Cost-of-living calculator

Moving somewhere new can be exciting, but there can be a lot of things to get used to when you get to your new home.

One thing you might need to get used to is the cost of living. The prices for everything from housing to groceries to transportation can vary significantly from state to state, city to city, and even neighborhood to neighborhood.

Doing some research on the differences in the cost of living where you live and where you may move to is important to help avoid sticker shock after you move.

What is the definition of ‘cost of living’?

Cost of living refers to how much you need to pay to maintain your desired lifestyle based on where you live. Prices can vary from one area to another, meaning two areas can have very different costs of living.

For example, Boston, Massachusetts, has a high cost of living, meaning it’s one of the most expensive cities in the U.S.  According to Payscale.com, you can expect to pay $3,400 a month for rent in Boston and $315.46 for electricity. Things like a loaf of bread will cost a bit more than $4.

By comparison, Tuscaloosa, Alabama, has a much lower cost of living, which means it’s a cheaper place to live. Rent is about $1,146 a month, and electric bills are close to $230, and bread is a bit less than $4 a loaf.

Costs for other things like healthcare, gas, and more also differ between the two cities. As you can clearly see, you’d need to make much more in Boston than in Tuscaloosa if you wanted to maintain the same lifestyle.

If you’re going to move somewhere new, don’t just think about how much house you can afford. Think about whether you can afford the cost of your lifestyle given your new location’s prices.

What factors go into the cost of living?

The cost of living in an area is based on the cost of common and essential products and services. Here are some of the things included in the expense of living in a certain area:

• Housing: Likely the biggest bill you pay every month. Prices range widely from one area to another and are based on whether you own or rent and your living situation. Using the above example, you’d pay more than $3,000 in Boston but less than $1,200 in Tuscaloosa for similar living situations, showing how different the price can be in different areas. In 2023, spending on housing averaged $25,436.
• Transportation: In some places, you may be able to get by with cheap public transit, or you can buy gas at a low price. Other areas may require a car or have high gas prices. In 2023, the average spend on transportation was $13,174.
• Healthcare: This includes insurance, prescriptions, and bills for emergency room visits or trips to the doctor. The average spending on healthcare in 2023 was $6,159.
• Utilities: This includes things like sewer, water, and electricity. Prices can vary depending on how your area generates power and what the demand for utilities is like. The costs average about $120 a month.
• Education: Public school is free, but you may pay out of pocket for tutors, private school, or college. In 2023, the typical cost was $1,656.
• Childcare: This includes the cost of babysitting, day care, preschool, and after-school programs. In general, costs of childcare rise as the cost of living rises so that workers can make enough to cover their own costs. In 2022, the median annual price for full-day childcare ranged from $6,552 to $15,600, depending on location.
• Entertainment: This includes things like the cost of movie or concert tickets, meals out, and more. Typical 2023 spending was $3,635.
• Miscellaneous: You spend money on a lot of things that don’t fall neatly into a single category, like haircuts, toothpaste, gym memberships, and the like. Don’t forget to account for these costs.

Keep in mind that high costs in one area, such as housing, don’t always mean that the total cost of living is higher, though this is often true. If costs in other areas are lower, it can help even things out.

The cost-of-living index

A cost-of-living index is a tool that can be used to compare the cost of living in different areas. There are many different indices used, such as the Council for Community and Economic Research’s index.

These indices take the price of many different products and services and put them through a formula to generate a single cost-of-living number. You can compare the cost-of-living number for two areas to roughly estimate the difference in how much you’d need to make to live comfortably in each area, which can help you decide where to live.

How to calculate cost of living

Calculating the cost of living for an area involves looking at the prices of a number of important goods and services, such as food, housing, healthcare, and so on.

For example, look up typical monthly spending on housing, food, utilities, childcare, healthcare, and entertainment for an area. Multiply that number by twelve, and that’s how much you’d need to make after taxes to live in that area. Do the same for a second location, and you can compare the cost of living between two places.

Doing all this math can be complicated, so consider using a home afforadability calculator to help you quickly analyze housing costs and other costs of living.

Comparing cost of living

Many people find themselves moving to less expensive areas because they get priced out of their current location or simply want to move somewhere where their dollar goes further. This is especially true when inflation reduces the purchasing power of people’s incomes, pushing the cost of living even higher.

Areas with lower cost of living often see a lot of net migration as people seek lower costs.

Some of the states with the highest net migration include Florida, South Carolina, Delaware, Texas, and North Carolina, and many of the fastest-growing cities are in these states.

However, people moving somewhere new for lower costs of living may find themselves facing rising costs over time. As more people move to an area, demand for things like housing will rise, pushing prices up.

FAQ

Understanding cost of living can be complicated, but it’s very important to consider differences in cost of living before you move somewhere new.

Are cost-of-living calculators accurate?

Yes, in general, cost-of-living calculators are accurate, but they are not perfect. They’re only as good as the data they use in their calculations, and they can’t perfectly account for differences in individuals’ spending habits.

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

To compare the cost of living in an area, the easiest thing to do is use a cost-of-living calculator that accounts for factors like housing, food, utilities, transportation, and other miscellaneous costs.

What does ‘cost of living’ include?

The cost of living in an area includes the amount you’d spend on common and essential goods and services, such as housing, food, transportation, health care, education, and entertainment.

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

A cost-of-living calculator can be very useful if you’re thinking about moving to a new city or state. They can help you get an idea of whether your current income is sufficient to maintain your lifestyle and whether you’ll need to make more or can save more if you move.

The bottom line

Housing is just one piece of the complicated picture that is an area’s cost of living. Before you move, use a cost-of-living calculator to get a sense for how much it will cost to pay for everyday goods and services in a new area to help you decide whether moving is a good idea.

If you’re ready to start shopping for a home, Rocket Mortgage® can help. Start your mortgage application today so that you’re ready to start touring homes and making offers.