What Is Cost of Living and Can I Afford It?

Peter Chambers

Feb 18, 2023


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A new job, the desire to live closer to family or wanting a fresh start are common reasons why people move around. Planning a move is, of course, exciting and nerve-wracking, requiring plenty of considerations. 

Before packing your belongings and signing a lease, examining a city’s livability is essential. Where will you reside? Do you have a job lined up? You might need to consider making a few sacrifices to tie you over financially as you settle in.

Depending on where you’re moving, you’ll need to figure out the cost of living for that area. But what is “cost of living” and can you cover the expenses?

Defining Cost of Living and What It Includes

Cost of living is the money you need to maintain a certain lifestyle in a particular location. Expenses usually comprise housing expenditures, taxes, groceries, health care, education, entertainment and amenities, clothing and transportation. 

The cost of living in major cities is much higher than in the suburbs or rural communities. This is because cities usually have something that attracts crowds — larger populations drive up expenses. From an economic point of view, city dwellers are generally more capable of and willing to pay higher prices for scarce goods, balancing the distribution of resources.

For example, Honolulu, Hawaii, is the most expensive city in the United States, primarily because its seclusion makes it more difficult and costly to import and allocate goods and services. 

New York City is another example of a large population demanding scarce goods. It’s expensive to deliver resources to Manhattan — a 5-axle truck pays a $110 toll to cross the George Washington Bridge — and you’re not going to find a Walmart Supercenter until you reach New Jersey, meaning smaller grocery stores with fewer items.

Your income is a determining factor in whether or not you can afford to live in different areas. However, as the cost of living has skyrocketed in 2022 due to rising gas prices, grocery costs and inflation, more people are finding their incomes no longer cover everything they need to maintain their lifestyles. Currently, 75% of middle-income Americans cannot keep up with their cost of living.  

Calculating the Cost of Living

You can calculate the cost of living by comparing the prices of the essentials, such as groceries, taxes and health care — according to spending habits and location — between multiple areas.

Consider that housing costs account for the most substantial living expenses, eating into most of your budget. According to the U.S. Bureau of Labor Statistics (BLS) December 2021 Consumer Expenditure report, 34.9% of Americans’ incomes went toward housing in 2020.

Online tools provide an easy way to compare livability between two cities, giving insight into how much you need to earn in your new city based on your current lifestyle and spending habits. Cost calculators also list the costs of goods and services between both locations. 

For example, a movie ticket costs $10.64 in Raleigh, North Carolina and $14.12 per ticket in Boston, Massachusetts. Likewise, a loaf of bread costs $3.74 in Pensacola, Florida and $4.51 in Hartford, Connecticut. Avid moviegoers may have difficulty affording entertainment if moving to Boston from Raleigh while relocating from Connecticut to Florida is undoubtedly a better cost of living.

If you’re planning to make a move soon, consider other expenses you’ll need to cover in addition to the cost of living. About 40% of Americans miscalculate moving expenses and forget to account for having to restock food items, turn on utilities, deposit fees for rentals and Cobra or individual medical insurance if changing jobs. 

Factor in the Cost of Living Before Moving to a New City

One of the worst financial decisions you can make is moving to a new city you can’t afford. Taking the time to analyze the cost differences and figure out where you can save in your typical spending habits will help you along the way.

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