A Cost of Living Adjustment (COLA) is an increase in income that helps individuals keep up with rising prices of goods and services. This adjustment is often applied to salaries, pensions, and social security benefits to ensure that purchasing power remains stable despite inflation. COLAs are typically calculated based on changes in the Consumer Price Index (CPI), which measures the average change over time in the prices paid by consumers for a basket of goods and services. By implementing a COLA, organizations and governments aim to protect individuals from the negative effects of inflation on their financial well-being.