HCOL vs. LCOL: Which Cost of Living Area Is Better? – Pros & Cons

Do you live in an area with a high cost of living (HCOL) or one where you enjoy a low cost of living (LCOL)? What would you prefer for your money management needs? This article will explore the pros and cons: HCOL vs. LCOL.

Where you reside can significantly affect your financial situation and overall well-being. It’s a crucial decision often determined by factors such as education, job prospects, and personal circumstances. When making this decision, it’s important to consider various aspects such as inflation rates, wages, median income, and the cost of living differences in different areas. 

Home prices and the average household income should be considered, along with the cheapest places to live. The minimum wage can also play a role in this decision-making process. Ultimately, the decision of where to live should be based on a comprehensive analysis of all relevant factors to ensure the best possible quality of life.

Where you choose to live will strongly impact whether you can save money or how much you have to spend every month. These factors will deeply impact your financial planning and budgeting.

What Are HCOL and LCOL?

Generally speaking, the cost of living is the money you need to sustain a certain standard. The affordability criterion, in this instance, entails basic needs such as housing, healthcare, transportation, childcare, entertainment, utilities, groceries, miscellaneous expenses, and more. Check out the cost of living index in various states of the United States here

HCOL stands for the high cost of living. This acronym is generally used to refer to cities that have a higher cost of living. If the cost of living expenses is above the average rate, the area would be labeled an HCOL area. Most of the first world’s big cities or capitals are usually HCOLs. An example of an HCOL area is San Francisco, California, one of the most expensive cities in the U.S. 

LCOL stands for a low cost of living. The term refers to areas or cities with a lower-than-average cost of living. If the cost of living in a certain city or area is cheaper than average, it is called an LCOL area. Most LCOLs are in small cities, the suburbs, or rural areas.

For example, in Cleveland, Ohio, and U.S. 

Living in an LCOL area would result in lower living costs. However, it is important to understand that while expenses are important considerations, your monthly savings also depends on how much money you earn. Generally, LCOL areas offer lower incomes compared to HCOL areas. 

Here is a comparison of a few cities in the U.S. to give you a better picture of the differences in the cost of living across various regions in the country. Look at various items such as median home value, average monthly rent, gasoline and entertainment expenses, food costs, and expenses on basic utilities. 

Almost all of the values below have been derived from the current data available at Kiplinger, a Washington, D.C.-based publisher of business forecasts and personal finance advice, and Numbeo, the world’s largest cost of living database. 

CITY NAMEEXPENDITURE San Francisco, CAChicago, ILCleveland, OHMcAllen, Texas
Median house rent (two-bedroom apartment)$3,724$2,210$1,200$838
Median house price$1,306,400$513,821$146,000$107,500
Transportation costs– gas per liter



Food costs-a loaf of bread -a dozen eggs



Entertainment costs(Movie ticket)



Basic utilities-Electricity, heating, cooling, water, and garbage for an 85-sqm apartment 




Here are a few learning points: 

  • The cost of living in Chicago, IL, is 39% less than in San Francisco.
  • The cost of living in Cleveland, OH is 38.75% lower than in San Francisco.
  • Rents are 77.24% higher in San Francisco, CA. than in McAllen, TX. 
  • San Francisco is an HCOL city, while Chicago can be categorized as an MCOL area (medium cost of living). Cleveland is an LCOL area, but McAllen, TX has the lowest cost of living among the cities compared above.
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As the table shows, a comparatively LCOL area would not necessarily have a lower cost in all aspects. For instance, while the overall cost of living in Chicago is slightly higher than in Cleveland and McAllen, the cost of basic utilities is generally less in Chicago. Compare the living cost between 2 U.S.  cities with this online calculator to determine affordable places to spend less. 

Pros & Cons of Living in an HCOL vs. an LCOL Area

Let’s walk through the pros and cons of living in an HCOL vs. LCOL area to help you assess what would be a better option for you.

The Pros of Living in an HCOL Area: 

  • HCOL areas offer a better quality of life. The cities categorized as HCOL feature various amenities that can improve the quality of life; for instance, New York City can be considered far more advanced than others in the country for all it offers.
  • HCOL areas also offer jobs with a higher income. You can only have a good quality of life in an HCOL area if your income is considerably higher than your expenses. You can save and spend on better healthcare, education, and entertainment.
  • If you spend your working years in an HCOL area, you can afford to save enough for an investment portfolio or your own business to help you reach financial independence. Then, you can comfortably retire in an LCOL area, living off the money you have earned.

Cons of Living in an HCOL Area: 

  • The cost of living in HCOL is high, and unless you have a good household income, you will be unable to have a safety cushion that helps you live comfortably.
  • HCOL areas do not offer a higher income to everyone. If you do not have sufficient income to offset your living costs, you cannot live comfortably despite the amenities your city offers. 
  • A high-paying job, in most cases, is stressful, with a few exceptions. If you live in an HCOL area and work at a well-paying but demanding job, over time, it can cause many health issues for you, including stress, sleep issues, anxiety, etc.

Pros of Living in an LCOL Area: 

  • The first and most obvious advantage of living in LCOL is the lower cost. It means you won’t have to worry about covering your expenses from one month to the next, depending on your income. 
  • Alternatively, you can live in an LCOL and work a less stressful job. It may pay less but will be sufficient to meet your expenses.
  • If you had previously been living and earning in an HCOL area and considering moving to an LCOL area, your skill set that enabled you to earn well while living in the LCOL area would be intact regardless of where you move. So, you can be a geo-arbitrager and live in a lower-cost area while working in a higher-cost area to maximize your savings.
  • You have the potential to maintain your earnings and save more by moving to an LCOL area. Not only that but the moving estimates and quotes you’ll receive from professional movers are often lower.
  • Quality of life is not necessarily associated with the luxuries and amenities of a particular place. It is also tied to your social circle, relationships, and family ties. If you are part of a close-knit community and feel comfortable having familiar people in proximity, you are better off living in an LCOL area.

Cons of Living in an LCOL Area: 

  • LCOL areas rarely offer very high-paying jobs. Therefore, even if the cost of living is less, you might be unable to save if you do not earn well.
  • Living away from an HCOL area can also mean a lack of facilities. If you previously lived in an HCOL area and moved to an LCOL area, you might miss eating out if you do not have good restaurants or shopping malls within reach.

Things to Consider When Deciding Which Area is Best For You

As you can see from the above comparison, it is not only the cost of living that must be considered when choosing where to live. There are various factors at play, financial and personal, and if you do not consider all of them while deciding where to stay, you may end up making a decision you might regret later. 

Here are a few things you must consider when determining which area suits your circumstances and preferences:

  • Financial Aspects: Monthly or Yearly Income, Taxes, and Cost of Living

In an earlier section, we provided a detailed breakdown of the cost of living for living in an HCOL and LCOL area. You can easily gather data to compare the living expenses in the 2 areas you are considering. 

At the same time, you must also focus on the amount of money you will bring home each month minus the taxes when determining your estimated income and expenses.

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  • Personal Aspects: Quality of Life, Social Circle, and Proximity to Friends and Family

While your paycheck is important, it is not the only thing to consider. What is the point of living in an LCOL or HCOL area if you are unhappy with your circumstances? Figure out what makes you happy. If it is being close to your near and dear ones, then that is what you must do to derive contentment and happiness. 

Unlike the financial aspects, personal factors are not easy to assess and quantify. They are subject to your circumstances and what you prefer. Consider the area’s prospects if you have a family or are interested in improving your education profile.

Examples of Best LCOL Places 

The Midwest and Southeast regions of the US have some of the best LCOL places. The most LCOL states are Texas, Ohio, South Dakota, and Idaho. 

To give you an idea about the cost of living in some of these states’ cities, here are more statistics from Kiplinger and Numbeo:

CITY NAMEEXPENDITUREOmaha, NebraskaJoplin, Missouri Topeka, KansasDecatur, Illinois
Median annual income$46,978$55,045$57,474$46,807
Median house rent (three bedroom apartment)



Median house price$239,900$179,900$154,800$110,800
Transportation costs– Gas per liter



Food costs-A loaf of bread -A dozen eggs



Entertainment costs-Movie ticket 



Basic utilities-Electricity, Heating, Cooling, Water, Garbage for 85m2 Apartment 




Tips if You Plan To Move to an LCOL Area

Before moving to an LCOL area, do the math of how it will impact your financial circumstances. You may also need to assess how it will affect your family and work situation. However, if moving means you can save more for your retirement, pay off your debts or be close to your family, then it makes complete sense.

In any case, relocating can be an overwhelming experience, and you need to be prepared to make the transition as smooth as possible. Here are a few helpful suggestions to nudge you toward relocating to an LCOL area:

  • Be careful when deciding where you want to move; it should further your personal and financial goals. Do thorough research on the cost of living and how the benefits of relocating outweigh the drawbacks, if any. While doing your calculations, also consider the cost of moving.
  • You may also need to assess your options in terms of your income. If moving to an LCOL area allows you to keep a job in a high LCOL area, there is nothing like it. Since the main financial goal of moving to an LCOL area is to increase net savings, you need to assess your circumstances carefully.
  • You also need to consider how the move will benefit you personally. If the new area is a step down from your current situation, some incentive must make relocation attractive. It could be anything from moving to a bigger house to being close to friends and family. 

Frequently Asked Questions (FAQs) – HCOL vs. LCOL

What Is HCOL? What Is LCOL?

HCOL refers to the high cost of living, and LCOL refers to the low cost of living.

Is It Advisable To Move to an LCOL Area?

If moving to an LCOL area means improving your financial and personal circumstances, it is certainly advisable. If you can increase your net savings, have a better quality of life, and improve your physical and mental health, you are better off living in an LCOL area.

What Is the Best LCOL Area in the World?

If we consider the entire world, Amsterdam, Netherlands, is one of the best places to live due to the lower cost of living. It also scores high on the livability and access aspects. 

Where Are the Best LCOL Areas?

Texas, Ohio, Idaho, and South Dakota have some of the best LCOL areas in the US.

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Conclusion – HCOL vs. LCOL

Your choice of places to live, impacts your finances significantly. While HCOL cities generally offer better income prospects, your expenses may also rise. 

Regardless of your choice, your financial well-being will depend on your spending habits, tracking and managing your finances, and practicing money smarts. Your standard of living, monthly budget, and financial life will always be tied together as you live out your life. 

In selecting a place to live, you need to consider and weigh many other factors and their importance in your life priorities and goals, which should be the basis of your decision. Find a middle ground on both financial and lifestyle considerations to determine the best choice for your financial empowerment and life satisfaction. 

May your choice bring you to your happy (and wealthy!) place.

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