If you want to calculate your cost of living, there are a couple of steps you can take. First, write down your regular expenses, such as your rent or mortgage payment, food, utilities, and other recurring monthly bills. Then, divide these costs by twelve to get the average monthly cost. Divide that number by the number of months in a year, and you'll have your cost of living estimate. Then, look at your budget and see where you can cut costs.Most cost of living indexes use a sampling of goods and services from around the country to determine what a person's expenses should be. For example, a gallon of milk may not be much in comparison to a new dress. Over the course of a year, food and clothing would likely cost more, and so on. The indexes also consider the relative importance of different products and services to a typical family.In addition to housing, the cost of daily life can be significantly affected by taxes. While housing is the most important factor, other everyday items like transportation, utilities, food, and healthcare can make a difference to your budget. Experts caution against relying on cost of living indexes because they often ignore taxes. Even though a specific city's tax rate is similar to another city's, these additional taxes can have a dramatic impact on your budget.