before you order that moving truck and start filling boxes with sweatshirts, dinner plates and books, you should determine how much more, or less, it might cost you to live in your new neighborhood.

Maybe homes cost tens of thousands of dollars more in the city in which you want to live. Maybe the town you are dreaming of settling in lacks public transportation, meaning that you’ll have to spend big dollars for a new car. Or maybe your new community boasts lower-cost housing, grocery stores with less expensive produce and an affordable commuter train.

Depending on the cost of living in your new community, you might have to budget more for your monthly expenses. But even if your new city is less expensive, it’s important to determine how your monthly spending might change after your move.

What Is Cost Of Living?

Think of cost of living as how much money you'll need to make – and spend each month – to maintain your current standard of living in whatever location you move to. People most commonly use cost of living to compare how expensive it is to live in one city or state versus another.

Say homes cost an average of $300,000 in the city in which you live now, and you want to move to a suburban area in which homes cost an average of $370,000. The cost of living in the community in which you want to live will probably be higher than in the one in which you currently reside.

Say gas costs $3.50 a gallon where you live now but just $3 in the community in which you want to live. If you drive often, you might lower your cost of living by moving to a community where it costs less to fill up your tank.

Knowing an area’s cost of living is helpful if you’re trying to determine how much home you can afford. That’s because doing a proper cost-of-living analysis will give you a more accurate view of your budget than will looking at the cost of homes only. If homes are more expensive in the area in which you want to live but everything else is cheaper, your cost of living might not increase that much, and you might not have to tweak your monthly spending budget by much, either. Knowing the cost of living in an area can help you make the best financial decision when determining where to move.

Fortunately, you can quickly determine the cost of living in different cities across the United States by using a cost-of-living calculator located on this page. Just enter the city in which you live, the city to which you want to move and your current pretax household income. We can then tell you how much or less you might spend in your new locale.

The Factors That Go Into Cost Of Living

Trying to determine the cost of living in a community? These are the factors that you should consider when trying to calculate how much more or less you might spend in your new hometown.

  • Housing: Housing costs are usually the biggest expenses you'll face each month, whether you’re renting an apartment, buying a home or moving into a condo unit. If you’re buying, remember that your down payment will be higher if you’re buying a more expensive home. Property taxes may be higher in nicer areas as well. And, if your area is prone to natural disasters or flooding, homeowners insurance could be more expensive. Don't forget to factor in maintenance costs, too, if you are buying. You can expect to pay from 1% to 3% of your home's purchase price in maintenance each year.

  • Food: Supermarkets and grocery stores might be more or less expensive in the community in which you want to move. Restaurant prices might be higher or lower, too, which could boost or lower the cost of eating out.

  • Transportation: The price of filling your car’s tank can play a big role in determining how expensive a new community might be. Auto repair shops might also be more or less expensive. You might save money if you move into an area that features a robust public transportation system.

  • Health care: You should research how much doctors, dentists, optometrists and other health care providers charge in the area in which you want to live. It’s important to know, too, whether local pharmacies charge higher or lower prices for pain medications and other over-the-counter drugs.

  • Utilities: Make sure to research the cost of utilities such as water, electricity, gas, Internet, garbage pick-up and phone service in the communities that you’re considering for a new home.

  • Taxes: If you’re buying a home, you’ll want to know how much you might pay in property taxes, sales taxes and other types of taxes, as these can add a significant amount to the cost of living in a community.

  • Education: If you’re sending your children to private schools, you’ll want to research the costs of tuition, uniforms and supplies in the area. Even if your children attend public school, you’ll typically need to cover the costs of enrollment fees, field trips and fundraisers.

  • Child care: If you’re working and you’ll need child care during the day, be sure to research the average cost of day care providers.

  • Entertainment: Movies, meals out, sporting events, live theater and musical performances might cost more in the community in which you want to move. If you like participating in these events? Be sure to research how much a dinner out or night at the theater might cost.

  • Miscellaneous: The price of a haircut, dry cleaning or toothpaste could impact your household budget, too. It’s important, then, to determine how much the miscellaneous expenses of daily living might cost once you move to a new community.

Find out how much you can afford.

Your approval amount will give you an idea of the closing costs you’ll pay.

The Cost-Of-Living Index

The Council for Community and Economic Research (C2ER) has created its own cost-of-living index. With the information from the council's index, organizations, government bodies, lenders and other institutions, can compare cost-of-living data from different cities against a national average, which helps consumers determine which cities or areas are more or less expensive places to live.

The C2ER assigns a base city with an average cost of living an index level of 100. Every other metropolitan area is measured against that city. Those with numbers lower than 100 indicate a lower-than-average cost of living. Cities with numbers above 100 indicate a higher-than-average cost of living.

Cost-of-living calculators can help you determine how far your current salary will go in different cities so you can make an informed decision about your future.

How To Calculate Cost Of Living

In order to calculate the average cost of living in a certain area, add up the average costs of several living expenses in that area. This includes everything from housing, food, utilities, transportation and anything else that you’ll have to pay on a regular basis.

Using a cost-of-living calculator is the easiest way to estimate whether it's more or less expensive to live in a particular city or area. But if you want to crunch the numbers by hand, there’s a simple formula that you can use if you have access to the cost-of-living index rating for each city you’re considering:

[(City X Index Value – City Y Index Value) / City Y Index Value] ✕ 100

1. Subtract: Start by subtracting the cost-of-living index value of your current city from the city you’re thinking of moving to.

2. Divide: Next, divide the difference by the cost-of-living index of your current city.

3. Multiply: Once you have this number, multiply it by 100 to get a percentage.

4. Assess: This final percentage shows you how much you’ll need to increase your salary or income by or how much less income you’ll need to maintain your current standard of living in your new location.

Cost-Of-Living Calculations: Comparing Costs

It’s helpful to know the average costs of different goods and services across the country when determining whether an area in which you want to move has a higher or lower cost of living. The table below lists several key costs and how high they tend to be on average in the United States.

Cost Of Living Factors To Consider

National Average Cost


The median existing-home sales price was $387,600 in November of 2023, according to the National Association of REALTORS®.


Households spent an average of $12,295 on transportation costs in 2022, according to the Bureau of Transportation Statistics.

Sales taxes

The Tax Foundation reported that as of July 1, 2023, California charged the highest state sales tax of 7.25%. Some states, such as Delaware and New Hampshire, charge no sales taxes.


The U.S. Department of Agriculture reported that in 2022, households earning the lowest incomes spent an average of $5,080 on food each year, while those with the highest incomes spent an average of $15,713 on food each year.


The U.S. government's EnergyStar program estimates that the average annual energy bill for a typical single-family home is $2,060.

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Cost Of Living FAQs

Questions about the cost of living where you live or where you are planning to move? Here are the answers to some of the more common.

Are cost-of-living calculators accurate?

Cost-of-living calculators are reasonably accurate. It all depends on the underlying data and the accuracy of any assumptions in the formulas that calculators use. Of course, your specific cost of living will depend on your lifestyle.

How do I do a cost-of-living comparison?

The easiest way is to rely on a cost-of-living calculator. The data powering these types of calculators typically focus on the costs of essential items such as housing, rent, food, transportation, health care and other factors. Just enter the city where you are living and the area you want to move to calculate your new possible cost of living. The calculator will tell you how much more or less you’ll need to make to maintain your standard of living in the community in which you want to live.

What does ‘cost of living’ include?

Several daily living expenses determine how much it costs to live in a community. These include the costs of housing, food, transportation, education, health care, utilities, taxes, child care, entertainment and other miscellaneous costs.

When should I use a cost-of-living calculator?

The best time to use a cost-of-living calculator is when you’re ready to move. You can use these calculators to help determine whether you’ll need more income to move to a certain city. You can also use these calculators to find a community in which daily expenses cost less, letting you stretch your dollars.

The Bottom Line: Use A Cost-Of-Living Calculator Before You Move

Want to make sure that you can afford your dream city or town? Don’t forget to plug your new destination’s information into a cost-of-living calculator. And once you’ve found the neighborhoods you want to live in, you can start the mortgage process with us.


Kevin Graham

Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage, he freelanced for various newspapers in the Metro Detroit area.