Five years ago, it was my personal mission to become financially independent and move to Hawaii.
However, in order to achieve this mission, I first needed to answer one question:
What is the Cost of Living in Hawaii?
Being a data nerd, I searched through all the publicly available data in order to answer this question.
Let’s dive in.
What is Cost of Living?
Cost of living is the amount of money required to support basic lifestyle expenses.
Cost of living includes budget line items such as:
- Housing
- Food
- Clothing
- Childcare
- Healthcare
- Taxes
The minimum income required to support these basic lifestyle expenses is known as a living wage.
Where we choose to live has a huge influence on both cost of living and it’s corresponding living wage.
However, we can use both measures to estimate how much it would cost to live in Hawaii.
What is the Living Wage in Hawaii ?
The first method in estimating the potential cost of living in Hawaii is understanding what the living wage is.
Using MIT’s Living Wage Calculator, we can easily identify the living wage for each island as well as by specific family structure.
Here are some interesting statistics that stood out:
- The Island of Oahu has the highest average living wage at $36.11 / hour
- The Big Island has the lowest average living wage at $30.54 / hour
- The highest living wage in the state of Hawaii is $65.39 / hour on Oahu with a family structure of 1 working adult and 3 children
- The lowest living wage in the state of Hawaii is $13.65 / hour on the Big Island with a family structure of 2 working adults and 0 children
A comparison of our anticipated wages vs the living wage allows us to understand whether or not we can support our basic lifestyle expenses.
What is the Cost of Living Index for Hawaii?
The second method in estimating the potential cost of living in Hawaii is by using a cost of living index.
According to The Council for Community and Economic Research, the Q1 2021 cost of living index for Hawaii is 187.6.
This means that the average cost of living in Hawaii is 87.6% greater than the average cost of living in the United States.
Let’s see how Hawaii’s cost of living compares to other states:
Here is what stood out to me:
- Hawaii has the highest cost of living in the United States
- Despite D.C. having the second highest cost of living in the United States, it is still on average 32.9% less expensive then Hawaii!
- The cost of living indices for 22 states (+ D.C.) were greater than the national average
So what factors are driving the 87.6 % cost of living increase in Hawaii?
This should be no surprise.
- High housing costs can be attributed to a limited supply of housing as well as Hawaii being a desirable location (near perfect weather, great beaches, etc.)
- High utility costs are due to Hawaii importing the petroleum to run it’s electrical grid as well as for consumer transportation (60% of all imports to Hawaii is petroleum)
- High grocery costs can be attributed to the fact that 90% of all food is imported
With the overall cost of living index broken out by individual budget category, we can now estimate what our expenses would be in Hawaii.
Let’s look at an example using real data.
In 2019, 63% of the average American household’s spending was comprised of only three expenses: housing, transportation, and food. These expenses totaled $39,590.
Because the big 3 expenses are the bulk of our spending, we will only be looking at those line items.
So what does spending in these categories look like after an adjustment to Hawaii’s cost of living index?
Using Hawaii’s cost of living index, the average American household’s spending in the big 3 expenses would increase by 134%.
For the most part, leveraging a cost of living index can provide a rough estimate in understanding the cost of maintaining a similar lifestyle elsewhere.
Other Financial Factors to Consider
Median Household Income Distribution in Hawaii by Island
According to the U.S. Census Bureau, the median household income by island in 2019 was:
Median Home Prices & Property Taxes in Hawaii by Island
The most expensive real estate in the United States can be found in Hawaii.
Fortunately, Hawaii happens to have the lowest property taxes in the United States!
Using Smart Asset’s Property Tax Calculator, we can calculate the average effective property tax rate for each island:
Final Thoughts
Everyone has different expenses, different lifestyles.
There is no one-size-fits-all magical number.
Instead, we should make a data driven decision based on our own personal lifestyle choices.
Do you think living in Hawaii is worth it?
Thank you for reading! 🙂
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