The cost of living is the amount of money it takes to attain a certain level of utility or a certain standard of living. A cost of living increase is the increase in the amount of money it takes to maintain a given standard of living. Cost of living increases are an important consideration for money managing and retirement planning, since it often takes more money to maintain a certain standard of living over time due to increases in prices.
Subtract the amount you calculated in Step 2 from the amount you calculated in Step 3. This is the increase in your monthly cost of living between the two periods. If your standard of living or spending habits changed significantly between the two periods (for example, you have a bigger home, new car or go out to eat more often) the cost of living increase calculation may not be meaningful.