I read an interesting article the other day by financial columnist Humberto Cruz. He pointed out that despite government reports that inflation is under control and growing by roughly 3% to 4% per year, we need to realize that the inflation rate that each of us experiences might be much different.

As examples, he pointed out that his health insurance premiums rose 30% in 2006, his homeowner's insurance rose 9%, his auto insurance costs rose 14%, and even his cable TV bills jumped 13%. (Groceries rose a more modest 4%.)

This is an excellent point. To understand the situation better, it helps to know what the official "inflation" rate really measures. The most common measure of it is the "urban" (i.e. non-farmer, non-military, non-institutionalized) Consumer Price Index (CPI), which measures, year by year, the cost of a basket of common goods and services we Americans purchase (think food, clothing, housing, medical care, energy, etc.). It's instructive to understand what's in that basket -- because odds are, it doesn't really reflect our own personal expense profile.

Here's how the Bureau of Labor Statistics, which manages the CPI, explains its system:

"For each of the more than 200 item categories, using scientific statistical procedures, the Bureau has chosen samples of several hundred specific items within selected business establishments frequented by consumers to represent the thousands of varieties available in the marketplace. For example, in a given supermarket, the Bureau may choose a plastic bag of golden delicious apples, U.S. extra fancy grade, weighing 4.4 pounds to represent the Apples category. [Read more.]"

The weightings
So how important are various categories? Well, according to recent data, food at home made up about 8% of the basket, and food away from home about 6%. If you're someone who rarely cooks at home and always dines out, this isn't really reflecting your lifestyle. Housing makes up a whopping 42.4% of the basket, but if your home is paid off, or you're living in your parents' basement, your personal profile is vastly different. Medical care is 6% of the basket -- there's a good chance that you spend more than that percentage of your income on health insurance and other medical expenses. Get the picture?

It's interesting and informative to note the changes in the CPI over time, but it's also important not to assume that it's reflecting the inflation that each of us faces. What we need to focus on is what Cruz called our "personal inflation rate."

What to do
So what should we do with this information? Well, this is where keeping track of our expenses can be useful. Do so for a month or two, just to get a handle on how much of your income you spend on this or that. Then pay attention to how the costs are rising over time. Here are some examples of price hikes in our future:

  • Comcast (NASDAQ:CMCSA) is hiking cable TV rates by about 3.1% in the coming year. Time Warner (NYSE:TWX) is increasing its own cable TV rates by 3% to 6% in some markets.
  • Beer makers such as Anheuser-Busch (NYSE:BUD) will probably be increasing the cost of beer at least a little, given that the cost of barley rose some 24% in 2006.
  • Altria (NYSE:MO) is upping the price of its cigarettes by $0.10 per pack, and in some regions, such as Texas, stiff taxes will drive up the price by as much as $1 per pack.

Keep your personal inflation rate in mind when doing retirement planning, as well. Don't just factor in 3% or 4% inflation if you foresee, for example, major medical expenses in your future, as they might rise by much more than that during your golden years.

Get much more guidance on retirement planning, including dealing with inflation, in our Rule Your Retirement newsletter. (You can try it for free for a whole month, accessing all past issues in full.)

Longtime Fool contributor Selena Maranjian owns shares of Time Warner, a Stock Advisor recommendation. Anheuser-Busch is an Inside Value pick. The Motley Fool has a full disclosure policy.