If you’re planning a move to a new location, it’s likely you’re calculating costs — everything from the price of a home and groceries to what your new electric and water bills might look like. You’ve probably heard the phrase “cost of living” thousands of times, but as you review your finances, you may be asking, “What is cost of living?”
It’s more than just a figure; it’s an ever-changing factor that influences your standard of living, especially if you’re planning to sell your current home and purchase a new one in a new city.
In this post, we explore the concept of “cost of living,” provide Cost of Living Index (CLI) links you can use, and share a handy set of additional tools to measure cost of living expenses in other places before you make your move.
What does ‘cost of living’ mean?
The phrase “cost of living” encompasses the financial requirements needed to maintain a specific lifestyle in a particular area. As defined by Statista, a leading market data provider, it is “the monetary cost of goods and services necessary to maintaining a certain standard of living.” This cost varies significantly based on location and lifestyle choices.
At its core, the cost to live somewhere typically includes the expenses you incur for:
- Housing (rent/mortgage)
- Energy (utilities)
- Food (groceries)
- Transportation (vehicles or transit systems)
- Healthcare (doctors, hospitals, etc.)
However, it extends beyond these basics to cover other aspects, such as:
- Clothing
- Education
- Childcare
- Entertainment
All these elements combined paint a comprehensive picture of the cost associated with a particular way of living.
Your standard of living is largely influenced by your salary or income, your debts, and how these compare to the costs of basic needs in the region where you live — or where you want to live. Let’s look at some ways you can compare the cost of living you have now with what you might experience in a new location.
What is a cost of living index (CLI)?
A cost of living index (CLI) monitors how much these basic expenses go up or down over time in different cities or regions. They provide a way for you to compare the price of maintaining a certain standard of living.
The CLI is calculated by assessing the price of essential goods and services such as housing, food, healthcare, and transportation in different areas.
An index is typically standardized, with a base city or region being assigned a baseline index value (often set at 100). Other cities or regions are then compared against this benchmark. For example, an area with a CLI of 120 would signify that living there is 20% more expensive than the base location, while an index of 80 indicates it’s 20% less expensive.
Additional tools to measure cost of living expenses
The United States government does not maintain or report an official cost of living index, but some agencies track factors that impact the overall cost of living.
- Consumer Price Index (CPI): The U.S. Bureau of Labor Statistics maintains the nation’s Consumer Price Index (CPI). The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. According to the bureau, “CPI is widely used as a cost-of-living index (COLI), which answers the hypothetical question concerning what expenditure level is needed to achieve a standard of living attained in a base period at current market prices.”
Additional wage and budgeting resources
- Living Wage Calculator: The Massachusetts Institute of Technology (MIT) has created a Living Wage Calculator designed to “help individuals, communities, employers, and others estimate the local wage rate that a full-time worker requires to cover the costs of their family’s basic needs where they live.”
- Family Budget Calculator: The Economic Policy Institute (EPI) provides a Family Budget Calculator that “measures the income a family needs in order to attain a modest yet adequate standard of living.” The tool presents estimated budgets based on community-specific costs for 10 family types in all counties and metro areas in the U.S.
Resources for homebuyers
- Home Affordability Calculator: Understand the costs associated with buying a home and find out how much home you can afford before you start looking at homes for sale or planning a move.
- Down Payment Calculator: Estimate how much you might need to put down on a home and learn more about the loan options that work best for you.
- Closing Costs Calculator: Find out how much cash you’ll need for closing costs on a house, including estimated lender and third-party fees.
- Buy Before You Sell: Learn about HomeLight’s Buy Before You Sell program that lets you move into your new home now and sell your current house with peace of mind and on your timeline. Learn more from the short video below.
Resources for home sellers
- Home Value Estimator: Get a preliminary estimate of what your current home is worth, along with options to help you get the best price when you’re ready to sell.
- Best Time to Sell Calculator: Use this calculator that incorporates nationwide real estate transaction data to help time your move.
- Agent Commissions Calculator: Learn how much you might pay in real estate agent commissions when selling a house in your current market.
- Net Proceeds Calculator: Get a ballpark idea of the net proceeds you could earn from the sale of your existing home.
You can find handy online tools that help you estimate the cost of paying for a mover and help you find a trusted mover. Examples include:
Partner with a professional to find your new home
As you plan your next move, HomeLight can connect you with a top-performing, trusted real estate agent in your current city or in the city where you’d like to live. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.
For the best of both worlds — coming and going — ask your agent about HomeLight’s Buy Before You Sell program to help take the uncertainty out of your next home purchase.
Header Image Source: (bilanol.i.ua/ Depositphotos)
