Home is where the heart is — but it’s also where you spend most of your money.
Where you live has a huge impact on your personal finances. If you find a cheap place to live, you’re liable to have more money leftover than if you lived in a big city. Consider that the median cost of a house in Hawaii, for instance, is easily five times the cost of one in Mississippi, according to pricing data from Zillow.
When you compare cost of living by state, you notice stark differences throughout the country. Nowhere is the difference greater than in the list below.
These are the four most expensive states in the country based on home prices and rent, followed by the four cheapest. How does your state stack up?
Most expensive states in the U.S.
Here are the four states that consistently rise to the top for having the most expensive houses, apartment rentals, and other living expenses.
If you want to own a home in the Aloha State, you might need to be a member of the millionaire’s club. The Council for Community and Economic Research (C2ER) found that the average cost of a home in Hawaii was just over $1 million. Just renting a one-bedroom apartment in Honolulu could set you back $1,800 per month, according to Zumper.
Your living expenses will also be high, considering most goods need to be imported to this island state. Even your energy costs will be sky-high, with C2ER estimating a monthly average cost of $455 per month. Although Hawaii might make you think of paradise, living here could be hell on your bank account.
2. New York
New York typically falls second on the list when you compare cost of living by state. Although small towns in New York are not especially expensive, prices are high for the 8.5 million residents of New York City.
Zumper estimates the average cost of a one-bedroom apartment in NYC is $2,800 per month. If you want to buy a home in the city, you’ll need a cool $1.6 million on average, found C2ER.
That being said, you could house hunt outside of the hustle and bustle of the city. The average home price in Rochester, for instance, is a more manageable $287,000.
But you still might have to pay as much as 8.82 percent of your paycheck toward state income taxes, found the Federation of Tax Administrators. You might be better off moving to a state with no income tax.
If you compare the cost of living of California with New York, you’ll find it’s not much lower. For one thing, California poses some of the highest state income taxes in the country. What’s more, the average cost of a home in the Bay Area is above $1 million, according to C2ER.
In fact, Zumper reported that San Francisco rent is even more expensive than New York rent, with a one-bedroom apartment averaging $3,480 per month. San Jose, San Diego, and Los Angeles also rank among the most expensive cities to live in.
There is one silver lining to living in the Golden State. Even though the overall cost of living is high, you’ll find affordable prices on fresh fruits and vegetables.
You don’t need to be a millionaire to buy a home in Massachusetts, but you should be ready to spend $634,233 — that’s the average cost of a home in this state, according to C2ER.
If you think renting will be cheaper, you’re out of luck. The average two-bedroom costs $2,668 per month in Boston. In nearby Cambridge, your energy bill will be an additional $288. After all, staying warm during the snowy New England winters can rack up quite the heating bill.
Cheapest states in the U.S.
Though these next four states are in the same country, they seem like they’re a world away when you compare cost of living. Here are the four least expensive states, based on the average cost of a home, rent, and other common expenses.
C2ER found Mississippi to have the lowest cost of living in the country — but there’s a catch.
Though the average cost of a home fell to $199,028, the median income in Mississippi falls more than $15,000 below the national median. Even though the cost of living is low, it might not be low enough to offset the challenges of slow income growth.
Next on the list is Indiana, where the average home costs $270,204. According to Zumper, rent for a one-bedroom in Indianapolis averages just $570 per month. Overall, Indiana is the second-cheapest state in C2ER’s study comparing cost of living.
If gas prices are driving you crazy, save money by moving to Michigan. While gas prices exceeded $3 per gallon elsewhere, they stayed closer to $2 in Michigan, home of the auto industry, found C2ER.
Homes are relatively affordable as well, with the average house going for $274,355. Meanwhile, renting a one-bedroom in Detroit will set you back just $550 per month, reported Zumper. A two-bedroom isn’t much more at $650.
Despite its turbulent past, Michigan’s economy is rebounding. In the meantime, real estate prices remain low, making Michigan affordable when you compare cost of living by state.
You can buy a home in the Natural State for just $301,128, according to C2ER. And according to Apartment List, the median cost of a one-bedroom apartment in Little Rock goes for $710 per month. A two-bedroom is an affordable $860 per month. That’s around $2,000 cheaper per month compared to the average cost of a one-bedroom in NYC.
Balance cost of living with job availability and other factors
Where you decide to live will have a big impact on your budget, but a low cost of living doesn’t always mean you’ll save more money. You also need to consider the employment opportunities in each state.
Other factors you can consider when choosing where you live include:
- Quality of education
- Cultural events and activities
- State tax laws
- Commute time
- Proximity to friends and family
Ultimately, you need to choose the state that’s right for you. But by looking closely at cost of living, you can create a budget that works for your money. Plus, you can feel confident you’ve chosen a state that helps you reach your financial goals.
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