The cost of living is calculated by taking the average cost of living in all the states of the United States. This average is taken as the base and considered as 100. Each state is then assigned an index and this index is compared with the base. An index above 100 indicates that the state is more expensive than most states and an index less than 100 indicates otherwise. The cost of living in North Dakota is 89. This indicates that it is cheaper to live in North Dakota than most other states. Transportation and housing are the biggest factors contributing to bringing this index down.