Inflation — Definition and What It Means for Your Income
The rate at which prices for goods and services increase over time, reducing purchasing power.
Inflation measures the rate of increase in prices for a basket of goods and services over time, typically tracked via the Consumer Price Index (CPI). Cumulative inflation from 2021-2024 was approximately 19-20%, with groceries up ~25% and rent up ~26%.
Why it matters
If wages don't keep pace with inflation, real purchasing power declines — a salary that seems unchanged on paper actually buys less over time.
Example
A $60,000 salary in 2024 has roughly the purchasing power of $50,000 in 2021, given approximately 19-20% cumulative inflation over that period — for workers whose wages didn't rise proportionally.
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Inflation — FAQ
How much has inflation affected grocery costs?
Grocery prices rose approximately 25% from 2021-2024 — a household that spent $5,700/year on groceries in 2021 would spend approximately $7,100 for the same basket in 2024.