What Are the Top 10 Cheapest States to Live In?

Understanding the varying costs of living across the United States is important for those considering relocation or understanding economic disparities. Living expenses differ substantially from one geographic area to another, impacting household budgets and financial well-being. A salary offering a comfortable lifestyle in one state might provide a much different experience in another. Examining these differences at the state level provides insight into where financial resources may extend further.

Understanding Cost of Living Measures

The “cost of living” quantifies the money needed to maintain a standard of living, including housing, food, and healthcare. A Cost of Living Index (COLI) is used to compare regions. The national average is set at 100 points. An index below 100 indicates lower costs than the national average, while an index above 100 signifies higher expenses.

Cost of living indices are comprised of six categories: housing, utilities, groceries, transportation, healthcare, and miscellaneous goods and services. Housing costs, including rent or mortgage, property taxes, and maintenance, often represent the largest portion of a household’s budget, frequently over one-third of total expenses. These categories are weighted based on typical consumer spending patterns to create a comprehensive index. For instance, housing might carry a weight of nearly 28%, while groceries could be around 13%, and miscellaneous goods and services over 34%.

The States with the Lowest Living Costs

Several states offer a lower cost of living than the national average, attracting those prioritizing affordability. They often have reduced expenses across categories, especially housing. Variations in overall cost of living indices reflect local market dynamics and state-specific economic conditions.

Here are some of the states with the lowest living costs:

• Mississippi: The most affordable state, with a COLI of 83.3. Housing costs are the lowest in the country, with a median single-family home priced around $140,818.
• Kansas: COLI of 86.5. Housing costs are 27.4% below the national average, with a typical single-family home costing $176,898. Transportation and grocery costs are also lower.
• Oklahoma: COLI of 87.9. Housing prices are 25% lower than the national average, with a median home cost of $171,057.
• Alabama: Also with a COLI of 87.9, featuring the second-lowest housing costs and average single-family homes selling for around $170,184. Healthcare and transportation expenses are low.
• Missouri: COLI of 88.0. Housing costs are 20% below the national average, where a typical home is valued at $218,208. The state also has lower health and transportation costs.
• Iowa: COLI of 89.8, known for its stable real estate market and housing affordability, with a median home sale price around $227,500.
• West Virginia: COLI of 90.5, consistently features inexpensive homes averaging $146,578.
• Indiana: COLI of 90.6, offers accessible housing, with median home prices around $260,000.
• Arkansas: Frequently cited for its affordability, including a median home sale price of $256,100.
• Tennessee: COLI of 89.0, rounds out the list of affordable states, noted for its lower living expenses.

Key Drivers of State Affordability

The affordability of living in a state is shaped by economic, demographic, and geographical factors. Housing supply and demand is a significant driver, influenced by population density and available land. States with lower population densities and ample land tend to have more affordable housing, as construction costs and land values are lower. This is evident in many Southern and Midwestern states, where housing prices are less than in densely populated coastal regions.

Local economic conditions also play a role in determining cost of living. Areas with less robust job markets or lower average wages may have reduced demand for goods and services, leading to lower prices. Conversely, strong job markets and higher incomes often correlate with elevated living expenses.

State and local tax structures also directly impact the cost of living. States that rely less on individual income taxes and more on sales or property taxes may present a different financial landscape, though the total tax burden can vary depending on individual spending and property ownership. For instance, states with no state income tax may compensate with higher property or sales taxes.

The cost of utilities and energy can contribute to a state’s affordability. Regions with abundant natural resources or efficient energy infrastructure may have lower utility rates, reducing household expenses. Climate also influences utility costs, as states with moderate temperatures may require less heating or cooling, leading to lower energy bills. Government policies, including land-use regulations and licensing requirements, can indirectly affect the cost of living by influencing the ease and expense of doing business and developing infrastructure.