Is the American Dream affordable? Analyzing the current cost of living in the U.S.

As the world changes at a rapid pace, so does "the American Dream". Many people aspire to own their homes, provide for their families, and achieve financial security. However, in recent years, the cost of living in the United States has undergone significant changes, raising concerns about the feasibility of this dream for many. This blog post delves into the current cost of living, examining various factors that contribute to the financial landscape Americans face today. Understanding the current situation, the general outlook, and identifying practical strategies for navigating and overcoming these challenges can help individuals and families make informed decisions. In November of last year, I posted an article on the cost of living in the US. I am not a certified financial expert but did a lot of research and provided facts and opinions from financial experts in that article, that I thought would be helpful to my readers. It was very well received, and many folks commented that they found the information useful. Cuts in interest rates by the Federal Reserve that I anticipated came true. Inflation slowed significantly, making it a little easier to finance a car, start a business, or handle the balance on your credit card(s). The stock market was strong. Fed chairman Jerome Powell said to reporters "The American Economy is in good shape." Unemployment rates dropped and a lot of companies were still hiring. This indicated that the administration's work to improve our cost of living was working. Personally, I was hopeful. Past tense.

Unfortunately, I have made a 180 degree turn with the new administration imposing trade tariffs on our long-time trading partners, which, if left in-place, will result in significantly higher costs to American consumers. The cost of most imported food products, lumber, raw manufacturing goods and such will increase as the countries impacted by the tariffs simply pass that additional expense to their customers - like us! Today, I was told that raw lumber coming from our friends in Canada could now increase the cost of framing new homes as much as 15%. Canadian power companies have now imposed a 25% surcharge which will be felt by American families, especially in New York, Michigan and Minnesota. In response to the new Canadian tariffs on electricity, President Trump said yesterday, that additional tariffs will be imposed on steal and aluminum coming into the US from Canada. That will not help our manufacturers or American consumers. Canada is now considering the complete shut-off of electricity to the US.

I have not heard anything from Columbia or Brazil on tariffs or supply disruptions so far, but nobody better screw with my coffee!!!

In addition to our tariffs being passed on to our own people, most countries have (or soon will) impose NEW tariffs on American goods being imported into their countries in retaliation. This has already started to hurt American businesses who, like the current stock market, are unsure of where this runaway train is heading. Hiring has started to slow, and unemployment has increased to 4.1%. This does not reflect the additional huge number of jobs lost (and many more expected) as a result of "DOGE" program initiatives supported by the current administration. The latest jobs report will be crucial for the Federal Reserve as it considers interest rate decisions amid these economic uncertainties. I do not believe another interest rate cut will be coming anytime soon. According to CBS News, Money Watch, Alain Sherter, March 7, 2025, Economists with Morgan Stanley Research report that they expect inflation in 2025 to rise 2.5%. Analysts at Goldman Sachs are expecting a rise of as much as 3%. As of this writing, inflation is at 2.8% and on a slow increase. If the tariffs remain in place, that increase will speed up significantly and I would not be surprised if we surpass that 3% mark. Many financial experts are warning of a recession.

Understanding the Cost of Living

The cost of living varies significantly across the U.S., influenced by such factors as geography, housing and job markets, and local economics. Historically, major urban centers such as New York, San Francisco, Boston, and Los Angeles, rank among the most expensive places to live. This can be seen in the useful chart provided by https://meric.mo.gov (excerpt below). Regardless of who produces it, all cost of living charts (or "indexes") start with a "Base Cost of Living", which is the average COL for an area - for our purposes, the US national average, expressed as "100" (as in 100%). If a state has a COL of "50", then the COL for that area is half the national average. If a state has a COL of "200", then living there could cost you twice the national average. Lets look at some examples:

Rank	State	Index	Grocery	Housing	Utilities	Transportation	Health	Misc.
1	West Virginia	84.1	99	59.9	96.6	93.1	97.7	90.2
2	Oklahoma	85.7	95.4	68.6	95.4	90.7	96.6	90.4
18	Nebraska	93.1	99.2	80	88.4	96.7	100	100.6
25	Wyoming	95.5	100.3	88.6	89.1	92.4	104.3	100.2
32	Puerto Rico	102	110	101.3	158	91.5	70.1	92.3
39	Maine	112.1	101.5	128.7	111	107.5	113.7	104.5
42	New Hampshire	112.6	99.9	117.5	112.4	105.6	104.1	117.1
44	Vermont	114.4	106.2	129.7	112.6	95.8	111.4	111.1
47	New York	123.3	103.9	168	99.7	106.8	108.9	106.9
48	Alaska	123.8	127.1	118	152.8	114.3	150	118.9
49	District of Columbia	141.9	105.8	222.4	102.6	107.7	117.4	113.3
50	California	144.8	111.7	208.7	139.8	136.7	107.7	115.3
51	Massachusetts	145.9	104.4	218.8	150	109.5	125.7	115.3
52	Hawaii	186.9	130.4	310	198	133.3	121.1	130.5

When we speak of "the cost of living", we refer to the amount you can expect to spend for the day-to-day necessities and still maintain a reasonably comfortable lifestyle. Just as expenses in a particular area of the country vary, so do salaries based largely on industry, demand for qualified individuals with specific skills, and local factors such as transportation and housing costs. It is often helpful, when considering salaries, to consider the total compensation package, including insurance coverages, possible housing credit or assistance, retirement programs or profit-sharing, and the value of other benefits.

Someone earning $50,000/Yr may have no problems meeting day-to-day expenses with enough money left in their pocket ("disposable income") to live very comfortably. The same person with the same salary would struggle just to get by in another area of the country. For example: You may triple your current income by going to Alaska, but what will you spend to stay warm?

Note: If you ARE actually considering moving, you can find a great tool for comparing your current location to the one(s) you are considering, at: https://www.nerdwallet.com/cost-of-living-calculator

Recent data has shown a sharp increase in costs across various sectors, particularly housing. According to reports, the median home price surged nearly 20% in the past year alone, making homeownership increasingly out of reach for many families. Such rapid increases can lead to a cascading effect, driving up rents and affecting the overall affordability of living in certain regions.

Housing Costs: A Major Contributor

Housing remains the most significant expense for most American families. In cities like San Francisco, New York, and Los Angeles, home prices have skyrocketed beyond what many consider reasonable. Even in smaller towns, housing prices have seen an uptick due to increased demand and limited supply.

As a response to these rising prices, many individuals and families are resorting to renting rather than buying. Unfortunately, rental prices have also risen dramatically. The average rent in major urban areas has increased by over 10% in just the last year, leaving many tenants feeling squeezed.

The high cost of housing often forces individuals to allocate a significant portion of their income—sometimes over 30%—towards housing alone, which experts commonly advise against for sustainable financial health.

The Grocery Bill: Eating Up Savings

Aside from housing, food is a substantial part of the monthly budget. Inflation over the past couple of years has significantly impacted grocery prices, with staples like eggs, milk, and bread showing substantial price increases. Reports suggest that grocery prices have risen by around 12% on average, driven by supply chain disruptions and increased demand during the pandemic. With the tariffs recently imposed, firing of USDA inspectors and likely staffing reductions by producers, this will get worse.

For families trying to eat healthy, these rising costs can derail budgets quickly. Many individuals are forced to compromise on quality or quantity, leading to tough choices about what to put on the dinner table.

Transportation: Commuting Costs

Transportation costs have also seen a rise, particularly in areas where commuting is necessary. The price of fuel shot up dramatically in recent months, leading to increased costs for both public transit and personal vehicles. For many individuals, the cost of commuting can consume a significant part of their budget—especially in cities with limited public transport options.

Moreover, car maintenance and insurance are also factors that contribute to the overall cost of living. As individuals try to navigate work and life obligations, rising transportation costs become an added financial burden.

Healthcare: The Ongoing Challenge

Healthcare is another critical aspect affecting the cost of living. Despite advancements in medical technology, healthcare costs in the U.S. continue to rise. Copays, deductibles, and the price of medications are often higher than many can afford. Some advancements made by the previous administration have now been rescinded and reduction of Medicare and Medicaid benefits are being considered.

For those without employer-sponsored health insurance, navigating the healthcare system can become a daunting task that results in exorbitant out-of-pocket expenses. Rising healthcare costs often force individuals to make tough choices about necessary medical treatments, impacting their overall quality of life.

Education Costs: Preparing for the Future

Education costs—both for younger children and higher education—can be staggering. The price of college tuition has increased at a faster rate than inflation, resulting in deep student debt for many graduates.

Furthermore, early childhood education and childcare services have also become incredibly pricey, leaving working parents struggling to find affordable options while juggling their careers and family responsibilities. These additional expenses can hinder long-term financial stability and wealth accumulation for families.

The current administration has expressed a desire to eliminate the US Department of Education and many positions. Politico reports that "Employees at the Department of Education were ordered to vacate the building by 6PM Tuesday ahead of a mass purge of nonpartisan career civil servants. Donald Trump and wrestling CEO/Education Secretary Linda McMahon plan to slash half the department, threatening special education and low-income schools, as well as access to higher education." While eliminating "fat" from any budget is a worthy goal, I do not see how this can end well for affordably and effectively educating our future generations. According to thebalancemoney.com, "The U.S. placed 16th out of 81 countries in science when testing was last administered in 2022." Reduced resources and investment in education will make education more expensive and make the US progressively less able to compete for high-tech jobs needed for any country's growth.

The Burden of Debt

In a society that values consumerism and instant gratification, many find themselves in a cycle of debt. With student loans, credit card bills, and personal loans, the burden of debt can make the dream of financial independence feel unattainable.

The current average American carries over $90,000 in personal debt, a grim statistic that reflects the struggles many face as they try to maintain a standard of living amidst rising costs.

Strategies for Adjusting to the Cost of Living

Amidst these rising costs, there are strategies that families can use to better cope with the current financial climate. Here are a few practical tips:

Debt Solutions

Debt can seem overwhelming. Consider exploring debt consolidation, negotiating with creditors, or seeking professional assistance to develop a structured repayment plan. By addressing your debts proactively, you pave the way for a more secure financial future.

[ Click on the blue banner below for information on an accredited debt solutions company. Recommended by Forbs. Member Better Business Bureau.]

Budgeting and Savings

Crafting a detailed budget and prioritizing savings are foundational steps in building financial resilience. There are a number of free and inexpensive budgeting Apps online. Sometimes it's easier to budget when you actually see and track your finances. I suggest checking them out and picking the one that you are most comfortable with using. Here is a great list compiled by fellow blogger, Jim Wang:

7 Best Absolutely Free Budgeting Apps for 2025

Even if it's only a couple bucks a week, try to put something into a high-yield savings account*. It's exciting to see it grow! Identify areas where expenses can be reduced, explore opportunities for additional income streams, [ See my article on 5 easy ways to make money from home ], and cultivate a habit of saving for future needs. Small changes in your financial habits can yield significant long-term benefits. 

One great opportunity to start saving is with a partnership of over 70 banks and credit unions, offering high-yield savings accounts, managed with a single log-in. You can even earn by referring your friends! Trustpilot rated 4.5 stars, ZERO FEES - Yup! FREE! Easy to start. It's called:

(Come-on, click on the logo and start saving now!)

Financial Education and Empowerment

Knowledge is a powerful tool in your journey towards financial stability. Invest in your financial literacy by seeking out educational resources, attending workshops, or consulting with financial advisors. Empower yourself with the skills and insights needed to make informed decisions and take control of your financial destiny. There are a ton of free financial courses and advisors available online. The National Foundation for Credit Counseling offers some good resources. In addition, if you have a bank account or retirement plan those organizations usually have FREE advisors available. A local social service agency may also be able to help you find a certified advisor or free course(s). NOTE: I am NOT a certified Financial Advisor, and the opinions expressed here (other than links to professionals, expert opinions, and facts obtained through my own research) are my own.

Other cost-cutting tips

You already know that store brands are generally less expensive, but don't forget to use coupons! There are a bunch of coupon websites in addition to neighborhood sales papers. It can take a little work but gets to be fun as you get better at it. Make it a game! Consider if warehouse stores such as BJ's or Sam's Club would be worth the investment for your family. Buying in bulk is sometimes handy for larger families but is sometimes NOT less expensive! Consider if you are saving money on a particular item or just buying more at the same price as your local grocer. Will your savings pay for the annual membership fee? If you are able, transfer credit card balances to another card offering an interest-free welcome period and pay it off (or as much as possible) before the welcome period expires. Loyalty clubs (for example: buy 6 sandwiches and earn a free one) can seem trivial but having enough of them for stuff you buy anyway, can be great.

If you have to spend on day-to-day essentials, why not join

and get some of your cash back?!? It's free to join. It does take a little time to accumulate, but I've received $100 checks from them for buying what I normally buy anyway! Car-pooling or public transportation might be worth considering. Need some exercise in good weather, how 'bout riding a bike or walking (if your Dr. agrees)? Roommates or friends/relatives might be in the same situation, and both of you might benefit from sharing housing costs. Gardening, whether a large backyard garden or small patio garden (in pots), can be a fun way to supplement with fresh veggies or fruit. (BTW - Food stamp/assistance such as SNAP programs can usually be used to buy seeds or food-producing plants.) Farm CoOps are available in most areas and can provide some savings, but may require you to buy more than some smaller families need.

Reduce energy usage whenever possible. (I just replaced several incandescent light bulbs with LED bulbs, dropping from 240 Watts to 18 Watts in a light that is usually on most of the day. Over time, that will be a savings.) They cost a bit more, but save you a lot and they last for many years!) Large screen TVs are notorious power-hogs. If you're not watching it, turn it off! Most utilities offer programs to help your energy efficiency. Even if a landlord covers that expense in your rent, excessive energy costs will eventually affect your rent ...and conservation is good for the earth!

Embracing the Unknown with Confidence

While the American Dream may be evolving, it remains possible for those committed to understanding and adapting to the current landscape. As you navigate the uncharted waters of the current cost of living in the US, remember that every challenge presents an opportunity for growth and transformation. By embracing uncertainty with confidence and resilience, you set the stage for a brighter financial future. Together, let's conquer the unknown and master the art of overcoming financial difficulties with courage and determination. Financial difficulties are stressful for everyone. If you are struggling or feeling overwhelmed, PLEASE don't hesitate to reach-out for help. Mental health is health like any other and there are many sources of support in your neighborhood (hospitals, clinics, social service agencies, churches, synagogues, temples, or just dial "211" from any phone in the U.S.) Bills are temporary and things DO get better.

In conclusion, the road to financial stability may be strewn with obstacles, but with perseverance, strategic planning, and a positive mindset, you can navigate the complexities of the cost of living in the US and emerge stronger than ever before.

Your financial well-being is within reach. Stay informed, stay empowered, and forge ahead with confidence on your journey towards financial success.