Cost of living

What It Means

Cost of living is the money needed to keep a given standard of living, covering everyday costs such as housing, food, transportation and health care, in a particular place at a particular time. It rises over time as prices go up, and it varies from place to place. The Bureau of Labor Statistics (BLS) notes that the Consumer Price Index is often called a cost-of-living index but isn't a complete one, because a full measure would also count things like public safety and water quality that affect well-being.

How It Sounds at Home

• "The pay's better, but so is the rent."
• "Everything's cheaper back home."
• "We'd need a raise just to break even there."

The Breakdown

A short example. Dana earns $60,000 in a town where prices sit close to the national average, a regional price parity of about 100. An offer comes in at $64,000 for the same job in a city where prices run about 1010,000 stepsA popular daily step goal that began as the name of a 1960s Japanese pedometer; later studies find health benefits begin well below it. See more% higher, a price parity of 110. It looks like a $4,000 raise, but keeping the same standard of living there would take about $66,000. By that measure, the bigger salary would buy less than the current one.

Where it goes wrong. Dana compares the two salaries and stops there. Housing costs swing widely between places: BEA's 2024 figures for housing rents run from 54.2 in West Virginia to 154.3 in California, a much wider spread than the overall price levels. A statewide average also hides the gap between a pricey city and a cheaper town in the same state.

What to watch for

• Rent or a mortgage paymentMortgageA loan used to buy or refinance a home, secured by the home itself and repaid in monthly installments over a set term. See more for the neighborhood you'd actually live in.
• A longer commute, or a second car the move would need.
• Child care, which is priced locally.
• State and local taxes, which a tax professional or the state's revenue department can explain.
• The standard of living you want to keep, written down before you compare numbers.

Good to Know

The Bureau of Economic Analysis (BEA) publishes regional price parities each year for every state and many metro areas, with the national price level set at 100, and California had the highest in its 2024 figures. They're averages, so one neighborhood can run higher or lower than its state. BLS publishes the Consumer Price Index to track how prices change over time, and notes the CPI's use in cost-of-living adjustments, though it describes the CPI as only a conditional cost-of-living index.

Related Terms and Categories

• Inflation

  A general rise in the prices of goods and services over time, so the same amount of money buys less than it did before.

• Purchasing power

  How much a unit of money, such as one dollar, can buy. When prices rise faster than your money grows, its purchasing power falls.

• Cost of living adjustment

  An increase in pay or benefits meant to keep up with rising prices, such as Social Security's yearly COLA, which is based on the CPI-W.

• Real income

  Income adjusted for inflation, so it measures what your pay can buy. The dollar amount before that adjustment is called nominal income.

• Household income

  The combined income of everyone in a household over a year; the Census Bureau counts every member age 15 and older, before taxes.

• Moving checklist

  A list of jobs to finish before, during and after a move, from checking the mover's registration to forwarding mail, so nothing important is missed.

Household money and budgeting