Cost of Living

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Definition

Cost of living is the amount of money required to sustain a certain standard of living at place by affording the basic expenses such as food, housing, healthcare, transportation, etc. The cost of living is often used in order to know how expensive it is to live in one city compared to another one. Cost of living varies from place to place and from time to time, depending on the prices of goods and services required for maintaining an average level of standard of living.

The cost of living is related to wages; hence it can impact one’s choice in work, choice of city to live, ability to save money, pay off debts, having a child, time of retirement and so on.
Cost of living is usually measured by calculating the average cost of a number of specific goods and services required by a particular group of people.

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LAYMEN TERMS

The cost of food we buy, clothes we buy, rent we pay to live in house, bus or train fare we pay to travel in a bus or a train and other costs of things that we pay daily - all these things together is a person's cost of living.

HOW DOES THIS TERM APPLY TO YOU

Suppose you live in Toronto. You get a job in Montreal, and you want to take up this job and move there. However, before moving to Montreal, you would research about the various expenses etc., such as the rent, healthcare, food, clothing, transportation, taxes to find out the cost of living there. You would compare the cost of living for both the cities first and only if the salary is more in Montreal than Toronto you would move there. Hence, the cost of living is always connected to wages or salaries.

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