Is it better to work in DC making $100k or in Rochester making $80k? Strictly from the perspective of the cost of living, the answer is Rochester by a mile.

How do I know that? The Council for Community and Economic Research (C2ER) puts together an index to measure the relative cost of living from one place to another. If you’ve ever gone to city-data.com to research a town or area, they provide that cost of living index as part of the vast set of data they maintain.

What does the index mean?

As with any index, 100 always represents the average or typical value (as in 100% of the average). It has nothing to do with actual cost. Values less than 100 represent areas with a lower cost of living (90 means 90% of the average) and values greater than 100 have a higher cost (200 means twice the cost).

Though it isn’t a perfect measure, it is accurate enough to make a decision by and the data is gathered by real people providing inputs on all sorts of costs.

How do I use the index?

The easiest way is to just compare a prospective location to where you currently live. Back to our original question:

Prospect (Prince William County, VA): 133

Home (Livingston County, NY): 95

I would expect it to cost 133/95 or 40% more to live in the new place relative to where I currently live. If I am not offered $112k or better then I am effectively taking a pay cut by taking the job.

You said the index is not perfect; what should I watch out for?

Home prices. These are way inflated in urban areas. When comparing a rural area to an urban one, look at the average home price as well since this will constitute the largest single monthly expense. Staying with my example, the average home is $366k in Prince William County but only $126k in Livingston County. That could be the difference between a $800/month and $3000/month payment. In that case you may want to add another $20k to the relative cost for Virginia ($132k).

You made it to the end of the post!