States with the Lowest Cost of Living by Category

The United States may be one country, but there are variations in the cost of living from one state to the next, and they can be substantial. Not everyone can afford to pick up and leave the state they’re living in to go to one where the cost of living is lower. But if you are planning on an out-of-state move, to find a new job or perhaps in anticipation of retirement, the lower-cost states definitely are definitely worth checking out.

Lowest Overall Cost of Living

According to the most recent report from the Missouri Economic Research and Information Center, the 10 states with the lowest cost of living overall are as follows:

1. Tennessee
2. Oklahoma
3. Kentucky
4. Arkansas
5. Texas
6. Idaho
7. Indiana
8. Kansas
9. Nebraska
10. Utah

It’s important realize that the numbers that make these states the lowest cost places to live our general numbers. There are any number of variables that may or may not fit with your personal situation or goals. There may be certain expenses that are more important in your budget than others, and if that’s the case you may be better off looking at each state based on certain expenses that are more favorable to you.

Let’s take a look at some that may be more relevant.

Lowest Housing Prices

One of the single biggest expenses that matters to retirees or couples with children, is housing. A generally lower cost of living may not matter if house prices are beyond your reach. Below are the 10 states with the lowest housing prices:

1. Michigan, $114,000
2. Ohio, $129,000
3. Indiana, $130,000
4. Nebraska, $135,000
5. Iowa, $135,500
6. Nevada, $138,000
7. Arkansas, $140,000
8. Missouri, $142,900
9. Oklahoma, $144,900
10. Kansas, $144,900

You may not consider going to one of the lower cost states in search of less expensive housing if you are well employed where you live. But it might be a consideration if you’re planning to retire soon, or if you have a successful business that’s also completely portable.

Source: Statistic Brain.

Lowest Real Estate Taxes

Few expenses vary more widely between the states than real estate taxes. A property tax bill that’s over $10,000 on a property in a high tax state can be only $1,500 on a similar home in a low tax state.

Below are the 10 states with the lowest property tax rates:

1. Louisiana, 0.18%
2. Hawaii, 0.26%
3. Alabama, 0.33%
4. Delaware, 0.43%
5. West Virginia, 0.49%
6. South Carolina, 0.50%
7. Arkansas, 0.52%
8. Mississippi, 0.52%
9. New Mexico, 0.55%
10. Wyoming, 0.58%

Notice that Arkansas not only is among the states with the lowest real estate tax rates, but it’s also one of the 10 lowest states in housing prices too. Notice also that Hawaii is has the second lowest real estate tax rate in the country, but it also has the highest property values country.

Source: About.com Tax Planning: US.

Lowest Health Insurance Costs

The average healthcare premium in the US is $215 per person per month, but there is a wide variation in premiums between states. If you live in Massachusetts ($437), Vermont ($401) or New Jersey ($364), moving to a state with much lower health insurance premiums may be of more interest to you then simply going to a state with a generally lower cost of living.

A family of four in Massachusetts paying $1,748 per month ($437 per person) in health insurance premiums, would pay just $544 per month by relocating to Alabama (at $136 per person). That’s a savings of $1,204 per month, or $14,448 per year!

The ten states with the lowest health insurance premiums (per person, per month):

1. Alabama, $136
2. California, $157
3. Arkansas, $163
4. Idaho, $167
5. Delaware, $169
6. Utah, $173
7. Florida, $178
8. Montana, $191
9. Colorado, $194
10. Missouri, $197

Source: Kaiser Foundation StateHealthFacts.org.

Lowest Auto Insurance

If you live in Louisiana, Oklahoma, Michigan or West Virginia, where auto insurance averages over $2,000 per person per year, you may find states with the lowest auto insurance rates to be attractive. This will be especially true if you have multiple insured drivers in the family.

The ten states with the lowest annual auto insurance rates from Forbes.com:

1. Maine, $889
2. Iowa, $985
3. Wisconsin, $987
4. Idaho, $1,011
5. North Carolina, $1,022
6. Vermont, $1,063
7. Ohio, $1,099
8. South Carolina, $1,108
9. New Hampshire, $1,133
10. Arizona, $1,176

Auto insurance rates alone are probably not a compelling reason to choose to live in one state versus another, but all things being equal it could be a swing factor.

States with No State Income Tax

Seven states also have no state income taxes; they are:

1. Alaska
2. Florida
3. Nevada
4. South Dakota
5. Texas
6. Washington
7. Wyoming
8. Tennessee

The absence of a state income tax could be a significant factor if you have a high income. In states with high state income taxes, such as New York and California, the tax bite on a six-figure income can run in the many thousands of dollars each year. Moving to a state with no income tax could be a way to fix that problem.

States with No State Sales Tax

Since sales tax is not typically a major factor (unless you’re buying a brand-new car) this one is kind of a bonus. Five states impose no state sales tax:

1. Alaska
2. Delaware
3. Montana
4. New Hampshire
5. Oregon

Keep in mind that while the state itself may not have a statewide sales tax, counties and municipalities can impose them. Overall, the local sales tax will generally still be a good bit lower than what you will pay in a state that does have a statewide sales tax. Counties and municipalities can add their own sales tax on top of the statewide sales tax in those states as well.

If you’re considering relocating to another state to take advantage of the lower cost of living, it may be better if you use the general lists as a starting point only. Take a look at certain major expenses that impact your situation more heavily, and see where the biggest savings are. You may find yourself relocating to a state that isn’t necessarily one of the cheapest overall.

Kevin Mercadante

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut.