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What is the cost of living index and in which states is it lowest?

The cost of living is an important factor in deciding where to live, so you can see if it matches your wages. What is it and in which states is it lowest?

Update:
El costo de vida es un factor importante para decidir dónde vivir. Te explicamos qué es y en qué estados de USA es más bajo.
Krisanapong Detraphiphat Getty Images

When looking for a new city or state to live in, it’s important to consider several factors, such as the cost of living. Cost of living refers to the amount of money needed to pay for basic living expenses. This varies from one state or city to another in the US, since it’s more expensive to live in some places than in others.

What is the cost of living index?

Since 1968, the Council for Community and Economic Research has collected and published cost-of-living index data at the state and local levels. According to this organization, the cost of living index measures regional differences in the cost of consumer goods and services, excluding taxes and non-consumption expenses.

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This indicator is based on more than 90,000 prices covering 60 different items whose prices are collected quarterly by chambers of commerce, economic development organizations, and applied economics university centers in each participating urban area. The index is based on six major component categories: housing, utilities, groceries, transportation, health care, and miscellaneous goods and services.

States where the cost of living index is lowest

According to data from the council, these are the states with the lowest cost of living index, meaning generally speaking, it’s cheaper to live there. Note that even if a state has a low index, the cost of living can vary from city to city.

  • Mississippi, with a cost of living index of 85%.
  • Oklahoma, 85.8%
  • Kansas, 87.5%
  • Alabama, 88.1%
  • Georgia, 88.6%
  • Missouri, 89.1%
  • Iowa, 89.2%
  • Indiana, 89.9%
  • West Virginia, 90%
  • Tennessee, 90.2%

Most of the states with the lowest cost of living are in the south and midwest. One factor contributing to the lower cost of living in these states is the availability of cheaper housing options. Also, the cost of goods and services like groceries, gas, and utilities tend to become more affordable as a result of lower demand.

The cheapest cities to live

According to the Council for Community and Economic Research's 2022 Annual Average Cost of Living Index report, these are the cities with the lowest cost of living index:

  • Harlingen, TX, with a rate of 77.1%
  • Kalamazoo, MI, 77.5%
  • Muskogee, OK, 78.3%
  • McAllen, TX, 79.4%
  • Decatur, IL, 80.1%