What Can a Dollar Buy? It Depends on Where You Live

Posted by Richard on October 13, 2016

You know that $25,000 car you’ve had your eye on? In just 10 years, it could cost almost $34,000, assuming prices rise by a mere 3% per year. That’s the reality of inflation, which is commonly understood as the increase in the price of any product or service.

While the consumer price index (CPI), which is based on a monthly survey by the U.S. Bureau of Labor Statistics, serves as the standard measure of inflation nationwide, prices on all sorts of goods and services — from a gallon of gasoline to a house — can vary widely by region, state, and even within states.

Such variations are captured by Regional Price Parities (RPPs), which measure the differences in the price levels of goods and services across states and metropolitan areas for a given year.1 RPPs are expressed as a percentage of the overall national price level (gleaned from the CPI) equal to 100.2

For instance, if an area’s RPP is greater than 100, it means that goods and services are more expensive than the national average; if an area’s RPP is less than 100, goods and services are less expensive than the national average.2

In July the Bureau of Economic Analysis published RPPs for 2014. The data showed that the District of Columbia’s RPP at 118.1 was greater than that of any state. States with the highest RPPs — and lowest “real value” of a dollar — were Hawaii (116.8), New York (115.7), New Jersey (114.5), and California (112.4).1 States with the lowest RPPs — hence, the biggest bang for your buck — were Mississippi (86.7), Arkansas (87.5), Alabama (87.8), South Dakota (88.0), and Kentucky (88.7).1

How do these price differences play out in real dollars and cents? The same gallon of regular gas that costs $2.74 in Hawaii might run you $1.82 in South Carolina.3 Or, viewed another way, if you had $100 to spend at a store offering a range of goods at national-average prices, in Hawaii, that $100 would feel more like $85.60, while in Mississippi the national-average $100 would be more like $115.30.3

The Bureau of Labor Statistics asserts that in areas where goods and services are more expensive, wages tend to follow suit — but that is not always the case.2

Be a Savvy Shopper — Wherever You Live

Regardless of where you live, consider some simple dollar-stretching tips.

  • Cut back on nickel-and-dime items. You might be surprised at how much you can save by reducing out-of-pocket expenses. Instead of indulging on a “designer” cup of coffee, purchase a regular coffee. The amount saved can add up fast.
  • Save on books, music, and movies. Visit your neighborhood library to check out books and music instead of purchasing your own.
  • Brown bag meals. Work days can be hectic, but instead of buying breakfast or lunch out, carry it in. If you spend $8 per day on lunch, you could free up $160 per month for your long-term financial goals.
  • Seek travel values. By traveling off-season or during the shoulder season — the periods just before or after the peak tourist season — you can receive discounted rates on lodging and airfares, which can cut your vacation expenses.
  • Practice energy efficiency. By turning the thermostat back in winter while you’re at work or sleeping, you can save on your heating bills. Same for the air conditioner in hot summer months.
  • Be creative. Can’t imagine skipping your daily trip to the vending machine? Don’t fret. The main point is to look for effective ways to stretch a dollar — and then do it. Over time, you might find that a little savings can make a big difference when it comes to funding your bigger ticket financial goals.


1The Bureau of Economic Analysis, news release, “Real Personal Income for States and Metropolitan Areas, 2014,” July 7, 2016.

2The Bureau of Labor Statistics, Monthly Labor Review, “Purchasing power: using wage statistics with regional price parities to create a standard for comparing wages across U.S. areas,” April 2016.

3The New York Times, “What $100 Can Buy State by State,” August 8, 2016.

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