Factors that affect the cost of living rate include grocery expenses, housing costs, utilities, transportation and health care, according to CNN Money. Inflation has an impact on cost of living rates, states the Social Security Administration. Inflation becomes a factor that varies by year and location.
The American Institute for Economic Research calculates price increases on common living necessities, including fuel, food and prescription drugs. It calculates this cost of living rate by comparing current costs to previous years and determines the rate of inflation based on these differences. The higher the rate of inflation, the higher the cost of living for residents.
CNN Money uses data from the average cost of items based on city. Its online calculator compares how far a user's salary goes from one city to another based on the cost of living rate in each city. The calculator requires information about current salary, current residence and desired residence.
Accurate cost of living rates take into account food used at home as well as in restaurants, explains the Social Security Administration. Housing includes rental properties, shelter or equivalent house ownership costs. Medical care includes medical appointments and insurance costs. The Social Security Administration uses annual clothing costs, recreational activities and college tuition as additional factors to calculate the cost of living rate.