What is a Cost of Living Index? A Cost of Living Index is a numeric score that compares typical expenses (rent, groceries, transport, utilities) across cities or countries, usually benchmarked against a reference city set at 100, to make relocation and Geo-Arbitrage decisions comparable at a glance. A city scoring 60 is roughly 40% cheaper than the reference city; a city scoring 130 is roughly 30% more expensive.
Worked example: if a reference city sits at 100, and a nomad hub scores 45, then $4,000/month of expenses at the reference city roughly maps to $1,800/month for an equivalent lifestyle in that city (4,000 × 0.45). This is a simplification, individual spending categories (rent versus food versus healthcare) can vary independently, so the index is a planning tool, not a precise budget.
| Index score | Relative cost vs. reference city |
|---|---|
| 40-60 | Significantly cheaper |
| 70-90 | Moderately cheaper |
| 100 | Reference city |
| 110+ | More expensive |
Cost of living indices vary by data source and methodology, some weight rent heavily, others emphasize groceries or healthcare, so comparing across index providers is unreliable. Used consistently within a single source, a cost of living index is one of the fastest ways to shortlist Geo-Arbitrage or Expat FIRE destinations before doing detailed line-item budgeting.