Which US state has the cheapest cost of living? A state-by-state guide

What ‘cost of living by US state’ means: key definitions and measures

Official price levels versus household budgets, cost of living by us state

The phrase cost of living by US state refers to how much, on average, goods and services cost in one state compared with another. In practice, analysts measure this in different ways: federal price-level statistics, professional cost indexes, and living-wage calculations all approach the question from related but distinct angles.

One widely used federal measure is the Bureau of Economic Analysis Regional Price Parities, or RPPs. RPPs put state and local areas on a common scale so readers can see whether a place sits above or below the national average in overall price levels; the BEA dataset provides the official state comparisons and the underlying documentation for those numbers BEA Regional Price Parities.

Professional indexes such as the Council for Community and Economic Research Cost of Living Index, known as COLI, use weighted baskets and benchmarking to compare areas for planners and movers. COLI and similar measures choose a set of categories and weights to reflect consumer spending and local price behavior, which means they can differ from federal RPPs in practice C2ER Cost of Living Index.

Separately, living-wage estimates look at the earnings needed to cover a basic standard of living in a county or state. These calculations incorporate local price patterns but translate them into required income levels, which is a different question from price-level comparisons alone. For readers testing affordability for a given household, the MIT Living Wage Calculator is a practical source for county and state estimates MIT Living Wage Calculator.

Using these tools together helps clarify whether a place is simply cheaper in prices, or whether lower prices still require a similar or higher income to live there comfortably. That distinction matters when comparing states for moving, budgeting, or policy analysis. See the Michael Carbonara homepage for related perspectives and resources.

How official and private measures work: methodology and limitations

BEA RPPs measure price levels across multiple categories, producing a single index that shows how a state compares to the national average. RPPs are useful as a consistent federal baseline because they apply the same concept and data sources across all states and many local areas Regional Price Parities by State and Local Area. You can also view RPP tables via FRED for data downloads and time series FRED Regional Price Parities.

C2ER COLI follows a different professional approach. It constructs a weighted basket of goods and services and uses price surveys and professional benchmarking to estimate relative costs. That means COLI may emphasize different categories or apply weights that better reflect specific consumption patterns, which can shift rankings relative to RPPs Cost of Living Index methodology. You can also explore interactive RPP tables and comparisons at ProximityOne ProximityOne.

Private rankings and media lists typically combine one or more price indexes with housing-market data, wage measures, and sometimes tax or quality-of-life indicators. Because each publisher chooses weights and secondary measures, two lists can feature many of the same low-cost states while ordering them differently.

Those methodological choices create real limitations for readers. An index built mainly from price-level averages may underweight local housing volatility. Conversely, a ranking that heavily weights recent home-price or rent data may reflect short-term market swings that are not yet visible in federal statistics.

Why housing drives most state-to-state differences

Housing costs, including rents and home prices, are the largest single component in most cost comparisons and often explain why one state looks much cheaper than another. Independent housing research shows that where housing costs fall or rise quickly, a state’s relative affordability can change faster than broader price indexes indicate Redfin Research.

Because housing represents a large share of household spending, small percentage differences in rents or mortgage payments can translate into large changes in household budgets. That is why many analysts treat local rent and home-price data as the decisive follow-up to any state-level price comparison.

Official indexes such as BEA RPPs include housing-related categories but do so on the basis of broader price and cost data that can lag current market listings. For that reason, readers comparing states should check recent housing reports and local listings alongside RPPs and COLI values.

In practical terms, this means a state that appears low-cost in a federal price index could nonetheless feel expensive in a fast-growing metro with rising rents, and vice versa for slower market areas. Combining price indexes with up-to-date housing data reduces the chance of a misleading conclusion.

Which states typically rank as the cheapest: what the 2024-2025 reports show

Multiple 2024 and 2025 rankings commonly list a similar group of Southern and Midwestern states near the bottom of national cost lists. Several private rankings and professional reports repeatedly include Mississippi, West Virginia, Arkansas, Oklahoma, Kansas, Missouri, Alabama, Kentucky, Tennessee and Indiana among states with the lowest overall price levels WalletHub cheapest states to live. The Business Insider map also highlights geographic variation in expense across states Business Insider.

Although the same states often appear across lists, the precise order varies because each source treats housing, wages, taxes, and other categories differently. A list that weights recent home-price movement more heavily will place states differently than one that prioritizes broad price averages.

Readers should treat any single ranking as an indicator rather than a definitive answer. Using several sources and noting which categories drive a particular ranking gives a clearer picture of whether a state is truly affordable for a specific household.

When federal RPPs are cited, they confirm that several Southern states rank below the national average in official price levels, which aligns with many private rankings even if the order is not identical BEA RPPs.

How to compare states for your situation: a step-by-step decision framework

Step 1: Start with a broad baseline. Use BEA RPPs to see which states sit above or below the national average in overall price levels. That gives a consistent, federal baseline for comparison BEA Regional Price Parities.

Step 2: Add local housing and wage context. Pull recent rent and home-price reports for the specific metro or county you are considering, and check living-wage estimates so you can compare required income to local wage levels MIT Living Wage Calculator.

This three-step approach helps you move from national comparisons to numbers that match your household. The steps emphasize layering authoritative price-level data with timely housing and wage information rather than relying on a single list. See recent posts on the news page for related coverage.

Common mistakes and pitfalls when using ‘cheapest state’ lists

Relying on a single ranking is a common error. Because different lists use different methods, one list alone can misrepresent the drivers of cost. Cross-checking at least one federal index and one living-wage source reduces that risk BEA RPPs.

Ignoring wages and taxes is another frequent pitfall. A low price level does not automatically mean a low living-wage requirement. Some lower-cost states still show substantial living-wage gaps that affect affordability for working households Living Wage Calculator.

Timing and lag effects can also mislead. Official indexes may reflect price levels from a year or more earlier, while housing markets can move quickly. That mismatch is why analysts recommend adding up-to-date housing market checks to any index-based comparison.

Short scenarios: comparing choices for three typical households

Scenario 1, a single renter on a tight budget: A renter focused on low monthly housing costs might prioritize a state and metro area with consistently low rents on recent listings. Combining RPPs with local rental-market reports helps identify candidate areas where housing is genuinely affordable rather than relying on an index that lags market listings Redfin Research.

Scenario 2, a family with school-age children: For families, housing size, local school quality, healthcare access, and childcare availability matter as much as headline price levels. Use living-wage data to test whether typical local wages cover family expenses, and pair that with local housing options to see if a reasonable home is affordable in practice MIT Living Wage Calculator.

Scenario 3, a remote worker prioritizing low taxes and broadband: Remote workers should combine price-level indexes with information on state tax rules and broadband coverage. A state that is low in overall price levels may still vary in tax treatment or internet access across counties, so check county-level data and local listings before deciding.

These scenarios are illustrative. Plug local RPP values, living-wage results, and current housing listings into the three-step framework to see which trade-offs matter most for your household.

Quick checklist and next steps before you move or decide

Download and compare these primary datasets: BEA RPPs for a broad baseline, the MIT Living Wage Calculator for income tests, and recent housing reports such as Redfin for market movement. Those sources give complementary views of price levels, required income, and housing supply trends BEA RPPs.

Ask targeted budget questions: What is realistic monthly housing for my household size? Do local wages cover the living-wage estimate? How do state and local taxes change take-home pay? Is broadband and healthcare access acceptable? Verifying current rent and home-price listings is essential because housing can change faster than published indexes.

Before a move, create a two-column comparison for your top candidate locations: one column for official measures and one for local housing and wage checks. That makes it easier to see where prices, wages, and services align or diverge. See the about page for background on the author and perspective.

Summary: what we know and what to check next

BEA RPPs and professional indexes consistently show that several Southern and Midwestern states sit below the national average in overall price levels, and multiple private rankings for 2024 and 2025 commonly list states such as Mississippi and West Virginia among the lowest-cost states BEA RPPs.

Across measures, housing is the dominant driver of differences between states, so pairing price-index comparisons with current housing data and living-wage checks gives the most reliable picture of affordability. For ongoing updates, watch the BEA RPP releases, C2ER methodology notes, the MIT Living Wage Calculator, and housing research from sources such as Redfin C2ER Cost of Living Index.

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