The cost of living can vary dramatically depending on where you reside, impacting everything from your grocery bill to your monthly rent. According to a recent survey by Yahoo Finance and Marist Poll, 47% of Americans cite the rising cost of living as their biggest financial hurdle. With inflation continuing to affect households across the country, understanding how your state compares can help you make more informed financial decisions.
The 5 Most Expensive States to Live In
Some states come with a hefty price tag, largely due to high housing costs and increased demand for goods and services. Here are the top five states with the highest cost of living in 2025:
1. California (Cost Index: 112.6)
California remains the most expensive state to live in, with a cost of living 12.6% higher than the national average. The primary driver? Housing costs. In major metropolitan areas like San Francisco and Los Angeles, rent prices are 57.8% above the national average, making it difficult for many residents to afford homeownership.
2. Washington, D.C. (Cost Index: 110.8)
The nation’s capital takes the second spot, with a cost of living 10.8% higher than the national average. Washington, D.C. has some of the highest housing and utility costs in the country, making it a challenging place for budget-conscious residents.
3. New Jersey (Cost Index: 108.9)
With a cost of living nearly 9% above the national average, New Jersey’s proximity to major cities like New York drives up housing prices. Goods and services also tend to be more expensive, making everyday expenses higher than in many other states.
4. Hawaii (Cost Index: 108.6)
Hawaii’s stunning landscapes come at a price. With its remote location, most goods must be imported, increasing their cost. Limited land availability and high demand for housing further contribute to Hawaii’s elevated cost of living.
5. Washington (Cost Index: 108.6)
Washington state rounds out the top five, with its cost of living sitting 8.6% above the national average. High housing costs—more than 25% higher than the national average—are a major factor.
The 5 Most Affordable States to Live In
If you’re looking for a more budget-friendly place to call home, these states offer the lowest cost of living in the country.
1. Arkansas (Cost Index: 86.5)
Arkansas takes the top spot as the most affordable state, with a cost of living 13.5% below the national average. Housing is particularly inexpensive, making homeownership attainable for many residents.
2. Mississippi (Cost Index: 87.3)
With housing and utility costs among the lowest in the country, Mississippi’s cost of living is 12.7% below the national average. Personal expenditures have increased slightly but remain manageable for most residents.
3. South Dakota (Cost Index: 88.1)
South Dakota’s affordability is driven by its relatively low housing costs and lack of state income tax. With a cost of living 11.9% below the national average, it offers financial relief for residents.
4. Oklahoma (Cost Index: 88.3)
With a cost of living 11.7% below the national average, Oklahoma benefits from low housing prices and affordable goods and services. Its overall affordability makes it a desirable place for families and retirees alike.
5. Louisiana (Cost Index: 88.3)
Louisiana’s affordable housing and low cost of goods contribute to its ranking as one of the cheapest states to live in, sitting 11.7% below the national average.
How to Reduce Your Cost of Living
Regardless of where you live, there are strategies you can use to lower your expenses and stretch your budget further.
1. Sign a Longer Lease
Landlords may offer lower rent prices in exchange for a longer lease agreement. Instead of signing a standard 12-month lease, consider negotiating an 18- or 24-month lease for potential savings.
2. Refinance Your Mortgage
For homeowners, refinancing your mortgage could help lower monthly payments. Securing a lower interest rate can significantly reduce your long-term housing costs.
3. Use Public Transportation
If you live in a city with reliable public transit, switching from a personal vehicle to public transportation can save you thousands in gas, insurance, and maintenance costs.
4. Negotiate with Service Providers
Many internet, cable, and phone companies offer promotional rates or loyalty discounts. Compare prices from competing providers and ask if your current provider will match or beat a competitor’s offer.
5. Consider Relocating
Moving to a more affordable state can dramatically reduce your cost of living. States with no income tax, such as Texas or Nevada, allow you to keep more of your earnings while enjoying a lower overall cost of living.
Where Should You Live?
Your location plays a crucial role in determining your financial well-being. While high-cost states offer job opportunities and amenities, they can also strain your budget. On the other hand, affordable states provide financial relief but may have fewer employment options.
If you’re struggling with rising costs, consider the strategies above to reduce expenses or explore relocating to a more budget-friendly state. Understanding these cost-of-living differences will help you make informed decisions that align with your financial goals.