Budgeting and the most common cost-of-living expenses

There are basic costs that are a part of everyday life—things like rent, bills, health care and groceries. These expenses are known as the cost of living. But how do you keep up as the cost of living changes from year to year and from place to place? And how are cost-of-living expenses calculated? 

Understanding how cost-of-living expenses relate to you may help you budget and plan for the future. If you know where your money will go each month, you can make more informed decisions about spending and saving—and be better prepared for the unexpected.

Basic cost-of-living expenses include housing, food, transportation, child care, health care and other necessities, according to the Economic Policy Institute. 

Cost-of-living expenses can vary from person to person because of factors like lifestyle and family size. For example, commuting costs could vary based on your job and how you get to work. The bigger your home, the more you may pay for things like heating and air conditioning. And having to provide for kids could increase costs in a number of different ways.

Cost-of-living estimates can also vary depending on which data is referenced, which standard-of-living measure is considered and how everything is calculated. 

Cost-of-living expenses are usually calculated based on data and estimates from official sources—agencies like the U.S. Food and Drug Administration and the Department of Housing and Urban Development. By adding up the cost of essentials, you can better calculate your potential cost of living.

The Economic Policy Institute developed a cost-of-living expenses calculator that does the math for you. It’s meant to provide a snapshot of how much money it takes to maintain a “modest, yet adequate” lifestyle. You can use it to see if your expenses align with averages in your area—or to get a better idea of what to expect if you’re planning a move or thinking about growing your family.

When analyzing cost-of-living expenses, one big consideration is housing. Rent or mortgage payments, utility costs, property taxes, homeowners association fees and household maintenance are all common housing costs.

Housing costs can vary widely between cities. So money may not go as far in a big city as it would in a small town. Your living situation could also affect things. Do you live by yourself? Or do you have a roommate or partner? The cost of living on your own could be more expensive if you don’t have someone to split bills with.

How close you are to a grocery store could also affect your budget. And the type of store that’s closest to you could make a difference, too. 

Smaller grocery stores may have higher prices than supermarkets because they may not be able to buy in bulk. And if it’s the only store in the area, it may not need to offer competitive prices.

In some places, you may run into food deserts—areas that don’t have access to affordable, nutritious food. That can make it harder to maintain a healthy diet, and it can make the cost of living more expensive too.

Family expenses like day care or school tuition are also costs to consider. If you don’t have family or friends to look after your little one while you’re at work, paying for a nanny or day care can be costly. 

Child care costs vary depending on children’s ages and needs. Small babies require more hands-on attention, so infant care tends to be more expensive. And just like housing, child care costs vary by location. 

For example, the Economic Policy Institute says Washington, D.C., has the most expensive child care in the nation, with infant care averaging more than $2,000 per month. Mississippi, on the other hand, has the lowest average in the country at just $453 a month.

Depending on your age, health, family size and whether your employer provides health insurance as a benefit, health care might be one of the larger expenses in your overall cost of living. 

In recent years, the cost of care has been on the rise. Hospital mergers and consolidations have been found to increase the price of hospital services by 6%-18%. In addition to driving up prices, it’s also been shown to affect the quality and availability of care, especially in rural areas.

You might be able to lower your health care costs by shopping around and comparing rates for health insurance and care providers. 

According to Consumer Reports®, if you purchase your own health insurance, costs could vary largely based on where you live. And if you get coverage through your employer, consider how those benefits affect your bottom line. For example, changes to the plans offered by your employer might impact your individual contributions and end up costing you more.

Transportation costs can vary depending on where you live and how you get to work. The U.S. Census Bureau reports the average American spends about 27 minutes commuting to work every day. If you drive to work, the cost of gas and car maintenance could quickly add up. 

Public transportation offers cheaper, more sustainable commuting options—not to mention some additional time to read or rest your eyes. If you’re looking to lower your transportation costs, you might explore bus and train routes if they’re available. And some employers even offer transportation subsidies.

And if you’re really looking to limit your commuter costs, you could investigate whether you’re able to walk or bike to work. Or ask your employer if working remotely is a possibility.

As you look at your cost of living, there are also miscellaneous expenses to keep in mind—things like household supplies, clothing and taxes. Even if you don’t see these costs every month—like you do a water bill—they still factor into your overall cost of living.

If you have children, you’ll also want to factor in one-off expenses related to their education. This might include classroom supplies or school uniforms.

Whether you’re planning a move, considering a lifestyle change or just trying to better manage your money, keeping up with the cost of living can be challenging. But knowing what to expect can help you plan and prepare. And if you need a few more pointers, Capital One has tips about budgeting with a credit card.

You could also check to see if there’s a Capital One Café in your area. Café Ambassadors are available to talk to you about products and resources to help you manage your finances, plan for the future and navigate the unexpected.

Capital One also offers the Money & Life Program. It’s designed to help people connect their goals with positive financial behaviors. And it’s free for everyone—whether you bank with Capital One or not. Check out the video below to see how the program helped one woman adapt her money habits after she made a move to a new city.