What is the Cost of Living?

Written by Anza Goodbar (last updated November 22, 2011)

The cost of living can be affected by several factors: inflation, region, and lifestyle. In order to calculate the cost of living, you must first determine the lifestyle you lead. Lifestyle can be influenced by location, profession, and family upbringing.

To determine your cost of living take a look at the city in which you live. The cost of housing, food, services, energy and taxes play a big part in the lifestyle choices available to you. Keep in mind that salaries are also influenced by the cost of basic needs in each community. If you are looking at relocating, do a quick comparison between where you currently live and where you'd like to relocate to see what kind of salary differential may exist in relation to the cost of living in that area. Inflation.com offers an easy to use cost of living calculator. Simply plug in your current income and the city in which you live, then plug in the city you are considering relocating it will calculate the salary comparison. Consider moving to a smaller city or suburb, the cost of living is usually slightly less.

Inflation or the rate in which the purchasing power of currency decreases, changes monthly. It is measured by the rate of change in level prices over time. The Government uses this type of data to come up with cost of living allowance (COLA) for employment contracts, pension benefits and entitlements like SSI. Salaries for this sector are normally adjusted annually based on the cost of living indices. Most other salaries increases exceed the COLA calculations.

Living in a metropolitan area can often have a higher cost of living as the supply of goods and services can be taxing on availability thus driving up costs. Areas like Hawaii and Alaska will have a higher cost of living due to the expense it takes to transport goods to the region. In recent years, retirees have chosen to make their home in Mexico as it is very affordable, has a nice climate, and the cost of goods and services is quite low when compared to the United States.

To fully capture your personal cost of living, put together a budget; be sure to include all of your monthly living expenses and incidental expenses including discretionary spending. This will give you a snapshot of what kind of income you need to make to maintain your cost of living.

Author Bio

Anza Goodbar

Anza is a single mother of four who makes her home in Colorado. She enjoys writing, hiking and is an avid football and hockey fan. She is the owner of a virtual business services company; writing is just one of the many services her company offers. ...

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