How to Calculate the Cost of Living [And Stay Within Your Budget]

While money can buy you “stuff” and experiences, it’s also a necessity to be able to live in today’s world. 

What is the Cost of Living?

Your cost of living will include regular expenses such as transportation, utilities, gas, rent and food. It will also include other everyday items such as clothing, internet, entertainment, phone, insurance and car payments. 

Why understanding cost of living matters

Understanding your cost of living is important as an individual because it can help you create a budget, make better financial decisions, as well as calculate how much you’ll need to save for retirement. 

The 50/30/20 rule

This rule suggests that 50% of your income should cover necessities such as rent, utilities and food, 30% should be for “wants” such as clothes and eating out, and 20% should be your income saved.

How is Cost of Living Calculated?

Your cost of living is simply calculated by adding up all your monthly expenses. That number is how much it costs to live as you for a month in your given location. 

How Can You Lower Your Cost of Living?

The simple way to lower your overall cost of living is by: - Lowering your monthly expenses - Reducing your “wants” - Increasing your income

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