Inflation is the increase in price of goods and services in an economy over a period of time, consequently, the purchasing power of the currency decreases.
The Consumer Price Index (CPI) is widely used to measure inflation. CPI is a statistical estimate constructed using the prices of a basket of representative consumer items like bread, housing, transportation, over a period of time.
Purchasing power is the amount of physical goods and services that can be bought by a given amount of time. The relative definition of being rich may not so much depend on how much money you have but how much purchasing power you have.
Inflation isn’t scary, the decrease in purchasing power is. If your wages have increased by 3% but the prices of goods increases by 5%, after adjusting for inflation, you are actually losing 2% of purchasing power.