Explainer
What a Cost of Living Index Number Actually Tells You (and What It Doesn't)
A cost of living index score is a basket-price comparison against a benchmark city, not a verdict on whether you can afford to live there. Here is how to read it, and what it misses.
Updated November 6, 2026 · Based on 12 sources · How we research
If you have seen a city's cost of living listed as 185 and taken that as a verdict on whether it is affordable, this guide is for you. The number does not mean what most people think it means. It is a basket-price comparison against a benchmark city, not a test of your income, and treating it as one is how people end up calling Singapore 'impossible' while nearly six million residents get on with their lives. This piece walks through what the index measures, what it leaves out, and how to turn it into something useful when you are deciding where to live.
A '185' is a price comparison, not a verdict
The number is a ratio. Nearly every major cost of living index, including the widely cited one from Numbeo, sets New York City at 100 and scales every other city against it. A score of 185 means the measured basket in that city costs roughly 85% more than the same basket in New York. A score of 42 means it costs roughly 58% less. In the RankGrids best cities ranking, Singapore and Zurich both read 185, Copenhagen reads 142, Kyoto 95, and Medellín 42. Those are points on the same scale.
The 'basket' is the part people skip past. Numbeo's methodology is explicit: the index is based on estimated average expenses for a four-person family, covering groceries, restaurants, transport, utilities, clothing and leisure, with rent handled as a separate index. Mercer's Cost of Living survey prices more than 200 items across 226 cities with New York as the base, and is designed primarily to set expatriate compensation. The EIU Worldwide Cost of Living prices more than 200 products and services across 173 cities, also benchmarked and also built around an expat profile. None of these indices include wages. They tell you what things cost, not what you can afford.
Why Singapore reads expensive and 5.9 million people live there anyway
Singapore is one of the most expensive cities in global rankings, and nearly six million residents live, work and raise families there. The reason that is not a contradiction is that the index prices a basket, and the people in it earn salaries. The median gross monthly salary in Singapore stood at around S$5,775 in 2025, per SmartWealth's Singapore salary data, with pay peaking around S$7,800 a month for workers aged 40 to 44. The RankGrids Singapore profile lists a median household income of US$78,400, denominated in the same currency that pays for the hawker lunch, the HDB rent and the MRT fare.
The other half of the explanation is what the basket actually prices. As the Singapore Global Network notes, the EIU survey excludes goods from local markets, bazaars and online marketplaces, and weights items like golf fees and seasonal clothing that most residents never buy. Hawker meals average S$2 to S$8, and most locals rely on public transport rather than the cars the index prices. The score is correct on its own terms, and also a poor fit for how a local household actually spends.
Cost of living index and average rent answer different questions
These are two numbers with two different jobs. The cost of living index is a composite comparing a whole basket of goods and services against a benchmark. Average rent is one line item, expressed in actual dollars per month. Numbeo even splits its own numbers: a Cost of Living Index (excluding rent), a separate Rent Index, and a Combined 'Plus Rent' index. Treating the composite as if it were a rent figure, or vice versa, will mislead you.
Use rent for the housing decision and the index for the broader comparison. The RankGrids data makes this concrete. Singapore and Zurich both read 185 on the composite, but Singapore's average rent is $3,200 and Zurich's is $4,200. If you are choosing between them for a family move, the roughly 31% rent gap matters far more than the identical composite score. One warning: city-level rent averages smooth over wide neighborhood variance. Pull real listings in the actual neighborhood you are targeting before you treat an average as yours.
| City | RankGrids COL Index | Avg Rent (USD) | Median Income (USD) |
|---|---|---|---|
| Singapore | 185 | $3,200 | $78,400 |
| Zurich | 185 | $4,200 | $95,000 |
| Copenhagen | 142 | $2,800 | $85,000 |
| Melbourne | 115 | $2,800 | $68,000 |
| Kyoto | 95 | $1,200 | $45,200 |
| Valencia | 68 | $950 | $28,500 |
| Krakow | 52 | $750 | $14,200 |
| Medellín | 42 | $450 | $8,500 |
How to tell if a city is actually affordable for your income
Skip the index for this question and do the math on your situation. The useful test is: take your expected after-tax income in local currency, subtract a realistic basket of local costs (rent in your target neighborhood, transport, groceries, healthcare, taxes you will pay as a resident), and see what is left. The two common shortcuts are the 30% rule, where rent should stay under 30% of gross income, and the 50/30/20 framework, which caps needs at 50% of net income, wants at 30%, and saves 20%.
Both shortcuts strain in high-cost cities. Earnest's analysis of the 30% rule argues the guideline often does not fit renters in cities like New York, San Francisco and Boston, where rent regularly runs well above 30% of income. In Zurich, Eurosalary lists an average gross salary of around €105,000 a year, which still gets chewed through by $4,200 rent, mandatory health insurance and higher day-to-day prices. The index number does not tell you any of that. Your own line-by-line budget does.
A low cost of living index does not mean 'cheaper for you'
This is the trap. Medellín reads 42 on the RankGrids composite, roughly 58% below New York. For a US-based remote worker earning $4,000 a month in dollars, that is extraordinary leverage: a one-bedroom in El Poblado runs $550 to $700 per month per getwherenext's Colombia data, and groceries, transport and healthcare scale down similarly. The index number and your income are in different currencies, pointing in your favor.
For someone earning a local Medellín wage, the same city is not cheap. Nomads.com reports a local income level around $700 a month. Rent at $450 is nearly two-thirds of that. The index score and local wages fell together, because that is what 'cost of living' means in a closed economy: prices adjust to what people there earn and pay. The same logic applies to Krakow, with its index of 52 and median income of $14,200, and to Da Nang at 45. These cities are a bargain to foreign income and a normal-to-tight local economy for people working local jobs.
Wages are left out on purpose, and Numbeo has a separate index that puts them back
Omitting wages is deliberate. Cost of living indices from Mercer, the EIU and Numbeo were designed as price comparators, used by multinationals to set expat allowances and by relocating professionals to anticipate price shock. The input is prices. Adding wages would blur what the index is for.
If you want an affordability number, Numbeo publishes one: the Local Purchasing Power Index. Per Numbeo's methodology page, the LPPI divides the average net salary in each city by the cost of the standard basket, then compares that ratio against New York. An LPPI of 100 means local workers on average salaries can afford the same basket as New Yorkers on average salaries. 200 means twice as much; 50 means half. Zurich's LPPI sits around 163, well above New York, because local salaries keep pace with high prices. Medellín's sits far lower, which matches the lived reality of local wages near $700 a month. If 'can people like me live well there' is your real question, this is the number to look up, not the headline Cost of Living Index.
Why Zurich can read 121 on one index and 185 on another
Numbers from different providers disagree, and that disagreement is methodology, not error. Numbeo currently lists Zurich at roughly 121 on its Cost of Living Index excluding rent, per the Numbeo Zurich page. The EIU Worldwide Cost of Living survey has named Singapore and Zurich joint most expensive cities in recent editions. The RankGrids composite lands both at 185. Each is internally consistent; they weight rent, imported goods and services differently, and some use crowdsourced data while others use curated expat baskets.
The useful habit is to look at the range across providers rather than fix on one number. If Numbeo, Mercer and the EIU all place a city near the top globally, that is a reliable signal the headline prices are high. If a single provider flags it as an outlier, dig into which basket they priced before changing your plans. And always pair the overall index with the actual rent and your expected local take-home, which is what the Singapore vs Zurich vs Copenhagen comparison is built to make easy.
The short version
A cost of living index is a tool with one job: comparing the price of a fixed basket between cities. It is not a measure of affordability and it is not interchangeable with average rent. Use it to see where a city sits on the global price ladder. Then look at three things the index cannot answer for you: the actual rent in your target neighborhood, your expected after-tax income in local currency, and the Local Purchasing Power Index if you plan to earn locally. A city with a score of 185 can be the right choice if your salary scales with the costs. A city with a score of 42 can be the wrong one if you are taking a local wage with it.
See Best Cities to Live in 2026Questions people ask
What does a cost of living index of 185 mean?+
It means the measured basket of goods and services in that city costs roughly 85% more than the same basket in the benchmark city, which is almost always New York (set at 100). It does not mean the city is 'unaffordable', and it is not an amount in dollars.
Why is Singapore listed as expensive but millions of people live there comfortably?+
The index prices an expat-style basket that does not match how local Singaporean households spend, and local wages rise with local prices. Singapore's 2025 median gross monthly salary was around S$5,775 per SmartWealth, which is a professional household income denominated in the same currency that pays the rent and the hawker bill.
Should I focus on cost of living index or average rent?+
Both, for different questions. Use average rent in your target neighborhood to gauge your largest monthly line item. Use the cost of living index to compare the overall price level between cities. They are not substitutes, and city-level rent averages smooth over big neighborhood differences.
How do I know if a city is actually affordable for my income?+
Take your expected after-tax income in that city's currency, subtract realistic rent in a specific neighborhood plus taxes, healthcare, transit and groceries, and see what is left. The 30% rule for rent and the 50/30/20 split for net income are useful starting points, though both strain in the most expensive cities.
Is a city with a low cost of living index always cheaper to live in?+
Only if your income comes from a higher-cost economy. Nomads.com reports a local income level in Medellín near $700 a month, so for someone on a local wage it is not 'cheap'. For a remote worker paid in dollars or euros, the same low index means real purchasing power.
Why do cost of living indices not factor in local wages?+
By design. Numbeo, Mercer and the EIU built their indices as price comparators for expats and relocating professionals, not affordability tests. Numbeo publishes a separate Local Purchasing Power Index that divides average net salary by the basket, which is the number that actually answers 'can locals afford this city'.
Why do Numbeo, Mercer and the EIU give different cost of living numbers for the same city?+
Different methodologies and baskets. Numbeo uses crowdsourced prices across a broad basket. Mercer and the EIU use curated baskets aimed at expatriate consumption, with different weightings for rent, imported goods and services. Look at the range across providers rather than fixating on a single number.
What is the Local Purchasing Power Index?+
A Numbeo index that compares the average net salary in a city against the cost of the local basket, then scales the ratio against New York (set at 100). An LPPI of 200 means the average local salary buys twice what a New York salary buys. It is the index closest to what people usually mean by 'affordability'.
Sources
What this guide is based on. We research from published specifications, independent reviews and owner reports; we did not test these products ourselves.
- 1.Methodology and Motivation (including Local Purchasing Power Index), Numbeo
- 2.Cost of Living in Zurich, Nov 2026, Numbeo
- 3.Cost of Living City Ranking, Mercer
- 4.Singapore remains world's most expensive city: EIU, The Edge Malaysia
- 5.Ranked: The 2026 Global Cost of Living Index, Visual Capitalist
- 6.Average Salary in Singapore: Median Income, SmartWealth
- 7.What Does It Really Cost to Live in Singapore, the World's 'Most Expensive' City?, Singapore Global Network
- 8.Average Salary in Zurich, Switzerland, Eurosalary
- 9.Cost of Living in Colombia 2026: Medellín and Bogotá, Get Where Next
- 10.Cost of Living in Medellín, Nomads.com
- 11.How Much Should I Spend on Rent?, Experian
- 12.How Much Should I Spend on Rent? Ignore the 30 Percent Rule, Earnest
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