Ultimate guide to understanding the cost of living in the USA

Expat life
19 Jun 2023
14 mins read
Written by Team Instarem

The cost of living in the United States can vary greatly depending on the city, state, and region in which one lives. In general, major metropolitan areas such as New York City, Los Angeles, and San Francisco tend to have higher costs of living due to factors such as housing, transportation, and food. However, there are also many smaller cities and towns throughout the country that offer a lower cost of living. 

 

In addition to location, other factors that can impact the cost of living in the United States include an individual’s lifestyle, income, and family size. For example, living expenses for a single person may be significantly different from those of a family with children. It is important for expats moving to the United States to research and plan their budget accordingly to ensure they can comfortably afford their expenses.

The economy and cost of living in the USA

Factors that affect the cost of living

The cost of living in the United States can vary widely depending on several factors. One of the most significant factors is the location, with major cities like New York and Los Angeles being more expensive than smaller towns and rural areas. The cost of housing, utilities, and transportation can also vary significantly based on the region.

 

Another important factor is the individual’s lifestyle and spending habits. The cost of food, entertainment, and other daily expenses can vary widely depending on whether an individual chooses to eat out frequently, purchase luxury items, or engage in expensive hobbies.

 

In addition, healthcare costs can be a significant factor in the cost of living in the United States. While healthcare is generally of high quality, it can be costly for those without insurance or with high deductibles. Overall, understanding the factors that contribute to the cost of living can help expats plan and budget accordingly when moving to the United States.

How the cost of living is calculated

Calculating the cost of living in the United States can be a complex process, as it depends on a variety of factors such as location, lifestyle, and family size. In general, the cost of living is determined by the amount of money needed to maintain a certain standard of living in a particular area.

 

One common method of calculating the cost of living is through the use of an index. The Consumer Price Index (CPI) is a measure of the average change in prices of goods and services consumed by households over time. The CPI is divided into various categories such as food, housing, transportation, and healthcare, which are weighted based on their relative importance in the average household budget.

 

Another way to calculate the cost of living is by looking at the cost of necessities such as housing, food, and transportation in a particular area. This can be done by researching prices of goods and services in local stores and online and comparing them to national averages.

 

It’s important to note that the cost of living can vary greatly depending on the region and city within the United States. For example, the cost of living in New York City is generally higher than in other parts of the country due to factors such as high rent prices and the cost of transportation.

According to data from Numbeo, a website that provides cost-of-living comparisons for cities around the world, some of the most expensive cities in the United States are New York, San Francisco, and Los Angeles. Other relatively expensive cities include Boston, Seattle, and Washington D.C.

 

On the other hand, some of the more affordable cities in the United States include Phoenix, Houston, and Dallas. Other cities with a lower cost of living include Atlanta, Charlotte, and Nashville.

 

It’s important to note that while certain cities may have a higher cost of living overall, the cost of specific items such as housing, groceries, and transportation can vary greatly within a city or region. Expats need to research the specific costs of living in the area they plan to move to to get a better understanding of their expected expenses.

New York

New York City is widely regarded as one of the most expensive cities to live in in the United States. The cost of living in New York City is higher than the national average due to factors such as high real estate costs, high taxes, and high demand for goods and services. According to data from Numbeo, the cost of living in New York City is 49.85% higher than the national average. This means that on average, you can expect to pay almost twice as much for goods and services in New York City as you would in other parts of the United States.

 

Housing costs are the largest contributor to the high cost of living in New York City. According to Property Shark, as of the fourth quarter of 2022 — the median sale price for houses in New York is USD 720,000. Other expenses such as groceries, transportation, and healthcare are also significantly higher than the national average. According to Numbeo data from 2023, the groceries in New York City index is at 100.0, which indicates groceries expenses cost is relatively high.

 

Despite the high cost of living, many people are still drawn to New York City for its cultural offerings, job opportunities, and diverse population. It is important to keep in mind that salaries in New York City are also typically higher than in other parts of the country, which can help offset some of the additional expenses.

 

As for transportation, New York City is known for its bustling public transportation system, which can provide a cost-effective means of getting around the city. The Metropolitan Transportation Authority (MTA) operates subways, buses, and commuter trains throughout the city and surrounding areas. The cost of a single subway or bus ride is $2.75, and a monthly unlimited MetroCard costs $127. Additionally, taxis and ride-sharing services like Uber and Lyft are readily available in the city but can be more expensive than public transportation.

 

For those who prefer to own a car, the cost of owning and maintaining a vehicle in New York City can be high. Parking can be difficult and expensive, with monthly parking rates ranging from $200 to $800 in Manhattan. Additionally, auto insurance rates in New York are among the highest in the country, with an average annual cost of $1,517.

 

Biking is becoming an increasingly popular means of transportation in New York City, with the city expanding its bike lane network and implementing bike-sharing programs. Citi Bike, the city’s bike-sharing program, offers daily, monthly, and annual memberships starting at $3.50 for a single ride and $15 for a day pass, making it an affordable and environmentally-friendly option for getting around the city.

 

Total cost of living index in New York

 

According to Numbeo, a crowd-sourced database of consumer prices and indices, the total cost of living in New York City is relatively high compared to other cities in the United States. As of 2023, the consumer price index (CPI) in New York City is 100.00 for all indexes (rent, groceries, and restaurants) in comparison to other cities in the United States.

San Francisco

As can be seen on Numbeo, San Francisco is the fifth of the most expensive cities to live in in the United States after New York, with a high cost of living for all indexes. The cost of housing in San Francisco is one of the main contributors to the high cost of living, with the average rent for a one-bedroom apartment in the city costing around $3,400 per month, according to RentCafe. However, other expenses such as transportation, groceries, and healthcare are also relatively high as well in San Francisco.

 

Transportation in San Francisco is also costly, with the average cost of a monthly transit pass at around $80 per person. However, many people in San Francisco choose to walk or bike to work, which can help reduce transportation costs. Groceries and healthcare expenses are also higher in San Francisco compared to other US cities.

 

Overall, while the high cost of living in San Francisco may be a deterrent for some, the city’s many job opportunities, cultural attractions, and beautiful scenery continue to attract people from all over the world.

 

Total cost of living index in San Francisco

 

The total cost of living in San Francisco according to Numbeo is high as it ranks in fifth place, right below New York. The two highest costs of living indexes are groceries and restaurants. So, for expats wishing to settle down in Francisco, it is suggested they manage their spending on groceries and restaurants wisely.

Los Angeles

Los Angeles is known for its warm climate, beautiful beaches, and bustling entertainment industry. It is one of the largest cities in the United States and is a popular destination for expats looking to move to California. When considering the cost of living in Los Angeles, there are several factors to consider.

 

Housing in Los Angeles is one of the biggest expenses. According to RentCafe, the average rent for a one-bedroom apartment in the city centre is around $1,800 per month, while an average three-bedroom apartment can cost upwards of $5,000 per month.

 

Transportation costs in Los Angeles can also add up. The city is spread out, and a car is often necessary to get around. Gas prices in California are some of the highest in the country, with an average price of around $4 per gallon. Monthly public transportation passes cost around $100 per month, and ride-sharing services like Uber and Lyft can also add to transportation expenses.

 

Total cost of living index in Los Angeles

 

The total cost of living in Los Angeles, according to Numbeo, ranks in 23rd place for the total cost of living, which means the cost of living is somewhat moderate in comparison to other cities in the United States. Though the cost of living is moderately lower, expats planning to move into the city should properly plan their expenses to avoid running into budget constraints issues.

Chicago

Chicago, known as the “Windy City,” is the third most populous city in the United States and the largest city in the Midwest. The cost of living in Chicago is moderately lower than that of New York City and San Francisco, but higher than other cities in the Midwest. According to data from Numbeo, the cost of living index for Chicago is 79.0 as of March 2023, which is lower than the national average of 100.

 

According to RentCafe, the average for apartments in Chicago is around $2,240 per month. Though, 19% of apartments in Chicago have average rent of $$1,001-$1,500. $2,000 per month is the second most common rent average in Chicago.

 

Food and groceries are relatively affordable in Chicago compared to other major cities, with a meal at an inexpensive restaurant costing around $15 and a gallon of milk costing around $3.50. However, dining out and entertainment can quickly add up, with a movie ticket costing around $14 and a domestic beer at a bar costing around $6. Overall, the cost of living in Chicago is comparable to other major cities in the United States, but it is important to consider factors such as housing and transportation when budgeting for daily expenses.

 

Total cost of living index in Chicago

 

From the numbers provided by Numbeo, the cost of living in Chicago is lower than in other cities in the United States — despite this fact, it is wise to plan your budget so that you have a sufficient budget for house items, travel and other expenditures such as clothing and entertainment.

Houston

Houston, Texas is a popular city in the southern region of the United States, known for its thriving energy and healthcare industries, diverse population, and bustling urban environment. When it comes to the cost of living, Houston is generally considered to be an affordable city compared to many other major cities in the US.

 

According to data from Numbeo, the cost of living in Houston is lower than that of New York City, which is often used as a benchmark for comparison. Housing is one of the biggest factors in the cost of living, and Houston’s housing costs are significantly lower than other major US cities, according to RentCafe. Though it depends on which area of Houston, the average rent price averages around $1,200-$2,000 per month.

 

Transportation costs in Houston are also lower than in many other major cities, with a monthly pass for public transportation costing around $70 compared to over $100 in cities like New York and San Francisco. Other factors that contribute to the cost of living in Houston include food, utilities, and healthcare, which are generally in line with national averages.

 

It’s important to note that the cost of living can vary widely based on individual circumstances, such as lifestyle, family size, and job location. However, overall, Houston is considered to be a relatively affordable city compared to many other major US cities.

 

Total cost of living index in Houston

 

Houston ranks 59th place for the cost of living index according to Numbeo. This means the total living cost in Houston is lower than in many other cities in the United States — thus allowing more flexibility in monthly expenditure.

Tips on how to live on a budget

Living on a budget can be challenging, especially in a country like the United States, where the cost of living can be high. However, there are various ways to cut costs and save money while living in the US.

 

One of the most significant expenses in the US is housing. To save money on housing, you can consider living in smaller apartments or sharing with roommates. It’s also essential to research different neighbourhoods to find one that is affordable and meets your needs. When looking for a place to live, be sure to check for any additional expenses like utilities, parking, and laundry facilities.

 

Another way to save money is to cook your meals instead of eating out. Grocery stores in the US offer a wide variety of affordable options, and you can save money by planning meals and buying in bulk. Additionally, you can consider purchasing a membership to a wholesale store like Costco, which offers discounted prices on bulk purchases.

 

Transportation can also be a significant expense in the US, particularly if you own a car. To save money, consider using public transportation, carpooling with coworkers or friends, or biking or walking to your destination. Many cities also offer bike-sharing programs, which can be a cost-effective and environmentally-friendly option. It’s also important to compare different insurance and gas prices to find the most affordable options.

 

So, here are two tips to help you out:


Plan your meals and cook at home: Eating out can quickly add up and become expensive. Planning your meals and cooking at home can save you a lot of money. Consider buying groceries in bulk and using coupons to save even more.

 

Use public transportation: If possible, use public transportation instead of owning a car. Public transportation is often cheaper than owning and maintaining a car, especially in cities where parking fees can be high. Look into getting a monthly pass or purchasing tickets in bulk to save even more.

How to find affordable housing

Finding affordable housing is one of the key strategies for living on a budget in the United States. Here are some tips to help you find affordable housing:

 

Research the Housing Market: Before you start looking for housing, research the local housing market to get an idea of what prices are reasonable in the area. Websites like Zillow, Trulia, and Craigslist can help find rental properties in your area.

 

Consider Alternative Housing Options: If you’re having trouble finding affordable housing in your desired location, consider alternative options like shared housing, subletting, co-living or renting a room in someone else’s house. These options can often be more affordable than renting a whole apartment or house.

 

Moving to the US can be expensive, but it doesn’t have to break the bank. By comparing the cost of living in various US cities and following these budgeting tips, expats can make smart financial decisions and enjoy their new home to the fullest.

Before you go…

And to further help you save on expenses, you can opt for Instarem as your main online and digital remittance service.

 

 

*rates displayed are for illustration purposes only.

 

Instarem offers the best rates for currency exchange and remittance services, this will help you save even more when you need to send money back home to your family.

 

Try Instarem for your next transfer by downloading the app or sign up here.

 

*Disclaimer: This article is intended for informational purposes only. All details are accurate at the time of publishing. Instarem has no affiliation or relationship with products or vendors mentioned.

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