Are you keeping up with inflation?
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For example, senior citizens may pay more for medication and health care than the average American. Because medical care costs in the last year have risen slightly higher than the increase in inflation, an American who is spending a lot on medical care likely is experiencing more inflation than someone who is relatively healthy.

Another reason people may feel more financial pressure than the inflation rate would suggest is because the rate doesn't consider the cost of things middle class Americans aspire to, says Bernstein. Consider future financial goals, such as "the price of decent quality child care and saving for college," Bernstein points out. "These prices are all going up much faster than overall inflation, so that's one of the reasons you feel pinched."

Increases in salary can help offset the inflation rate. For example, if your paycheck went up by 4 percent last year, you may think you're breaking even, but if you have to pay more in income tax as a result of that pay increase, your money still is not going as far as it used to.

And while tracking the rate of inflation may seem simple, it's important to keep the terminology straight. The bureau also tracks what is known as the "core inflation rate," which is much like the CPI except it leaves out price changes in food and energy -- no minor consideration these days.

The idea behind excluding these expenditures is that they make it more difficult to track general inflation trends because they're so volatile. Naturally this figure will be lower than the general inflation rate (currently the core inflation rate is at 2.3 compared to the Consumer Price Index at 4), but it's not reflective of the impact of inflation on your wallet. "When's the last time you met anybody that doesn't burn energy and eat food," says John Burford, an economist with The International Bank of Miami.

Long-term effects
The more inflation rises, the more likely it is to affect consumer behavior. "Consumers are adjusting to inflation by altering the way they spend their money," says Burford. "They're buying necessities to a much greater degree and cutting back on anything that's optional."

Typically, two occurrences tend to lower inflation. One is an economic slowdown, in which slow sales lead to price decreases to get rid of inventory. The other is a sudden increase in productivity. "Say we discover a new type of energy that's really cheap. Then all of a sudden, energy prices would drop like a stone," Burford adds.

One way the Federal Reserve has dealt with inflation over recent years is with interest rates. Raising interest rates tends to lower inflation because it discourages spending, which brings costs down. However, in today's economy, the Federal Reserve "has chosen to cut rates because they're so worried about how sick the economy is," says Seiver. "That is not going to keep inflation from going up. In fact it may push it up even faster."

Historically, the rate isn't as high as it's been. It was up around 10 percent for a while in the late '70s and early '80s, Seiver points out. But the Fed's focus on getting the economy back up and running could generate increased inflation.

"In the short run, (lowering interest rates) will probably have done a lot to help the economy so a recession wouldn't last too long or go too deep," says Seiver. "But that could make inflation get a little worse and that's not good in the long run."