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What U.S. Cities Have the Lowest Cost of Living?

written by: Faith Oh•edited by: Jean Scheid•updated: 5/11/2011

Making a choice of where to live goes a long way in determining how far one's income goes and how comfortable one lives. Find out which city has the lowest cost of living rate and what expense breaks your budget the most.

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    Meeting all your costs Brenda, a single 26-year old lives in Newark Delaware and makes $35,000 as an administrative assistant. Stephanie lives in New York City and makes $40,000 a year at a similar job. They both are frugal and have similar spending patterns and values. At the end of the year, Brenda is able to save toward a down payment for the house she hopes to purchase while Stephanie barely covers her cost of living and is living from hand to mouth. This simplified example illustrates how where you live goes a long way in determining how far your pay check goes. But let's take a closer look at the finances of these two.

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    Housing: The Budget Buster

    Brenda's take home pay per month is $2,300 while Stephanie's is $2,650. They understand that they shouldn't spend more than 35 percent of their monthly income on housing, including rent, utilities and any maintenance costs. This leaves 65 percent of their income for all other expenses including, food, clothing, transportation, entertainment, and debt reduction. Both Stephanie and Brenda have some credit card and student loan debt. Going back to housing expenses, Stephanie cannot spend more than $928 on housing and Brenda not more than $805. For Brenda, this is no problem. She wants a reasonably-priced and comfortable one-bedroom apartment. She is able to find one for $550. She gets an all-inclusive Internet, cable and cell phone plan from a local phone company for $100, her electricity bill is on average $100, amounting to a total of $750, which is within her budget.

    Stephanie on the other hand would like a one-bedroom apartment but would never be able to afford it while living in New York City. Instead she is able to rent a house with a few friends in which she has her own bedroom but shares common living spaces such as the kitchen, living room, and bathrooms with four other people. All utilities are included and her share of the rent, which is $1,000. This is the cheapest she could find and it put her at $72 above budget and spending 38 percent of her income on housing. Therefore, she has to reduce her spending in other areas. After apportioning her income to other expenses, she has just enough to cover her costs and nothing saved for emergencies or to meet future purchase goals. If an emergency does come up, she would be forced to use her credit card and go further into debt.

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    Cities with the Lowest Living Costs

    If you are concerned like many people, about having your earnings go the furthest, then you are likely interested in which states and cities in the U.S. are the most affordable. Sperling compiles a list of the best places to live in the U.S. that is a result of detailed research using data from various government and non-governmental sources, including the Bureau of Labor Statistics' Consumer Price Index (CPI). Its cost of living tool compares cities on the basis of how much they deviate from the national average with an emphasis on such indicators as the cost of housing, food, transportation and clothing. You can compare any two cities with the tool. You can also search information for cost of living by city for any state and the District of Columbia.

    Kiplinger compiles a list of 367 of the best metropolitan areas to live in, using the cost of living index (CLI). The CLI calculation is based on a score of 100, which is the national average -- lower than 100 is low and higher than a 100 is high. The following are the cities with the lowest cost of living in the United States and their corresponding CLIs.

    1. Fort Smith, AR - 83
    2. Pueblo, CO - 83
    3. Hagerstown-Martinsburg, MD-WV - 84
    4. Tulsa, OK - 85
    5. Jonesboro, AR - 85

    These cities have the lowest cost of living because they have the lowest housing, transportation, clothing and food costs. For a detailed analysis of any two cities in the U.S., and to conduct a customized search, see Sperling's cost of living analysis tool.

    Image Credit (MorgueFile)