How Cost of Living Comparisons Work
A cost of living index measures the relative price of a basket of goods and services in a city compared to the national average (set at 100). A city with an index of 130 costs 30% more than average; a city with an index of 85 costs 15% less.
To find the equivalent salary in a new city, multiply your current salary by the ratio of the two indexes:
Equivalent Salary = Current Salary × (Target City Index ÷ Current City Index)
For example: if you earn $80,000 in a city with index 95 and are moving to a city with index 140, you'd need $80,000 × (140 ÷ 95) = $117,900 to maintain the same lifestyle.
Why Housing Dominates the Comparison
Housing costs vary more between metro areas than any other category. In BEA's 2024 figures, goods in the San Francisco area cost about 8% more than the national average, while rents were almost double (194.7). That is why two areas can have similar overall price levels but very different housing costs, and why housing is often the deciding factor in a move.
When evaluating a move, look at the housing index specifically. A city that appears only 20% more expensive overall might have housing costs that are 60% higher, which matters enormously if you're renting or buying.
What Cost of Living Indexes Don't Capture
- State income taxes: Moving from Texas (no income tax) to California (up to 13.3%) can cost more than the cost of living index suggests. Use the Income Tax Calculator to compare.
- Neighborhood variation: Indexes represent metro-wide averages. Costs can vary enormously within a single city.
- Lifestyle differences: If you spend heavily on dining out or entertainment, cities with high costs in those categories will affect you more than the overall index suggests.
- Commute costs: A city may have lower housing costs but require a long, expensive commute that narrows the gap.
Frequently Asked Questions
What does a cost of living index mean?
A cost of living index compares prices in an area to the national average, set at 100. An area at 120 is 20% more expensive than average; one at 85 is 15% less expensive. This calculator uses the Bureau of Economic Analysis's Regional Price Parities for metro areas, which cover all goods and services and break out housing rents, goods, utilities, and other services.
How much more salary do I need when moving to a more expensive city?
Divide your target city's cost of living index by your current city's index, then multiply by your current salary. For example, moving from a city with index 90 to one with index 135 means you need 50% more salary (135 ÷ 90 = 1.5) to maintain the same standard of living.
Is housing the biggest cost of living difference between cities?
Yes, by far. Housing costs vary more dramatically between cities than any other category. Groceries, utilities, and healthcare tend to vary much less. Two cities with similar overall cost of living indexes can have very different housing costs if one has cheaper housing but more expensive other costs.
Does cost of living affect taxes?
Indirectly, yes. Higher-cost cities often have higher state and local income taxes, higher property taxes, and higher sales taxes. These are not always captured in standard cost of living indexes, which focus on goods and services. When evaluating a relocation, factor in state income tax differences separately.
How accurate are cost of living comparisons?
Cost of living indexes are useful estimates based on average spending patterns and average prices. Your personal costs may differ based on lifestyle, neighborhood, family size, and spending habits. Housing in particular can vary enormously within a single city depending on the neighborhood.
Should I take a job offer in a higher cost-of-living city?
Use this calculator to find the equivalent salary, then compare it to the actual offer. If the offer exceeds the equivalent salary, you'd come out ahead financially. Also factor in state income tax differences, career growth potential, and quality-of-life factors beyond pure cost.
Is remote work changing cost of living decisions?
It can. A remote worker paid on a high-cost city's scale who lives somewhere cheaper keeps the difference, which this calculator can size. Some employers adjust pay by location, so check the policy before assuming the salary moves with you.