When deciding which state to call home or set up your small business in, the cost of living is a major factor. 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 also impacts the salaries paid in a given area. Higher-cost areas like Washington, D.C., tend to offer higher salaries to compensate for the high cost of living. If you're relocating your business or opening in a new state, factor the cost of living into potential employee salaries.
States With the Lowest Cost of Living
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.
Based on information from The Council for Community and Economic Research, here are the 10 states with the lowest cost of living in America in descending order, starting with Indiana 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.
With an overall cost of living index of 90.4, Indiana comes in at number ten for most affordable cost of living in the U.S, but that definitely doesn't mean it's expensive! While smaller towns and cities typically provide a cheaper lifestyle than big cities, Indianapolis, Indiana's capital city, is one of the most affordable cities in the country.
The median price for a house in the Hoosier State is $142,600, while $662 is the average monthly rent for a one-bedroom apartment. Its natural resources like coal are an important part of the economy.
Clocking in with an overall index score of 90.2, Tennessee has a lot to offer when it comes to getting the most bang for your buck. Its stand-out savings category is housing, with a score of 82.6, among the lowest in the country. The state employs the majority of its workers in agriculture and trade-related industries, complementing its status as one of the most affordable places to live in the nation.
8. New Mexico
Known as The Land of Enchantment, New Mexico offers scenic surroundings and diverse culture. It's the third-least-expensive place to live with an index of 89.6. Its median home price is $193,200, and the average rent for a one-bedroom apartment is $693 per month. The state's economy is based on oil, gas, tourism, and federal government spending on its many military bases and research institutions.
New Mexico has three Air Force bases and is also home to White Sands Missile Range.
Alabama played a central role in the civil rights movement and it's home to almost five million residents and the University of Alabama. Alabama has an overall cost of living index of 89.4, with housing at 70.2. The median home price is $129,300, and the average rent for a one-bedroom apartment is $639. According to Education Week, Alabama ranks 44th in the country for education. Its median income is $48,486.
Low housing expenses are the most notable contributor to the attractive overall cost of living in Georgia. With a housing index of 71.3 versus the national benchmark score of 100, it provides cheaper accommodations, on average, than many U.S. states. The average monthly rent for a one-bedroom apartment is $821, compared with a national average of $930. The median home price in the state is $186,500.
With a focus on health care, biosciences, advanced manufacturing, and professional services, Missouri offers affordability and economic opportunities. Its overall index is 88.9, with a low housing score of 71.6. The median home price in Missouri is $159,500, and a one-bedroom apartment has an average rent of $650 per month. Kansas City has the highest cost of living out of Missouri's cities, followed by Columbia, Jefferson City, St. Louis, and Springfield.
In Kansas, the overall cost of living index is 87.9, making it the state with the fourth-lowest cost of living in the country. The cost of housing in Kansas is considerably lower than the national average, with a score of 71.8. The median house price in the Sunflower State is $137,700, and the average monthly rent for a one-bedroom apartment is $645.
Arkansas had the third-most affordable overall cost of living index at 87.8, and was bolstered by low housing (75.2), health care (86.2), and transportation (86.1) scores. It's known as the Natural State due to its diverse geography. When it comes to employment, Arkansas is home to Wal-Mart's headquarters. Tyson Foods and Baptist Health are also major employers.
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 86.8, and with ample land for development, its housing index registers at 70.1—the the lowest score in the country. The median house price is $124,800, while rent for a one-bedroom apartment averages $629.
Mississippi is the most affordable state in the U.S., with an overall cost of living index of 84.8. Housing (66.1) is the country's cheapest. The median home value in the Hospitality State is $128,600, and the average monthly rent for a one-bedroom apartment is $612, which is over $315 less than the national average. The state also scores well for health care (89.0) and utilities (91.8).