In this article, we will take a look at 20 of the cheapest states to live in the US. If you want to see some more of the cheapest states to live in the US, go directly to 5 Cheapest States To Live In The US.
The United States is a huge country with 50 different states. Given geographical and economical diversity, each state is different.
Some states are very expensive to live such as Hawaii where there isn't all that much land and real estate prices are high. Given real estate prices are high, the cost of many other services are high as well.
Other states, meanwhile, are pretty affordable to live such as Texas which has a huge land mass and bountiful energy resources. With cheaper energy, a lot of consumer products are also a little bit cheaper.
In terms of the difference in the cost of living between states, there can be a pretty wide gap between the top and the more affordable states. For Hawaii, for instance, the state had a cost of living that's more than twice as high as Texas according to the 2022 second quarter cost of living composite index. A big reason for the expensive costs to live was that housing which was over 3 times the national average in terms of the index.
Inflation
Source: Federal Reserve.
Inflation has been a problem recently. For September, the core consumer price index rose 6.6%, marking a 40 year high. Although the Federal Reserve has increased interest rates, the increase in rates will take time to take effect. According to a Bloomberg survey of economists October 7-12, core inflation is still expected to be 4.1% for the first quarter of 2023 and 3.3% for the third quarter of 2023 before falling to an expected 2.6% for the first quarter of 2024.
Although incomes could increase when there is inflation, not everyone's income rises as much as inflation. As a result, inflation could increase the cost of living.
Companies
Some companies make products or services that make life more affordable.
Retailers like Walmart Inc. (NYSE:WMT) have helped lower the price of products given their efficient distribution and scale. Wholesalers like Costco Wholesale Corporation (NASDAQ:COST) have helped pioneer bulk buying to lower costs further. Discounters like Dollar General Corporation (NYSE:DG) have also helped make some items very affordable as well.
In terms of tech companies, Amazon.com, Inc. (NASDAQ:AMZN) is making life more affordable by competing in logistics which could help lower distribution costs in the future. The company is also investing heavily in AI, machine learning, robotics, drones, and more to improve its logistics efficiency.
Lastly, tech giant Alphabet Inc. (NASDAQ:GOOG) is also helping make life more affordable by keeping the prices of its most popular products such as search and online videos free. Alphabet Inc. (NASDAQ:GOOG) is also investing in AI which could help one day pioneer technology that will lower prices in many different sectors.
In terms of their stocks, Walmart Inc. (NYSE:WMT) has fallen around 7% year to date versus the S&P 500's decline of around 22% as of 10/18. In terms of analyst commentary, recently Corey Tarlowe of Jefferies raised his price target on Walmart Inc. (NYSE:WMT) to $165 from $161 saying the company is well positioned in the environment given some higher income customers trading down. Tarlowe has a 'Buy' rating on Walmart Inc. (NYSE:WMT).
Of the 895 hedge funds in our database, 67 owned shares of Walmart Inc. (NYSE:WMT) at the end of Q2 2022.
Costco Wholesale Corporation (NASDAQ:COST) has declined about 17% year to date given the decline in the company's overall valuation multiple. If the broader market declines substantially, it's harder for individual companies like Costco Wholesale Corporation (NASDAQ:COST) to keep their original multiples unless the company outperforms by a fair margin. 64 hedge funds we track owned shares of Costco Wholesale Corporation (NASDAQ:COST) at the end of the second quarter. Among them, Fisher Asset Management held more than 4.3 million shares of Costco Wholesale Corporation (NASDAQ:COST).
Dollar General Corporation (NYSE:DG) shares have increased slightly by 0.75% year to date as of 10/18 as demand for lower priced products could rise in times of inflation. Although Dollar General Corporation (NYSE:DG) benefits from higher demand, the company's valuation multiple is also affected by the weaker broader stock market. 51 hedge funds in our database owned shares of Dollar General Corporation (NYSE:DG) at the end of the second quarter. Among them, Orbis Investment Management owned almost 1.6 million shares of Dollar General Corporation (NYSE:DG).
Dollar General Corp. (NYSE:DG), Logo, Car, Automobile, City, Cup, Bristol
Action Sports Photography / Shutterstock.com
Amazon.com, Inc. (NASDAQ:AMZN) shares are down about 30% year to date due to the broader market weakness. While it's stock is lower, there are still things to like about Amazon.com, Inc. (NASDAQ:AMZN). Polen Global Growth Fund commented on Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2022 investor letter earlier in year,
Amazon has done a terrific job managing through the pandemic, in our view. Many companies struggled to pivot their business model during COVID-19, which represented an existential threat. Amazon had the opposite problem – a surge in demand. The company leaned into this by entering an extremely heavy investment cycle, doubling its fulfillment network and headcount over the past two years. To put this into context, Amazon added 273,000 employees in the last half of 2021 on top of over 400,000 employees the prior year. The company has also made significant Capital Expenditures, adding IT infrastructure for AWS and transportation capacity during this period. This all took place in the face of inflation related to wage increases and higher pricing from third-party carriers supporting the company’s fulfillment network. These heavy investments paid off—AWS grew 40% year over year, reached a $71B annual run rate, and total company revenue posted a two-year annual compounded growth rate of 25%. We believe this heavy investment cycle, like Amazon’s previous ones, will continue to support ongoing growth and will further separate Amazon from its competition while also providing the ability to increase margins through economies of scale. With respect to the margins specifically, AWS and Advertising – two fast-growing businesses – continue to contribute greater operating earnings to the overall business. We believe management has done an excellent job managing through this period and that the company is even stronger today than when COVID-19 first began to spread around the world.
252 hedge funds in our database owned shares of Amazon.com, Inc. (NASDAQ:AMZN) at the end of Q2 2022.
Alphabet Inc. (NASDAQ:GOOG) is down about 30% year to date given the broader market decline. Nevertheless, there is potential for Alphabet Inc. (NASDAQ:GOOG) shares to go higher in the long term if the ad market rebounds and the company keeps innovating. Given Alphabet Inc. (NASDAQ:GOOG) has invested heavily in self driving cars, the company has a chance at gaining meaningful market share in a technology that could one day help lower transportation costs and also help increase profits. 153 hedge funds in our database owned shares of Alphabet Inc. (NASDAQ:GOOG) at the end of the second quarter.
Photo by Firmbee.com on Unsplash
Methodology
We used the composite cost of living index 2022 2nd quarter taken from the Missouri Economic Research and Information Center. Of the 50, we took the top 20 states. In terms of the composite index, the average is 100 for the states in the United States. The lower the composite index, the lower the living costs generally are.
20 Cheapest States To Live In The US
20. South Dakota
2022 Second Quarter Cost of Living Index: 93.8
South Dakota ranks #20 on our list of 20 Cheapest States To Live In The US given its 2022 Second Quarter Cost of Living Index of 93.8. Although grocery costs are slightly more expensive in South Dakota than the average state, housing and utilities are 9% and 10.7% lower, respectively. Given the sparse population in South Dakota, real estate is more affordable.
Pixabay/Public Domain
19. New Mexico
2022 Second Quarter Cost of Living Index: 93.6
New Mexico has a second quarter cost of living index of 93.6 given the state's cheaper housing and utilities. New Mexico also has plenty of land for the state's population which makes real estate more affordable.
Pixabay/Public Domain
18. Louisiana
2022 Second Quarter Cost of Living Index: 92.8
Louisiana ranks #18 on our list of 20 Cheapest States To Live In The US given its composite cost of living index of 92.8. One reason for the affordability is the state's index score of 86.9 for housing and 87.6 for utilities which mean the two are more affordable than the average state in the United States.
17. Ohio
2022 Second Quarter Cost of Living Index: 92
Ohio is one of the cheaper states to live given its 2022 second quarter cost of living index of 92. Although grocery and transportation costs are close to the national average, housing is over 21% cheaper. Healthcare costs are also slightly cheaper than the average in Ohio as well.
Although groceries are more expensive than average in Wyoming, the state has plenty of land and hence housing is almost 20% cheaper than the average. With the cheaper housing and also cheaper utilities, Wyoming has a 2022 Second Quarter Cost of Living Index of 91.8.
Pixabay/Public Domain
15. Michigan
2022 Second Quarter Cost of Living Index: 91.6
Michigan is one of the more affordable places to live in the United States given its 2022 Second Quarter Cost of Living Index of 91.6. Not only does the state have scenic beaches, but also the state's housing is almost 20% cheaper than the average.
michigan, lake, sunset, historical, lake michigan, lighthouse, sunrise, grand haven lighthouse, light, port, old, great lakes region, dusk, building
Larry Knupp/Shutterstock.com
14. Nebraska
2022 Second Quarter Cost of Living Index: 91.5
Nebraska ranks #14 on our list given its 2022 Second Quarter Cost of Living Index of 91.5. As a state with a population under 2 million but an area of over 77.3 million square miles, there is plenty of land in the state and the cost of housing is affordable with a score of 83.6 versus the average of 100.
13. Illinois
2022 Second Quarter Cost of Living Index: 91.4
Although Chicago might be more expensive than the average, Illinois as a whole is actually pretty affordable. In the second quarter of 2022, the state had a cost of living index of 91.4 given cheaper housing. Illinois also has cheaper utilities than the national average too.
12. Texas
2022 Second Quarter Cost of Living Index: 90.9
Texas isn't just one of the largest states in the United States and one of the few states without state income taxes, Texas is actually also one of the more affordable states given its 2022 Second Quarter Cost of Living Index of 90.9. Groceries, transportation and housing are all more affordable than the national average in Texas.
Texas
Photo by Jarritos Mexican Soda on Unsplash
11. Arkansas
2022 Second Quarter Cost of Living Index: 89.9
Arkansas is one of the more affordable states in the country with a 2022 Second Quarter Cost of Living Index of 89.9. One reason why is housing is more than 21% cheaper in Arkansas. Healthcare costs are also cheaper than the average in Arkansas.
10. Tennessee
2022 Second Quarter Cost of Living Index: 89.5
Tennessee ranks #10 on our list of 20 Cheapest States To Live In The US given its 2022 Second Quarter Cost of Living Index of 89.5. In terms of affordability, housing is about 20% below the average and transportation costs are also more affordable in Tennessee.
Memphis, Tennessee
Photo by Heidi Kaden on Unsplash
9. Iowa
2022 Second Quarter Cost of Living Index: 89.0
Iowa isn't just known for producing corn, the state is also one of the cheapest states to live in the United States given its second quarter cost of living index of 89. In addition to its beautiful scenery, Iowa has affordable housing with a score of 72 versus the average of 100.
Pixabay/Public domain
8. Indiana
2022 Second Quarter Cost of Living Index: 88.9
Indiana is another Midwestern state that's pretty affordable to live in with a second quarter cost of living index of 88.9. Although utilities are more expensive than the average, Indiana has a housing score of 77.3 versus the average of 100.
Fort Wayne, Indiana
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7. Missouri
2022 Second Quarter Cost of Living Index: 88.6
With a second quarter cost of living index of 88.6, Missouri is the 7th most affordable state to live in the United States. Housing is around 20% cheaper in Missouri while transportation costs are also below the national average.
6. West Virginia
2022 Second Quarter Cost of Living Index: 88.5
West Virginia ranks #6 on our list of 20 Cheapest States To Live In The US with a 2022 Second Quarter Cost of Living Index of 88.5. Although transpiration costs are higher than average, the state has a housing index score of 67.8 versus the average of 100.
