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The rising cost of living remains a prominent concern across the U.S., with surveys showing that Americans rank inflation as one of the top problems facing the country.
As prices continue to soar in nearly every aspect of life—from groceries to transportation to housing—it seems sticky inflation has a hand in everything.
With today’s affordability challenges in mind, Forbes Advisor set out to investigate how states rank across essential expenditures, including housing costs, transportation, health care, food and income taxes, by analyzing publicly available data.
Key Takeaways
- Hawaii claimed the top spot as the most expensive state in terms of cost of living, with a total average annual expenditure of $55,491. Additionally, residents of the Aloha State have the lowest amount of disposable income available annually ($5,929).
- Mississippi stood out with its low cost of living. Residents spend an average of $32,336 per year on essential expenses.
- While New York had the fourth-highest cost of living nationwide, its residents held the most disposable income. New Yorkers have, on average, $25,427 leftover after paying key expenses annually.
- Massachusetts had the highest average annual salary at $76,700, while Mississippi had the lowest at $45,180.
- Hawaii ranked highest for transportation costs at $7,458 per year, a $3,037 difference compared to Rhode Island, the most budget-friendly state for transportation.
- West Virginia residents spend an average of $752 on median monthly housing costs (across all renters and homeowners), in stark contrast to California, the highest-ranked state in this category, which spends $2,111.
- Alaska had the highest food prices, averaging $5,970 annually. In contrast, Oklahoma residents spend $3,683 per year, $2,287 less.
- Alaska led in healthcare costs, spending $13,188 on average. Utah is the most cost-effective, with an average expenditure of $7,241.
Total Cost of Living and Impact on Disposable Incomes
Cost of living refers to the average amount one can expect to spend on essential expenses while maintaining a reasonable lifestyle in a particular location during a specific period.
Salary and wages also play a vital role in whether the cost of living in an area is affordable. For instance, a salary of $75,000 in one state may afford someone a comfortable lifestyle with money left over for nonessentials. However, someone earning the same in a state with higher costs may only be able to cover basic necessities.
While cost of living is essential when deciding where to set down roots, you will likely want to balance the lure of affordability with what you require to enjoy your life on a day-to-day basis. For example, a location with a lower cost of living does not always equate with a better quality of life.
Even so, getting a sense of how much money you’ll have left in your pocket after shelling out for essentials can help direct your attention to places more likely to fit your affordability requirements and lifestyle needs.
- Hawaii took the top spot in our investigation of the states with the most expensive cost of living. The total average annual expenditure of $55,491 leaves its residents just $5,929 to spend per year on average. Consequently, Hawaii ranked as the state with the lowest disposable income.
- Mississippi has the lowest cost of living, with residents spending $32,336 annually—notably $23,155 less than Hawaii. However, despite the stark gap, Mississippi residents ranked 49th for disposable income—just ahead of Hawaiians—with a total of $12,844 extra spending money, per year. Average salaries in Mississippi are roughly $16,240 less than in Hawaii, which mainly led to this ranking.
- New York stands at the top for having the highest disposable income. On average, New Yorkers enjoy a substantial yearly disposable income of $25,427, but it’s also the fourth costliest state to live in.
- The West and the Northeast regions include the most expensive states to live in, while the South includes the most states ranking among the bottom 10 for cost of living.
Average Salary by State
How much salary you earn and in which state you earn it has a significant impact on how well you’ll manage the cost of living in a particular area.
However, keep in mind that no matter where you live and work, inflation erodes purchasing power. In the past few years, real wages—or how much your income is worth after accounting for inflation—have struggled to keep up with spiking costs, despite wages rising at a fast clip amid record job openings.
In today’s high-inflation world, to enjoy the same purchasing power of a $75,000 salary earned in 2013 you would need to earn over $98,000 today.
Knowing a state’s average salary can help you determine if a location will likely meet your income needs when choosing where to live and grow a career.
- The average salary across the U.S. is $61,900, according to Bureau of Labor Statistics data.[ ]
- Massachusetts led the nation with the highest average annual salary, at $76,600—money you’ll need to pay the high rent and home prices.
- Mississippi landed at the bottom of the list, boasting the lowest average salary of $45,180, a staggering $31,420 less than Massachusetts.
States With the Highest Transportation Costs
When thinking about whether you can afford to live in an area, a key consideration must be transportation.
Depending on how you plan to get from point A to point B, transportation costs may include vehicle purchases or leasing, fuel, motor oil, auto insurance, parts, maintenance and public transportation.
Public transportation expenses can add up each month but are usually more predictable than expenses that come with owning a car, considering that fuel, maintenance and parking costs can fluctuate.
To assess transportation expenses, Forbes Advisor analyzed 2023 data from the Council for Community & Economic Research (C2ER) to identify the states with the highest transportation costs. These are some of the standout stats:
- Hawaii ranked as the priciest state for transportation, with an annual average cost of $7,458.
- Rhode Island emerged as the most economical state for transportation costs, with an average annual expenditure of $4,421. This allowed residents of the Ocean State to save a substantial $3,037.
- It’s worth noting that Rhode Island is the smallest state by land area, with an average one-way commute time of just under 25 minutes. Hawaii is also small, but transportation costs in the Aloha State are highest due to the state’s remote location, expensive gas prices and high car registration costs. The average commute time in Hawaii is just over 27 minutes.
States With the Highest Real Estate Costs
The typical American household is rent-burdened, meaning more than 30% of their income is going toward rent. For homeowners, real estate costs should typically remain at or below 28% of a borrower’s gross monthly income, yet homeownership costs are hovering in the 30% range.
However, home prices, rent, property taxes, utilities, fuel and maintenance and repair costs will vary widely across cities and regions, making home affordability more manageable in some places.
House Prices and Average Mortgage Payments by State
Before you begin house hunting and fall in love with a dream home that’s at the top of your budget, you may want to know which states are the most affordable and costly to buy a house and what to expect for your monthly mortgage payments.
Forbes Advisor analyzed Zillow data to find the most and least expensive house prices by state, along with the average mortgage payments in each state.[ ] All prices assume an average down payment of 13% and an interest rate of 7.32% on a 30-year mortgage.
When reviewing the monthly mortgage payments, keep in mind that these figures only include your loan’s principal and interest. Owning a home also requires you to pay property taxes, homeowners insurance and mortgage insurance if your down payment is below 20%. Also expect to spend on maintenance and repairs.
- Hawaii ranked as the most expensive state for home prices, with a staggering median price of $837,324 and an average monthly mortgage payment of $5,004.
- West Virginia emerged as the most inexpensive state for real estate. In the Mountain State, the average house price stood at $155,773, accompanied by an average monthly mortgage payment of $93
States With the Highest Costs for Rent
With mortgage rates the highest they’ve been in over two decades, many would-be homeowners are waiting out the housing market and turning to renting until rates and home prices cool off.
Forbes Advisor analyzed rental cost data from Apartment List from 2017 to 2023.[ ] Although high demand and low inventory has caused rental costs to surge in some cities, there are drastic differences in average rental expenses across states.
When deciding where to rent, be sure to check if the landlord is registered with a rent-reporting service. These services report your on-time rent payments to one or more of the three credit bureaus: Equifax, Experian and TransUnion.
Reporting your on-time rent payments to credit bureaus can improve your credit report, making it easier to rent in the future. Moreover, reporting on-time rent payments can boost your credit score, putting you in a stronger position to qualify for a lower interest rate when you’re ready to take the leap into homeownership.
- Hawaii nabbed the top spot for the state with the highest rental expenses, averaging a total monthly cost of $2,423.
- North Dakota ranked at the bottom, earning the title of the most budget-friendly state for rentals with an average monthly cost of $869. It also ranked 13th for median salary at $55,800, which means that average monthly rent accounts for just over 18% of residents’ gross median income. This may give some peace of mind to hopeful renters interested in moving to the state.
Median Monthly Housing Costs
Buying a house or putting down a security deposit on a rental requires a chunk of money up front. However, once that costly hurdle is out of the way, get ready for monthly housing costs that can make a big dent in your budget.
Forbes Advisor adjusted the most recent U.S. Census Bureau data (from 2021) on the median monthly housing costs across all renters and homeowners to 2023 dollars to account for inflation.[ ]
Homeowners include both those who have a mortgage and those who have paid off their mortgage and only need to cover housing-related expenses such as homeowners insurance, property tax and utilities.
When comparing median monthly housing costs between states and what you can afford, also consider the space you’re getting for your money and how that may impact your quality of life. For instance, a higher average monthly payment in one state does not necessarily equate to larger living areas. In fact, you may find the opposite is more common, with states that tout lower average monthly housing costs providing larger spaces for the money.
- California ranked as the state with the highest median monthly housing expense, totaling $2,111. Not only did California rank highest for this metric, but California is also among the states with the most expensive square footage, meaning that $2,111 median monthly housing expense will get you a smaller space compared to other states.
- West Virginia ranked as the most budget-friendly state for median monthly housing costs, boasting a total average expenditure of $752, or nearly 65% more affordable than California. You’ll also get a lot more square footage for your buck.
States With the Most Expensive Food Prices
Food prices have a tendency to widely fluctuate, which is why they’re excluded from core inflation readings. Even so, Forbes Advisor was able to evaluate food prices by analyzing 2023 C2ER cost of living index data to determine the average food expenditure for each state.
Some notable statistics include:
- Alaska ranked top position as the state with the highest food prices, averaging $5,970 annually.
- In contrast, Oklahoma emerged as the most budget-friendly state for food costs. Residents in Oklahoma spent $2,287 less than those in Alaska, resulting in a total yearly expenditure of $3,683.
States With the Highest Costs for Healthcare
Healthcare costs include your insurance premium, deductible, copayments, coinsurance and out-of-pocket expenses. When determining healthcare costs by state, Forbes Advisor referred to KFF.org’s healthcare expenditure data, which we averaged from the available 2018-2020 data.[ ]
Here are the states that rank the highest and lowest for average annual healthcare costs:
- Alaska ranked as the most costly state for healthcare with a total average yearly expenditure of $13,188.
- Utah landed at the bottom, making it the most cost-effective state for healthcare, with an average expenditure of $7,241.
States With the Highest Income Taxes
State income taxes vary from state to state. If you’re flexible about where to live, it’s good to have a basic estimate of your income taxes every year. Forbes Advisor utilized the MIT Living Wage Calculator to gather tax data for each state.[ ]
More Americans moved to low- or no-income tax states between 2019 and 2020, according to IRS migration data. Other data suggests that this trend has since continued.
However, before committing to move to a state based on low income tax, do your research to determine if your wallet will take the hit elsewhere, such as with monthly housing costs. Additionally, when a state doesn’t collect income tax, this may impact the state’s capacity to support quality education, healthcare, and social services, which could compromise your quality of life.
- Hawaii ranked first in state income taxes with a total expenditure of $7,850. However, Hawaii did not rank comparably high for median salary, ranking 17th at $61,420.
- South Dakota landed at the bottom with the lowest income tax costs at $3,704. It’s worth noting that the Mount Rushmore State also ranked near the bottom for median salary (47th) at $49,890.
Tips To Navigate a Cost of Living Crisis
It’s easy to see how inflated prices on high-cost items can make a big dent in your wallet. To help manage your budget, you can put that vacation plan or new car on the back burner.
Despite these sacrifices, you may still find that your everyday essentials are adding up. While inflation is well below the eye-popping 9.1% rate of June 2022, the country remains in a mercurial economic climate amid ongoing geopolitical uncertainties intermittently impacting supply chains. This turmoil has made it difficult to predict when prices for everyday essentials will become more affordable again—and stay affordable.
Use these actionable steps to help lower your monthly costs.
Tips To Save On Everyday Expenses
- Create a reasonable monthly budget using a budgeting app or spreadsheet
- Deposit funds in a high-yield savings account
- Set up credit card alerts that let you know when you’ve reached a monthly spending threshold
- Apply to credit cards with loyalty programs, amass points and use points instead of cash at your favorite stores
- Find a 0% interest rate credit card offer, transfer other credit card balances and repay them before the end of the promotional period
Tips To Save On Food
- Buy store brands to maximize your savings at the grocery store
- Use apps like Too Good To Go that connect you with unsold, surplus food at local restaurants and shops at a reduced price
- Formulate a weekly meal plan
- Batch cook meals and freeze leftovers
Tips To Save On Transportation
- Use a gas app to find the least expensive fuel for your vehicles
- Bike or walk to work instead of taking a car or public transportation
- Perform simple car maintenance tasks, like changing out air filters or replacing your wiper blades, at home
Tips To Save On Housing
- Shop around with multiple mortgage lenders to find the lowest rate
- Refinance your mortgage to a lower interest rate if the math makes sense for your situation
- Lower the thermostat and wear a sweater
- Keep your blinds and windows closed during the hottest parts of the day to maintain a comfortable interior temperature without using the air conditioner
- Turn off any unused lights or devices to save energy
- Move in with family temporarily to save money
Find The Best Online Savings Accounts Of 2023
