Inflation Tops Americans’ Financial Concerns as Income Fails to Keep Pace: Insights from Northwestern Mutual’s 2025 Planning & Progress Study
Published March 10, 2025
As inflation continues to impact everyday expenses—from grocery bills to gas prices—Americans are increasingly worried about their financial futures. According to the newly released 2025 Planning & Progress Study by Northwestern Mutual, inflation stands as the number one financial concern for U.S. adults heading into 2025. The study reveals that a majority of Americans feel their household incomes are failing to keep up with rising prices, deepening the sense of financial insecurity nationwide.
Inflation: The Dominant Financial Worry in 2025
Northwestern Mutual’s latest study finds that 65% of American adults identify inflation as the dominant factor that could influence their finances this year. Half of the respondents (51%) expect inflation to increase in 2025, markedly higher than the 25% who predict it will decrease. This inflation anxiety is reflected in the fact that 44% of Americans view rising prices as the greatest obstacle to achieving financial security.
Indicators of these concerns are evident in people’s lived experiences. An overwhelming 84% reported elevated grocery costs in the past three months, while 68% noted higher utility bills and 60% felt the pinch at the gas pump. Housing expenses also climbed for more than half (52%) of participants, and among Gen Z and Millennial parents, 36% say childcare costs have increased significantly.
John Roberts, Chief Field Officer at Northwestern Mutual, remarked, “Inflation is sticky not just at the economic level but in people’s daily lives—it frequently reminds them of financial challenges. Addressing inflation’s impact requires intentional financial planning to balance present enjoyment with future goals.”
Income Growth Lags Behind Inflation
More than half of Americans (52%) report their household income is growing slower than inflation, a figure consistent with last year’s findings. This contrasts sharply with only 11% who say their income is increasing faster than inflation. Even among millionaires with over $1 million in investable assets, a mere 19% see their incomes outpacing inflation, while 40% experience income growth slower than price increases.
Debt Landscape Shifts: Medical Debt Surpasses College Loans
The study highlights a significant milestone among Millennials: for the first time, college loans no longer rank among their top three sources of debt. Instead, medical debt has emerged as a major financial burden, joining credit card and car loans as primary sources of non-mortgage debt. Medical debt now ranks higher than personal education loans across most generations except Gen Z.
Credit cards remain the leading source of non-mortgage debt (31%), followed by car loans (13%), with medical debt holding 8% of the total. Remarkably, 64% of adults prioritize paying down debt over saving money, continuing a three-year trend towards focusing on debt reduction.
Roberts emphasized, “The rise of medical debt as a leading concern underscores the importance of comprehensive financial protection, including health and disability insurance, particularly for younger generations. Sudden medical expenses can drastically alter financial stability.”
Decreasing Personal Debt and Spending Trends
Encouragingly, the average amount of personal debt excluding mortgages dropped to $21,500 in 2025, down from $22,713 the previous year and significantly lower than the $26,621 reported in 2020. This indicates a gradual easing of debt burdens despite ongoing financial pressures.
Another notable finding centers on Gen Z’s spending behavior. Unlike older generations, 40% of Gen Z adults plan to increase discretionary spending on non-essential items in 2025 compared to 2024—far exceeding the 29% average among all U.S. adults. This “Spend Z” phenomenon suggests younger Americans are embracing consumer optimism even amid broader economic concerns.
Housing Affordability Remains Out of Reach for Many
Homeownership continues to elude a large segment of the population. The majority of Americans who do not own homes feel they will never be able to afford one, a sentiment especially prevalent among Gen Z. This persistent housing affordability crisis adds another layer of financial anxiety for many.
A Mixed Financial Outlook
Despite inflation-related worries and debt challenges, the study presents some optimistic trends. Fears of a U.S. recession have diminished, and financial discipline appears to be improving after a five-year decline. Additionally, nearly half of adults believe the traditional American Dream is becoming increasingly unattainable, highlighting ongoing concerns about long-term economic opportunity.
About the Study
Northwestern Mutual’s Planning & Progress Study is an annual proprietary research initiative that surveys a diverse cross-section of Americans to gauge attitudes, behaviors, and perspectives on financial well-being and long-term security. The 2025 iteration provides key insights into how inflation, debt, spending, and financial priorities are evolving amid ongoing economic uncertainties.
Key Statistics at a Glance:
- Inflation expectations: 51% expect an increase in 2025
- Household income vs. inflation: 52% report income growing slower than inflation
- Top financial concern: Inflation (identified by 65% as dominant issue)
- Primary non-mortgage debt sources: Credit cards (31%), car loans (13%), medical debt (8%)
- Millennials’ debt shift: Medical debt surpasses college loans
- Average personal debt (excl. mortgages): $21,500 in 2025, down from $22,713 in 2024
- Discretionary spending plans: 40% of Gen Z expect to spend more on non-essentials in 2025
For Americans navigating a challenging financial landscape shaped by persistent inflation and evolving debt burdens, studies like Northwestern Mutual’s Planning & Progress offer valuable perspectives to help inform financial planning and resilience strategies for the year ahead.