"Cost of living is 20% higher in the new city" is one of those numbers that sounds precise and is frequently misread. Is that 20 percentage points on some index, or a 20% percent change from the baseline city's cost? The two mean very different things for your actual budget, and most relocation calculators don't spell out which one they're showing you.
Step 1: Understand What the Index Number Actually Represents
Most cost of living comparisons use an index where one city is set to 100 and every other city is scored relative to it. If your current city scores 100 and the new city scores 120, that's usually described as "20% higher," and in this case it genuinely is a percent change, because the index itself is built as a ratio, not a raw percentage. The confusion creeps in when people start treating index-point differences (a 20 point gap) as interchangeable with percent change (a 20% relative difference), which happens to align here but won't always.
The alignment only holds because the baseline city happens to be set at exactly 100. Compare two non-baseline cities directly, say one scoring 115 and another scoring 138, and the raw point gap (23) and the percent change ((138 minus 115) divided by 115, which is about 20%) diverge again, the same way they do with any other pair of percentages. Always check which two numbers a "cost of living is X% higher" claim is actually comparing before trusting the headline figure. There's a longer explainer on percentage points versus percent change if this general distinction is new to you, since it shows up well beyond just relocation math.
Step 2: Pull the Category Breakdown, Not Just the Headline Number
A single overall index number hides enormous variation underneath it. Housing might be 40% higher in the new city while groceries are only 5% higher and healthcare is roughly the same. If your spending doesn't match the "average basket" the index assumes, your personal cost of living difference could be meaningfully higher or lower than the headline number suggests. The Bureau of Labor Statistics publishes regional price parity data broken out by category if you want to see how components move independently of the overall index.
This category-level view matters most for remote workers weighing a move for lifestyle reasons rather than a job requirement. If you don't drive, transportation cost differences between cities are close to irrelevant to your actual budget, even if they're a significant chunk of the overall index. Pulling the category breakdown and zeroing out or down-weighting categories you don't spend much in gets you a far more honest number than the single headline percentage. The Wikipedia entry on cost of living covers how these indexes are generally constructed if you want the underlying methodology before trusting any single number.
Step 3: Adjust the Number for Your Actual Spending Mix
Once you have the category breakdown, weight it by how you actually spend, not by the generic basket the index assumes. If you rent instead of own, if you don't drive, or if a big share of your budget goes to something the average household doesn't prioritize, your real percent difference in cost of living will diverge from the published index. This step is tedious by hand but changes the answer meaningfully for anyone whose spending doesn't look like the average household.
Step 4: Convert the Percentage Into an Actual Salary Number
A cost of living percentage is only useful once it's translated into real dollars against your specific income. If your current salary is $70,000 and the new city runs 20% higher on cost of living, you'd need roughly $84,000 in the new city just to maintain the same purchasing power, not counting any change in take-home pay from a different state's tax rules. The U.S. Census Bureau publishes regional income data that's useful for sanity-checking whether a salary offer is actually competitive for the area, beyond just the cost of living adjustment itself.
Don't stop at the equivalent salary number either. State and local income tax differences can swing your actual take-home pay by a few percentage points on their own, independent of the cost of living index entirely. A city with a slightly higher cost of living but no state income tax can still leave you with more spendable income than a slightly cheaper city with a high state tax rate, which is a comparison the cost of living index alone won't surface for you.
Step 5: Run the Numbers With a Calculator Instead of Estimating
Doing this by hand across multiple spending categories is exactly the kind of repetitive math a calculator handles better than mental estimation. A Cost of Living Calculator lets you compare two cities directly and see the equivalent salary you'd need, without manually re-weighting index categories yourself.
Why the Percentage Point Distinction Still Matters Here
Even with a clean index number, watch for reporting that mixes up a raw index point gap with a percent change, especially when comparing more than two cities or tracking how a single city's cost of living shifted over several years. The same percentage point versus percent change confusion that shows up in interest rates and raises applies just as directly to relocation math, and it's worth understanding the general distinction rather than re-deriving it every time you see a new city comparison. EvvyTools covers that exact distinction, with more everyday examples, in a longer explainer if you want the fuller picture.
If you're evaluating a job offer in a new city, checking the tools directory for salary and budget calculators alongside the cost of living tool gives you a fuller picture before you sign anything.
A Sanity Check Before You Decide
Once you've run the numbers, run one more gut check: does the resulting equivalent salary match what actual job postings in the new city are offering for your role? If the math says you'd need $84,000 to break even but the going market rate for your job in that city is closer to $75,000, that's important information the index calculation alone won't tell you, and it usually means the move involves a real pay cut in purchasing power regardless of what any cost of living calculator says. The index tells you what equivalent purchasing power costs; it doesn't tell you what the local job market will actually pay.
One More Thing Indexes Tend to Miss
Cost of living indexes are built around a fairly generic household spending pattern, and they rarely account well for one-time relocation costs: a security deposit and first/last month's rent in a pricier market, moving costs, temporary housing overlap if your lease dates don't line up, or a car you now need in a city that isn't walkable when your old city was. None of those show up in an ongoing cost of living percentage, but they hit your bank account the same month you move, and they're worth budgeting for separately from the ongoing salary comparison. A move that pencils out fine on paper over a full year can still be a rough few months if you haven't planned for the upfront cost of actually getting there.
For Remote Teams Setting Location-Based Pay
If you're on the other side of this, setting compensation bands for remote hires across different cities, the same category-weighted approach beats a flat index multiplier applied uniformly across every role. Two employees in the same "high cost of living" city can have very different actual cost of living exposure depending on whether they own or rent, and whether their household matches the index's assumed spending mix. A defensible pay policy accounts for that variance rather than treating every resident of a given metro area as financially identical.
Bringing It All Together
The steps above take longer than reading a single "X% higher cost of living" headline, but the headline number is a starting point, not an answer. Between the index-versus-percent-change distinction, the category weighting adjustment, the tax rate difference, and the one-time relocation costs, the honest answer to "can I afford to move here" usually looks meaningfully different from the number a quick search first suggests. Running your own numbers once, carefully, beats trusting a generic index every time you're weighing a real decision this size.
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