Identifying countries with the lowest cost of living is imprecise as prices and economies fluctuate. Historically, the lowest living costs are found in the developing world, but there is usually not much opportunity for income growth. Countries with higher standard wages also have high living costs. The cost of living is best understood in context, and many of the lowest-ranked countries are also some of the poorest and most unstable. Visitors and vacationers from countries with higher living costs often choose to vacation in countries with lower living costs. The cost of living is how much money it takes to afford basic necessities, especially food and shelter. In most cases, the calculation does not take into account the local economy and factors such as income potential or political stability. In the west, the cost of living tends to be higher in Northern Europe, especially Scandinavia, and Japan.
Identifying the countries with the lowest cost of living is imprecise science, as prices rise and fall and economies boom and bust; a country with a high cost of living one year may have a relatively low the next. Historically, the lowest living costs are found in what is known as the “developing world,” in regions such as sub-Saharan Africa, Central America and Southeast Asia. It is often not expensive to live in countries in these places, but at the same time there is also usually not much opportunity for income or wage growth. In many cases, countries with higher standard wages also have generally high living costs. The United States and Canada, Australia and much of Western Europe fall into this category. Cost of living is usually best understood in context, since many of the lowest-ranked countries are also, though not necessarily always, some of the poorest and most unstable.
General examples
India and Pakistan traditionally have some of the lowest costs of living in the world, but much of this depends on the region. In most cases, national averages are just that: averages that can be different in dense cities than in rural areas. Several African countries, including Algeria, Egypt and Morocco, also typically score relatively low when it comes to cost-of-living indexation.
In South America, the country with the lowest cost of living is traditionally Bolivia. Bolivia is one of the poorest countries in the region, and is widely divided between indigenous peoples who make up the majority of the population and a wealthy elite who have, at least historically, controlled political life and the economy. The country has experienced several political crises, most related to the control of natural gas reserves, which are one of Bolivia’s few natural resources. These conflicts and the general instability of the country as a whole have likely contributed to its relatively low cost of living.
Nicaragua, which experienced considerable political turmoil in the 1980s, has enjoyed increased economic growth since the 1990 peace deal, and the tourism industry has rebounded. The Marshall Islands, likewise, offer warm temperatures, sandy beaches and waters ideal for fishing and scuba diving. Many of the islands were used for nuclear tests by the United States in the 1940s and 1950s when the country was occupied by the United States, and some areas are still contaminated; however, the region has been trying to retool itself as a tourist destination where luxuries aren’t as expensive as they might be elsewhere.
Visitors and vacationers
People from countries with relatively higher living costs often choose to vacation in countries like these to take advantage of the generally strong exchange rate and purchasing power, and people sometimes retire to these places with a similar logic. Simply moving around during working years can be a challenge, unless a person has a job that can be done remotely or is self-sufficient, as in most cases local salaries are adjusted to the local cost of living.
Cost of living basics
Cost of living is how much money it takes to afford basic necessities, especially food and shelter. Different industry groups have devised various ways to calculate the exact rankings, but in most cases the largest factors are the costs associated with certain standard food items, such as bread and milk, and the costs of renting or owning land necessary to house a moderate -big family. The purchasing power of the local currency is important, as is the cost of basic services such as electricity, medical care and taxes owed. The idea is to get a basic figure of what it costs for a person or a family to live, not necessarily for them to live in comfort or luxury, but rather for them to simply exist and have what they need to survive.
Why are some numbers low?
In most cases the calculation does not take into account the local economy and usually does not take into account factors such as income potential or political stability. As a result, many of the countries considered to have low cost of living also have relatively low living standards and many are quite impoverished.
In other words, having a low cost of living doesn’t necessarily mean that a country would be a good place to live or visit. Even those countries that are relatively peaceful often have poor infrastructure, such as a lack of paved roads or regular supplies of electricity, and limited access to services, including medical care. In many cases, the cost of living is low due to high unemployment and an uncertain economy.
In the west
Globally, the cost of living tends to be higher in Northern Europe, especially Scandinavia, and Japan; the US, Canada and Australia are usually not far behind. It is important to keep in mind, however, that in many cases this high cost represents a large number of services available for free or at a drastically reduced cost. This may include government-sponsored welfare services and benefits.
Much also depends on the precise location. The cost of living in the United States, for example, is on average lower than many might expect, but many large cities, especially New York and Los Angeles, have very high costs of living that in some cases even exceed their European counterparts . Location is an essential part of the calculation and the average figures say just that.
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