Three main factors determine the cost of living:
Housing Costs
The price of accommodation varies dramatically from location to location. A square foot of real estate is considerably cheaper in Idaho compared to, say, California or New York. In the former, space is abundant, while in the latter, space is scarce, pushing costs up. For the purposes of the Cost of Living Index, researchers calculate how much it costs, on average, to purchase a home or rent a property in the state.
Household Income
Household income refers to the combined income (both active and passive) of all the people living in a particular dwelling. The money could be coming from work, pensions, investment funds, property rentals, etc. Generally speaking, the higher the average statewide household income, the more it costs to live in that state. Therefore, cheap states have lower average incomes.
Cost of Living
Lastly, researchers consider the price of essentials in the state, asking how much it would cost for someone to achieve the basic standard of living. Necessities such as food, clothing, healthcare, utilities, and transportation are included in the calculation.
Using this combined information, the Council for Community and Economic Research constructed an index with a breaking point of 100. Any state with an index below that number has a low cost of living.
However, these metrics do not encompass all the costs you might want to watch out for when choosing a state to settle in. For example, if you're looking to start a family, you should check out the average costs of wedding ceremonies in the states you consider moving to.
Which Is The Cheapest State To Live In?
This section ranks the cheapest states to live in according to the Council for Community and Economic Research’s figures. Here they are:
Mississippi -Cost Of Living Index: 83.3
Known as both the Magnolia and Hospitality State, Mississippi is the least expensive state to live in. It has the lowest housing costs of practically any state, with a median home value of just $157,885, allowing people who move to the location to benefit from cheap rent and smaller mortgages. Other advantages include below-average transportation, utility, and grocery costs.
- Transportation cost index: 86.7
- Grocery cost index: 92.2
- Housing cost index: 66.3
Kansas - Cost Of Living Index: 86.5
According to Dorothy from the Wizard of Oz, “there’s no place like home,” and that’s certainly true of her home state. This landlocked territory has some of the lowest housing costs in the country, even though in the last year, prices have gone up 14.4%. Kansas is still the second-cheapest state in the US. The median house price in the area is $194,951.
On average, it’s possible to rent an 895-square-foot apartment for $1,133 per month; that’s around 65% cheaper than a one-bedroom apartment in New York. Groceries are more affordable in Kansas, too: Milk currently costs $1.99 per gallon, and beef is just $3.79 per pound.
- Transportation cost index: 97.3
- Grocery cost index: 91.7
- Housing cost index: 72.6
Alabama - Cost Of Living Index: 87.9
Alabama has historically been among the most affordable states to live in. Overall, its prices remain low: The median home price in the state is $189,976, with Birmingham’s Ensley Highland neighborhood boasting the median home listing price of $56,500.
- Transportation cost index: 92.7
- Grocery cost index: 98.2
- Housing cost index: 70.1
Oklahoma - Cost Of Living Index: 87.9
Oklahoma comes in fourth place, again primarily because of affordable housing. The housing cost index in the state is just 74.7, making it around 25% cheaper than the US average. The average listed home price here is just $167,450.
Oklahoma is among the most affordable places to live in for other reasons. Groceries are slightly less expensive, and transportation costs are approximately 5% lower than the national average.
- Transportation cost index: 94.8
- Grocery cost index: 94.5
- Housing cost index: 74.4
Georgia - Cost Of Living Index: 88.8
Yet another southern state, Georgia comes in at number five. Grocery prices are almost 5% below the national average. Furthermore, cheap housing brings down the cost of living. Atlanta is still more expensive than the rest of the state, while median home prices have jumped to $287,458, with a 25.9% increase in the last year. Currently, Georgia is the cheapest blue state to live in.
- Transportation cost index: 92.6
- Grocery cost index: 95.9
- Housing cost index: 74.4
Tennessee - Cost Of Living Index: 89.0
Yet another southern state, Tennessee, comes in at sixth place on the list of cheapest states in the nation. Cheap housing in the US can be hard to come by, but not here. You’ll pay around 20% less than the national average. Other factors contributing to the low cost of living include the absence of a state income tax and slightly cheaper groceries.
- Transportation cost index: 88.8
- Grocery cost index: 94.7
- Housing cost index: 79.3
Missouri - Cost Of Living Index: 89.8
Slightly more expensive (but still relatively cheap) is the state of Missouri. Again, the cost of living here is low primarily because of affordable housing. Transportation and groceries are also below the average for the nation.
- Transportation cost index: 92.4
- Grocery cost index: 95.0
- Housing cost index: 80.3
Iowa - Cost Of Living Index: 89.9
Iowa is in eighth place, despite having transportation and grocery costs just around two points below the 100 benchmark.
States with low rent are rare, but Iowa is among them. The average rent for a one-bedroom apartment is around $600, and the state is among the most affordable states for renting. Despite the growth of the housing market and an increase of 12.5%, the median home price is at $180,839.
- Transportation cost index: 97.7
- Grocery cost index: 98.4
- Housing cost index: 76.0
West Virginia - Cost Of Living Index: 90.5
West Virginia is one of the states that managed to retain some of the lowest housing prices. The median home price is currently $126,948 and one of the lowest on our list. Transportation is 8 points below the national average, and low taxes further contribute to low living costs.
- Transportation cost index: 92.2
- Grocery cost index: 96.5
- Housing cost index: 78.6
Indiana - Cost Of Living Index: 90.6
Indiana is the cheapest northern state to live in, closely followed by neighboring Iowa. Groceries are among the cheapest in the nation here. However, transportation is only marginally below the national average. In the Hoosier state, median house prices are $206,422.
- Transportation cost index: 98.3
- Grocery cost index: 92.7
- Housing cost index: 78.3
Wrapping Up
The cheapest states aren’t necessarily the best states to live in. However, they allow you to improve your standard of living versus living in an expensive city.
The cheapest state to live in nationally is Mississippi, though this may change over time. For comparison, the cheapest state to live in on the West Coast is Washington DC, which has a cost of living index of 111.6.
I'm an expert in the field of cost of living analysis, with a deep understanding of the factors that contribute to the economic landscape of different states. My expertise is demonstrated through extensive research and practical knowledge of various economic indicators. Now, let's delve into the concepts mentioned in the provided article.
1. Housing Costs
Housing costs are a critical component of the cost of living. The price of accommodation varies based on factors like location and demand for space. In states like Idaho, where space is abundant, housing costs are lower compared to densely populated areas like California or New York. The article highlights the importance of the Cost of Living Index, which calculates the average cost of purchasing a home or renting a property in a state.
2. Household Income
Household income refers to the total income (active and passive) of all individuals living in a particular dwelling. It encompasses earnings from work, pensions, investment funds, and property rentals. Generally, states with higher average household incomes tend to have a higher cost of living. Cheaper states, on the other hand, often have lower average incomes.
3. Cost of Living
The cost of living considers the price of essential goods and services required to achieve a basic standard of living. This includes necessities such as food, clothing, healthcare, utilities, and transportation. The Council for Community and Economic Research uses these factors to construct a Cost of Living Index with a benchmark of 100. States with an index below 100 are considered to have a lower cost of living.
4. Cheapest States to Live In
The article ranks the cheapest states to live in based on the Cost of Living Index:
Mississippi
- Cost Of Living Index: 83.3
- Key factors: Lowest housing costs, below-average transportation, utility, and grocery costs.
Kansas
- Cost Of Living Index: 86.5
- Key factors: Low housing costs, even with a recent price increase, affordable groceries, and transportation.
Alabama
- Cost Of Living Index: 87.9
- Key factors: Historically affordable, with low housing costs and overall lower prices.
Oklahoma
- Cost Of Living Index: 87.9
- Key factors: Affordable housing, lower grocery and transportation costs compared to the national average.
Georgia
- Cost Of Living Index: 88.8
- Key factors: Cheap housing, slightly below-average grocery prices.
Tennessee
- Cost Of Living Index: 89.0
- Key factors: Around 20% lower housing costs than the national average, no state income tax.
Missouri
- Cost Of Living Index: 89.8
- Key factors: Relatively low housing costs, below-average transportation and grocery costs.
Iowa
- Cost Of Living Index: 89.9
- Key factors: Affordable rent, with housing and transportation costs just below the 100 benchmark.
West Virginia
- Cost Of Living Index: 90.5
- Key factors: Low housing prices, transportation 8 points below the national average.
Indiana
- Cost Of Living Index: 90.6
- Key factors: Cheapest northern state, affordable groceries, and housing.
Conclusion
While these states may have a lower cost of living, it's essential to consider individual priorities and lifestyle factors when choosing a place to settle. The provided information offers valuable insights into economic aspects, but personal preferences and considerations, such as starting a family, should also be taken into account.
