Inflation Remains Americans’ Top Financial Concern as Incomes Lag Behind, Northwestern Mutual’s 2025 Study Reveals
Milwaukee, March 10, 2025 – Inflation continues to weigh heavily on the minds and wallets of Americans, with a majority saying rising prices are significantly impacting their finances. According to Northwestern Mutual’s newly released 2025 Planning & Progress Study, inflation not only stands as the top financial concern for the year ahead but also highlights a troubling disconnect: most Americans feel their household incomes are not keeping pace with rising costs.
Inflation: The Dominant Financial Challenge in 2025
The comprehensive study shows that 51% of U.S. adults expect inflation to increase in 2025, outpacing by more than double the 25% who anticipate it will decrease and the 24% who believe it will remain steady. Inflation ranks as the dominant factor worrying Americans, with 65% citing it as the primary concern that may affect their finances. More than four in ten (44%) identify inflation as the greatest obstacle preventing them from achieving long-term financial security.
This economic strain is felt across all income levels. Among millionaires—those with over $1 million in investable assets—only 19% report their incomes growing faster than inflation. In contrast, 40% say their income rises slower than inflation, while 38% say it keeps pace.
Income Growth Falling Behind Inflation
The study reveals a persistent gap between income growth and inflation. For the second consecutive year, a majority of Americans (52%) report that their household income is increasing at a slower rate than inflation. This contrasts sharply with the mere 11% who say their income is growing faster and 28% who believe their earnings keep up with inflation.
Everyday Costs Bite Deep: High Prices Across the Board
Americans are feeling the pinch from a range of elevated expenses:
- Groceries: 84% have noticed price increases in the last three months.
- Utilities: 68% report higher costs.
- Gas: 60% see rising prices at the pump.
- Housing: 52% face increasing housing expenses.
- Childcare: 15% overall, but this spikes to 36% among Gen Z and Millennial parents.
Among those facing these elevated costs, significant proportions say these increases have a "large impact" on their personal finances: childcare (48%), housing (45%), groceries (43%), utilities (34%), and gas (33%).
John Roberts, Chief Field Officer at Northwestern Mutual, commented, “Houses, kids, groceries and gas: all of these higher prices are having an outsized impact on people’s budgets, and most Americans believe these challenges will grow in 2025. Inflation is ‘sticky’ not only at the economic level but also in daily life. Americans can adapt, but it requires intentional financial planning to balance present needs and future goals.”
Changing Debt Landscape: Medical Debt Surpasses College Loans Among Millennials
The study marks a significant shift concerning debt among Millennials. For the first time, student loan debt no longer ranks among their top three sources of debt. Instead, medical debt has emerged as a new and formidable financial burden. Across all generations, credit card bills remain the leading source of non-mortgage debt, followed by car loans, with medical debt replacing personal education loans in the third spot.
Breakdown of debt sources among generations:
| Debt Type | U.S. Adults | Gen Z | Millennials | Gen X | Boomers+ |
|---|---|---|---|---|---|
| Credit Card Bills | 31% | 22% | 35% | 35% | 30% |
| Car Loans | 13% | 10% | 13% | 14% | 13% |
| Medical Debt | 8% | 8% | 11% | 8% | 6% |
| Personal Education Loans | 7% | 16% | 10% | 5% | 1% |
The prioritization of debt repayment continues to eclipse saving, with 64% of adults focusing more on reducing debt than setting money aside, maintaining a trend observed over the past three years.
Roberts noted, “Medical debt surpassing education loans highlights evolving financial challenges, particularly as Millennials age and healthcare expenses become more pressing. This underscores the importance of comprehensive financial planning, including adequate health and disability insurance, to protect long-term financial security.”
Debt Levels Showing Some Improvement
While debt remains a concern, Americans’ personal non-mortgage debt levels show signs of easing. The average personal debt stands at $21,500 in 2025, down from $22,713 in 2024 and significantly lower than the $26,621 recorded in 2020. —
The Spending Spirit of Gen Z: ‘Spend Z’ Leads the Charge
Unlike other generations exercising caution, Generation Z is poised to increase spending on non-essential purchases in 2025. Forty percent of Gen Z adults expect to spend more on discretionary items compared to the previous year, a rate notably higher than Millennials (34%), Gen X (26%), and Boomers+ (19%).
Overall, 29% of U.S. adults anticipate increased discretionary spending, 34% expect to maintain the same level, and 34% predict they will cut back.
Homeownership Outlook: A Generation Priced Out
The study also highlights widespread disillusionment regarding homeownership affordability. Among Americans who do not own homes, the majority feel they will never be financially able to buy one, with Gen Z especially feeling priced out of the market.
Silver Linings Amid Economic Concerns
Despite persistent inflation worries and financial insecurity, optimism about the broader economy is increasing. The fear of a U.S. recession has lessened, and financial discipline among Americans has improved, reversing a downward trend witnessed over the past five years.
Nonetheless, only 46% of U.S. adults believe the traditional “American Dream” remains attainable for most people, reflecting ongoing challenges facing the nation’s financial future.
About Northwestern Mutual’s 2025 Planning & Progress Study
The findings stem from Northwestern Mutual’s annual Planning & Progress Study, a proprietary research project evaluating the attitudes, behaviors, and financial concerns of Americans. This year’s study continues to shed light on the evolving financial realities shaping the lives of individuals and families across the country.
As inflation continues to challenge budgets nationwide, the 2025 Planning & Progress Study highlights the essential need for thoughtful financial planning and informed decision-making to navigate these economically turbulent times. For more insights and resources, readers can visit Northwestern Mutual’s website or consult financial professionals to develop tailored strategies for enduring security and growth.