If you’ve checked your grocery bill, rent, or insurance lately, you’ve probably thought: “Why does everything feel expensive if inflation is supposedly under control?”
Official stats say inflation is cooling. Headlines talk about “moderating prices.” Yet your bank account is screaming a very different story.
You are not crazy. There really is a gap between what the inflation numbers say and what daily life feels like. That gap comes from three big forces:
- How the official CPI basket is built
- How companies raise prices without raising prices
- How our brains perceive price changes and losses
Let’s unpack why everything feels expensive — and why your “personal inflation rate” may be much higher than the government’s.
1. CPI Is an Average, and Your Life Is Not Average
The official inflation rate is usually based on something called the Consumer Price Index (CPI).
In plain English, CPI is: A giant shopping basket that tracks how the “average” household spends its money — then measures how that basket gets more expensive over time.
That basket includes:
- Housing (rent + owners’ equivalent rent)
- Food
- Transportation
- Medical care
- Recreation
- Education
- And dozens of other categories
Each category gets a weight. Housing often makes up roughly a third of the index, transportation another chunk, and so on.
Here’s the catch:
Your spending ≠ the CPI basket
If you’re:
- A renter in a big city
- A recent grad with student loans
- A parent with daycare costs
- Someone whose insurance just jumped 30%
…your budget does not look like the “average” household.
So when CPI tells you inflation is, say, 3–4%, that’s the change in the average basket — not necessarily your basket. If the stuff you rely on most (rent, childcare, car insurance, eating out) is rising faster than average, your real inflation can easily feel like 8–10%.
No wonder everything feels expensive.
2. Housing: The Silent Inflation Anchor
If you want to understand why everything feels expensive, start with housing.
For many people — especially renters in major cities — housing is:
- Their biggest expense
- The hardest to adjust
- The one that doesn’t go “on sale”
Yet the way housing shows up in CPI is… odd.
Owners’ Equivalent Rent: The weird housing proxy
For homeowners, CPI doesn’t look at mortgage payments. Instead, it uses “owners’ equivalent rent” (OER) — basically, what a homeowner thinks their house would rent for.
That creates two problems:
Lag: OER adjusts slowly. Research from the Dallas Fed found that market rent inflation peaks about 12–13 months before it fully shows up in CPI rent measures. When market rents spiked in 2021, CPI rent inflation didn’t peak until April 2023 — nearly two years later. So CPI can understate recent rent spikes or overstate them with a delay.
Missed pain: If you signed a lease during a hot market or bought a home when rates were low, and now you’re locked out of moving, your lived experience might be completely different from the smooth CPI line. Housing inflation peaked at 8.3% year-over-year in April 2023 and had only fallen to 4.8% by late 2024 — still double the pre-pandemic norm.
If 40–50% of your income goes to rent or a mortgage — and that cost jumped sharply over a few years — then even stable prices elsewhere won’t change the fact that everything feels expensive. You already lost so much breathing room that a return to “normal” inflation still feels bad.
In Los Angeles, for example, the average rent for a one-bedroom apartment climbed into the mid-$2,400s by 2023 — roughly a 13% jump in a single year — while two-bedroom units pushed above $3,300, rising nearly 20% year-over-year. If your income didn’t rise by that much, rent alone now eats a far larger share of your paycheck than before.
| Year | CPI Shelter Inflation (YoY %) | Market Rent Growth (YoY %) |
|---|---|---|
| 2020 | 1.8% | 3.1% |
| 2021 | 4.1% | 6.7% |
| 2022 | 7.5% | 6.0% |
| 2023 | 6.2% | 7.9% |
| 2024 | 4.6% | 5.1% |
3. Goods vs Services: You Don’t Feel Discounts, You Feel Bills
One more gap between CPI and reality: goods vs services.
Over the last few years:
Many goods (electronics, TVs, some furniture, even used cars) have seen price growth slow, flatten, or even reverse.
Services — the things you pay every month — have stayed stubbornly high:
- Rent
- Auto insurance
- Healthcare & dental
- Daycare
- Streaming and subscriptions
- Restaurants and takeout
You don’t notice that a TV is slightly cheaper than three years ago. You do notice your car insurance jumped 19% year-over-year in 2024 — the biggest increase in nearly 50 years — and your rent renewal is brutal.
CPI blends both together. Your brain doesn’t. That’s another reason why everything feels expensive even when the official rate is drifting down.
4. How Companies Make Prices Go Up Without “Raising Prices”
Here’s the sneaky part: companies know people hate obvious price hikes.
So instead of just slapping +10% on the sticker, they use tactics that hide or soften the increase. That keeps official inflation numbers smoother, while consumers still feel squeezed.
Let’s walk through the greatest hits.
4.1 Shrinkflation: Same Price, Less Product
Shrinkflation is the classic move:
A bag of chips stays $3.99… but the size quietly shrinks.
Real examples from 2023-2024:
- Family-sized Frosted Flakes dropped from 24 ounces to 21.7 ounces (a 40% increase in per-ounce pricing)
- Party-size Tostitos shrank from 18 ounces to 15.5 ounces
- Folgers coffee went from 51 ounces to 43.5 ounces
- One laundry detergent brand dropped from 189 fluid ounces to 140 — a 26% reduction
Research found that about one-third of roughly 100 common grocery products tracked since the pandemic have shrunk in size. The worst offenders? Household paper products saw shrinkflation in 60% of tracked items, with breakfast foods at 44% and candy at 38%.
On paper, the price per unit went up, not the sticker price. In practice, your money buys less.
Statisticians try to adjust for this, but real-world shrinkflation can slip through. You just know that your groceries don’t stretch as far — and that makes everything feel more expensive.
4.2 Skimpflation: Same Price, Worse Experience
If shrinkflation hits the product, skimpflation hits the service.
Examples:
- Same hotel rate, but no daily cleaning and fewer staff
- Same restaurant price, but smaller portions and longer wait times
- Same streaming subscription, but more ads and fewer “premium” features
The sticker price hasn’t changed much, but the value you receive has fallen. The economic reality: you’re paying more for less, after adjusting for quality.
No one sees this in a simple price chart. You feel it every time you spend.
4.3 Fee-flation and “Junk Fees”
Next up: fee-flation — the art of unbundling.
Instead of raising the base price, companies add:
- “Service fees”
- “Convenience fees”
- “Processing fees”
- “Resort fees”
- “Delivery fees” + “platform fees”
You thought the ticket was $50? By checkout, it’s $68. The room was advertised at $150? You’re leaving at $190.
Base prices look stable, but the all-in cost has crept up. Official stats sometimes miss or underweight this, but your credit card statement never does.
4.4 Subscription Creep and the Death of One-Time Purchases
Another quiet way everything gets more expensive: subscription creep.
What used to be a one-time purchase is now a monthly charge:
- Software (hello, “Pro” plans)
- Cloud storage
- Streaming services
- Premium features in apps and games
- Some physical products via “subscribe & save”
The average American now juggles 3.6 streaming subscriptions alone, spending around $48 per month just on video services. But that’s only part of the story — when you add phone plans, internet, software subscriptions, and other recurring charges, the average monthly subscription spend sits at $273.
Between 2018 and 2021, the average consumer’s annual spending on recurring purchases increased by $430. Each line item may not rise that quickly. But over a few years, your number of subscriptions multiplies. Your monthly fixed costs swell, and you feel poorer — even if CPI doesn’t scream “crisis.”
4.5 Dynamic Pricing: The Price Changes With You
Ride-hailing, airlines, hotels, ticketing platforms — they all lean on dynamic pricing.
Prices change based on:
- Time of day
- Demand spikes
- Location
- Your purchase history
- Even your device or zip code in some cases
This creates the feeling that there’s no stable “fair price” anymore. You might pay 30–50% more than a friend for the same ride or ticket, simply because the algorithm spotted high demand or tagged you as willing to pay.
It’s not always fully captured as “inflation,” but it’s absolutely part of why everything feels expensive.
5. The Psychology: Our Brains Are Wired to Hate Losses
Even if the numbers were perfectly measured, our perception of inflation is emotional, not just mathematical.
A few psychological quirks explain a lot:
We remember spikes, not discounts. A sudden 20% jump in rent or insurance sticks in your mind. A slow 5% drop in TV prices barely registers.
We feel loss more than gain. Losing $50 of monthly breathing room hurts more than gaining $50 ever feels good. So once prices jump, even if inflation “comes down,” you still feel the loss.
Essentials dominate our mental model. You can skip a vacation. You can’t skip rent, food, or transportation. When essentials go up, your whole life feels more expensive — even if luxury goods or gadgets stabilize.
Social media amplifies the extremes. Screenshots of ridiculous prices, viral posts about rent hikes, and memes about side hustles reinforce the idea that everything is broken. And for many people, it truly is tighter than the averages suggest.
6. How to Estimate Your Personal Inflation Rate
One way to reclaim some control is to build your own rough “personal inflation rate.”
Here’s a simple version:
1. List your top 5–7 monthly expenses
- Rent or mortgage
- Groceries
- Eating out
- Transportation (car payment, insurance, gas, transit)
- Utilities
- Subscriptions and phone/internet
- Childcare or tuition
2. Estimate how much each has changed in the last 3–5 years
- Rent up 30%?
- Groceries up 20%?
- Insurance up 25%?
- Subscriptions up 40% in total (mostly just more of them)?
3. Weight them by how much of your budget they take
If rent is 40% of your spending and went up 25–30%, that alone pushes your personal inflation high.
You might discover that, while CPI says inflation cooled to ~3–4%, your actual lifestyle is running at 8–10% more expensive than before.
That doesn’t mean the official numbers are fake. It just means they’re averages, and you don’t live an average life.
7. So… Are You Just Stuck Feeling Poorer?
Short answer: you’re not imagining it — but you’re also not powerless.
A few practical moves:
Audit subscriptions: kill the ones that don’t spark real value.
Renegotiate or shop around: especially for car insurance, internet, and phone plans. The average person who shopped around saved $398 on car insurance in 2023.
Look at the “price per unit”: not just the sticker price in groceries and household goods.
Think in total cost of ownership: sometimes a slightly more expensive, durable item beats a cheap thing you have to replace.
Track your personal inflation once or twice a year: it’s a reality check and a planning tool.
Understanding why everything feels expensive doesn’t magically lower your bills. But it does help you separate three things:
- What’s happening in the macro economy
- What companies are doing with pricing tactics
- What’s happening to your specific lifestyle
Once you see the game clearly, you can respond more strategically — whether that’s cutting back, changing how you spend, or simply not gaslighting yourself when the headlines say “inflation is down” and your wallet says otherwise.
References
[1] U.S. Bureau of Labor Statistics – Consumer Price Index data and rent measurement methodology – Available at: https://www.bls.gov/cpi/
[2] Federal Reserve Bank of Dallas – Rent inflation research and forecasting models, 2023 – Available at: https://www.dallasfed.org/research/economics/2023/0620
[3] White House Council of Economic Advisers – Housing inflation analysis, December 2024 – Available at: https://bidenwhitehouse.archives.gov/cea/
[4] The Zebra – 2025 Auto Insurance Trends Report – Available at: https://www.thezebra.com/resources/car-insurance/auto-insurance-trends-report/
[5] NPR – Cost of Living series on car insurance premiums, October 2025 – Available at: https://www.npr.org
[6] LendingTree – Shrinkflation analysis of consumer products, October 2024 – Available at: https://www.lendingtree.com
[7] Deloitte – Digital Media Trends Survey, 2023 – Available at: https://www2.deloitte.com
[8] West Monroe – Consumer subscription spending research, 2024 – Available at: https://www.westmonroe.com
[9] Rentometer. “Los Angeles, CA Rental Market Trends.” n.d. Available at: https://www.rentometer.com/los-angeles-ca-rental-market-trends
[10] iProperty Management – Average Rent By Year – Available at: https://ipropertymanagement.com/research/average-rent-by-year
