The 10 States With the Lowest Cost of Living

Nashville, Tennessee at sunset.
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When deciding which state to call home or to set up your small business in, cost of living is a major factor to consider. Cost of living refers to the amount of money necessary to maintain a certain standard of living and includes essential expenses such as housing, utilities, food, clothing, health care, and taxes. It can be used to compare the affordability of one state to another. 

Cost of Living Index

Unfortunately, the U.S. government publishes no official cost of living comparison between states. However, some reporting is undertaken by independent organizations. The cost of living index released by The Council for Community and Economic Research is widely accepted as a standard benchmark. Numbeo is a website that publishes the cost of living in cities around the world in comparison with New York City. Many other websites, such as BestPlaces.Net, list the cost of living in different states and cities and compare them with the national average.

States With the Lowest Cost of Living

Based on information from multiple sources, here is The Balance's ranking of the 10 states with the lowest cost of living in America in descending order, starting with Kentucky in the 10th spot. All index scores cited are in comparison to a score of 100 for the national benchmark. Scores below 100 indicate prices that are cheaper than the national average.

10) Kentucky

Low housing cost is the most notable contributor to the attractive overall cost of living in the Bluegrass State. With a housing index of 80.5 versus the national benchmark score of 100, it provides cheaper accommodation, on average, than many U.S. states. The average monthly rent for a home in Kentucky is $1,000. For a two-bedroom apartment, the average rent is $725 per month, compared with the national average of $1,027. The median home value in the state is $131,300. Attractive grocery (88.9) and healthcare (88.7) scores also make Kentucky a great place to live. Overall, the cost of living index for the state is 90.8.

9) Texas

With an overall cost of living index of 90.7, Texas is the state with the ninth-lowest cost of living. An attractive housing market is the most significant contributor to the overall cost of living index. Housing affordability is in large part attributable to the low cost of land as well as governments' friendly approach to development and construction that minimizes red tape and bureaucratic delays.

The housing index in the Lone Star State is 84.5. The average price for a rented house in Texas is around $1,450 per month. The median home value in Texas is $163,100. Grocery (89.5) and transportation (93.7) scores also help keep Texas affordable. The average cost of a meal in an inexpensive restaurant in Texas is $9, and you can grab a local beer for as low as $3.

8) Kansas

In Kansas, the overall cost of living index is 90.4, making it the state with the eighth-lowest cost of living in the country. The cost of housing in Kansas is considerably lower than the national average, with a score of 77.4. As in Texas, low home purchase and rental prices are aided by the cheap real estate that is at least one tangible benefit of Kansas City's urban sprawl. The average house price in the Sunflower State is $124,400, and the average monthly rent for a two-bedroom apartment is $777. 

7) Tennessee

The cost of living in the Volunteer State is inexpensive (89.8), and its world-famous Memphis barbecue and Nashville music scene are other reasons to call Tennessee home for yourself and/or your business. Housing (77.5) is the biggest budget helper, aided by cheaper-than-average scores for transportation (89.9), health care (90), and groceries (92.7).

6) Idaho

Idaho has the cheapest groceries of any state, thanks to healthy price competition provided by Boise-based WinCo Foods, a regional grocery retailer. The low cost of food items contributes to the Gem State's overall cost of living index of 89.6. Cheap food, in conjunction with inexpensive housing (77.8), helps Idaho enjoy the sixth-most-affordable cost of living. Idaho achieves its low overall score despite being more expensive than the national average for transportation (106.1) and health care (101.9).

5) Oklahoma

There is a lot to like about Oklahoma when it comes to low cost of living. Kiplinger named the state's capital, Oklahoma City, one of America's most affordable cities. The overall cost of living index for the Sooner State as a whole is 88.6, and with ample land for development, its housing index registers at 76.7—one of the lowest scores in the country. The average house price is $114,800, while rent for a two-bedroom apartment averages $740.

4) Arkansas

In 2019, U.S. News & World Report's list of the 20 Best Affordable Places to Live in the U.S. named Fayetteville, Arkansas, as the nation's fourth best place to live. And according to the National Low Income Housing Coalition, Arkansas was the most affordable state to live in for people making the minimum wage in 2019.

The state's 88.5 overall cost of living index was bolstered by low housing (77.7), health care (87.8), and transportation (89.1) scores. And speaking of transportation, Arkansas boasts some of the lowest commuting times in the U.S. On the other hand, walkability is an issue, so you will need that vehicle.

3) Michigan

There is a lot to like about Michigan, the third-cheapest state (88.2) in which to live. With two peninsulas jutting into the Great Lakes and 11,000 inland lakes, the Wolverine State boasts more miles of freshwater shoreline than any other U.S. state. It also has about 150 commercial wineries and more than 350 breweries.

Michigan's housing index is 77.1, with the average price for a house at $147,900. For a two-bedroom apartment, the average monthly rent is $802. Grocery (89.6) and health care (93.3) scores also contribute to the state's affordability.

2) Indiana

With an overall cost of living index of 87.9, Indiana is the second-best place to live affordably in the U.S. And while smaller towns and cities typically provide a cheaper lifestyle than big cities in many states, Indianapolis, Indiana's capital city, is one of the most affordable cities in the country, with an overall index of 89. Indiana's 75.8 housing index score is the country's second lowest. The average price for a house in the Hoosier State is $139,900, while $764 is the average monthly rent for a two-bedroom apartment.

The grocery (92.4) and utilities (91.1) indexes also contribute to the state's affordability. Its cheap energy is on the wane, however, as Indiana shifts electricity production away from coal, the predominant source in the past, toward natural gas.

1) Mississippi

Mississippi is the most affordable state in the U.S., with an overall cost of living index of 86. Housing (68.4) is the country's cheapest. The average home value in the Hospitality State is $112,000. The average monthly rent for a house is $1,050, and the average monthly rent for a two-bedroom apartment is $727, which is $300 less than the national average. The state also scores well for health care (89.9) and utilities (89.6).

Other Factors

When it comes to cost of living comparisons, there are other variables of course, such as differences between urban, suburban, and rural locations, as well as between premium districts and less popular locales. Some state rankings, such as the listing of best states to retire in, consider other factors in addition to the cost of living, such as crime rate, weather, and personal well-being. Knowing state cost of living rankings, however, can be a useful early step in your research on where to start a business or take up residence.