Cost Of Living Comparison Calculator

Data source:  ACCRA

Necessary vs discretionary spending

Necessary spending is the money used to cover basic or essential needs, such as housing and food — these expenses are living costs that cannot be avoided. The term discretionary spending, on the other hand, is used to describe non-essential costs. These might include recreation, entertainment or other items consumers purchase when they have money leftover after necessary expenses are covered. 

Discretionary spending could also include luxury goods and travel. It is influenced not only by how much disposable income one has remaining after paying for essential expenses, but also by the overall economic climate. People generally feel more comfortable spending on non-essential items when broader economic conditions are positive.

Cost of living index

A cost-of-living index is a city-to-city comparison of the cost of living in each place, based on a variety of consumer expenses and spending categories. Typically, the index is based on expenses such as food, housing, utilities, transportation, health care and other goods. For most indexes, the number 100 is used to represent the national average cost of living. Each city or region is given a number that’s either above or below 100, which is a barometer that consumers can use to gauge how the cost of living in a particular city relates to the national average. There are various cost-of-living indexes available online, including:

• The Council for Community and Economic Research (C2ER) Cost of Living Index
• Economic Policy Institute (EPI) Family Budget Calculator
• Missouri Economic Research and Information Center (MERIC) Cost of Living Index

In addition, the U.S. Bureau of Labor Statistics (BLS) publishes the widely referenced Consumer Price Index (CPI). This index measures changes in prices for goods and services purchased by urban households. It also includes such consumer expenses as water and sewer service fees and sales and excise taxes. The CPI does not, however, include costs associated with income taxes or money consumers spend on investments like stocks, bonds or life insurance.

What’s included in cost-of-living comparisons

Cost of living calculations are based on various key necessities and expenses. These include:

• Housing: Shelter is considered a necessity, an essential cost of living that cannot be avoided. A housing expense may be a mortgage or rent, and it is typically the single biggest expense for consumers. The 2023 Consumer Expenditure Survey published by the BLS found that housing expenses accounted for 32.9 percent of average budgets, or about $25,436 annually. Depending on income level, some consumers spend significantly more than that.
• Food: Similar to housing, food is a basic need. It is the third-largest expense category for consumers, behind housing and transportation. In 2023, American households spent an average of $9,985 on food, or 12.9 percent of their budget. This can also vary depending on income level.
• Transportation: The costs associated with commuting and transportation are often the second-largest expenditure for most people. Consumers spend about 17 percent of their annual budget on this necessity, which amounts to about $13,174. 
• Lifestyle and additional costs: Beyond basic necessities, lifestyle expenses might include things like clothing, entertainment and personal care such as haircuts. Childcare, education, transportation and utilities are additional necessities that combine to create the overall cost of living for the average individual or family. Health care is another major expense, eating up about 8 percent of a consumer’s annual budget, or about $6,159. 

Economic and other factors to consider

Aside from your personal expenses and lifestyle habits, you’ll also need to be mindful of macroeconomic items that aren’t within your control, such as inflation, interest rate hikes, and mortgage rate fluctuations. While it’s impossible to predict these types of changes, it’s smart to have a plan in place to minimize their impact on your finances.

Sometimes, these factors will be managed on your behalf. If you’re a Social Security recipient, for example, your benefit will be updated for inflation as needed, thanks to the annual cost-of-living adjustment (COLA). Keep in mind, too, that some cities may charge local city taxes on top of state taxes.

Also, remember that some of the outputs on the cost of living calculator — like medical visits and food costs — are for an individual person, so you’ll need to adjust the calculations depending on the size of your household.

Bankrate’s Best Places to Live series can help you narrow down cities to compare. We’ve broken down the top cities in several states, ranked by such factors as affordability, job prospects and safety. 

How to use this data

Cost-of-living calculator info can be helpful to make comparisons between two or more cities and determine how much money would be required to make ends meet. This is important if you’re job-searching or considering relocating to a new part of the country. The information provided by a cost-of-living index can help you get a realistic snapshot of living expenses and create a budget — and help you determine whether or not you can afford to live in a particular location.

Comparing states

To give you an idea of how living expenses vary by state, let’s compare the cost of living differences in three of the country’s most-populated states: California, Texas and Florida. 

According to data from RentCafe, the cost of living in California is 38 percent higher than the national average. But this is highly dependent on where you live within the Golden State: For example, in Bakersfield, that figure is 11 percent higher than the national average, but in San Francisco, it’s 71 percent higher.

Compare that to the cost of living in Texas, which is 7 percent lower than the national average statewide, even though pricier cities like Plano clock in above it. 

Similarly, Florida’s cost of living is 2 percent lower than the country as a whole, but cosmopolitan cities like Miami will put you above it by double digits.

Important categories like groceries and health care also vary widely in these states. According to MIT’s living wage calculator, food costs in Texas run $3,812 per year for a single adult, but in Florida and California the total is around $4,500. On the other hand, medical costs are lower in California: $2,603 per year for a single adult, vs $2,640 in Florida and $2,992 in Texas.