We've all been so focused on whether we are officially in a recession that we may not have paid enough attention to the creeping threat of inflation.

But rising prices are equally threatening to your financial well-being.

The Federal Reserve recently decided to keep its target for the federal funds rate at 2 percent, partly because of concerns about inflation.

"Uncertainty about the inflation outlook remains high," the Federal Open Market Committee, which sets the funds rate, said in announcing its rate decision.

Inflation, simply put, erodes the purchasing power of your dollar.

Talk to anyone who had to pay for gas, groceries or any consumer goods in the 1970s and they'll tell you how hard inflation can be.

I remember those days. I recall my grandmother piling us in the car before dawn, getting us up that early to get in line to buy gas. At one point, in many areas, you could only buy gas on odd or even days of the month, depending on the last digit of your license-plate number.

Federal Reserve Chairman Ben Bernanke said he doesn't think we're headed for a similar slide into a '70s-style economic crisis.

Still, with gasoline rolling past $4 per gallon and utility bills skyrocketing, it's enough to give you heat stroke. We might not get to a double-digit inflation rate but the rate of inflation is hurting households already struggling to make ends meet.

So what does a family do when they've been setting aside, say, $100 a month for gas and now it costs $300 or $400 a month? What do you do if you've budgeted $500 for food for your family of four and now that expense has increased by 30 percent?

How can you budget when prices keep rising, but your income is flat or declining?

If you haven't already moved toward becoming more energy efficient, you won't make your budget work in an inflationary environment.

Drive slower. Use less of your air conditioner. Walk through your home and see what you can do to make it more energy efficient. I started charging my kids $1 every time a light was left on after they exited a room. They've become much better at energy conservation since it began costing them money.

Shop smarter by switching to store-brand grocery items, although when I bought some off-brand soda, my oldest, Olivia, did rag on me for days. But, hey, it was 69 cents for 2 liters. If the kids don't like the store-brand soda, they can drink water, which is better for them anyway.

Bend down. Often the less costly items are on the lower store shelves.

Consider putting some (not all) of your investment dollars in two inflation-indexed securities offered by the U.S. Treasury: Treasury Inflation-Protected Securities (TIPS) and I Bonds. Both are designed for investors who want inflation protection and a guaranteed rate of return on their principal. With TIPS, the principal and interest payments are adjusted to compensate for changes in inflation. The earnings rate on an I Bond is a combination of a fixed interest rate plus the rate of inflation. You can buy TIPS and I Bonds from financial institutions and at www.treasurydirect.gov.

I know the economic whipsaw we're in is so frustrating.

But you have to do more than fret. The key to beat inflation is to do what Bernanke says. You have to be flexible with your finances. You have to act. Stop talking about cutting costs and do it — now.