How To Calculate Cost of Living Expenses Where You Live


Looking at it from bird’s eye view, you will probably say that cost of living is simply how much you spend to sustain your lifestyle month on month. And this is not far off the mark. Cost of living is the portion of a household’s income spent on the necessities of life- food, shelter, clothing, health and transport.

Your cost of living and that of your neighbor will differ, but there is a standard measure for the country as a whole referred to as the cost of living index. While the government does not publish an official cost of living index, the Council for Community and Economic Research (C2ER) offers a reliable city-by-city index.

Their index factors in the cost of more than 60 items that make up the key expenses in most American households. Below are some of them and what you can do to drive down your expenditure.


Housing is one of the most significant recurrent expenses in any household. Having a handle on what you spend on this item is important in determining your cost of living. Most families in America typically spend 30 percent of their net income on either rent or mortgage payments.

You probably won’t have to look at your bank statement to know how much you spent on housing last month. But how can you reduce your expenditure on this item? While there are no short-term fixes, you can explore several options to reduce your housing expenses in the future.

You can consider moving to a cheaper house or a city where the cost of rental accommodation or home maintenance is lower. Owning a home in New York can cost you up to three times as much as what it would cost you in other parts of the country.

Another way to save on housing is to begin making plans to buy a house. However, you will need to make mortgage payments for more than 10 years before you can finally realize savings on housing expenses with the latter option. Moving to


If you are like most employed Americans, you and your dependents will enjoy medical cover paid for by your employer. This means you won’t have to factor medical expenses into your budget unless your scheme requires you to make a co-payment at some providers. Or you need medical services or medicines not covered under your scheme.

If you’re self-employed or don’t enjoy such benefits at your job, it is wise to sign up for a scheme or set aside a specific amount for healthcare from your monthly income. This will help you avoid the possibility of a medical emergency finding you with an empty wallet.


On average, most American households spend 10 to 15 percent of their income on food. The actual expenditure will vary from home to home depending on the city you live in and your family size. Your lifestyle will also determine to a large extent, the portion of your paycheck food consumes.

If you are willing to tweak your lifestyle regarding your food habits, you will be able to bring down your overall cost of living significantly. Reducing the number of times you eat out will help you spend less on food. You will also be able to control the quality of food you eat if you shop for the ingredients and cook for yourself.

Better food means a healthier family and less money spent on hospital bills and medicine.


Commuting to your office daily, if you don’t have the luxury of telecommuting, can take up a good chunk of your paycheck. The rising cost of gas means you will spend more to fill up your tank for this daily shuttle and your weekly shopping trips. If you have to make school runs, there will be more pain at the pump. Owning your means requires you to shoulder the cost of maintenance as well.

Relying on public transport robs you of a bit of convenience but can help you make huge savings. No gas, no parking fees, no auto insurance premiums and no trips to the mechanic.

Additional Expenses

In addition to putting a roof over your head, eating and clothing yourself, you need lights in your home and access to broadband Internet. You also need to be able to communicate with friends and family. And every once in a while you need to spend some quality time with your loved ones away from home.

These items will stretch your paycheck and sometimes require more funds than your wages can provide. This is where external financing comes in. You can either borrow a lump sum or sign up for a credit card. This can be a challenge if you have a less-than-clean credit history. However, a 500 credit score credit cards with no deposit can help you overcome this hurdle.

Contemplating a Move

Getting a handle on your cost of living can help you see which areas you can reduce your expenditure. If your living cost is unsustainable, you can consider relocating to a more affordable location. This will help you boost your savings and be able to achieve your financial goals faster.

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