Inflation Remains Americans’ Top Financial Concern in 2025, Income Growth Lags Behind, Northwestern Mutual Study Finds
March 10, 2025 – Milwaukee
Inflation continues to dominate the financial worries of Americans as the cost of everyday essentials such as groceries, gas, and housing shows little sign of easing, according to Northwestern Mutual’s newly released 2025 Planning & Progress Study. The study reveals that a majority of U.S. adults feel their income is not keeping pace with rising prices, underscoring persistent economic challenges nationwide.
Inflation: The Forefront of Financial Anxiety
Northwestern Mutual’s 2025 Planning & Progress Study, a comprehensive research effort tracking Americans’ financial attitudes and behaviors, shows that half of U.S. adults (51%) expect inflation to increase over the coming year. This expectation dwarfs the 25% who foresee inflation decreasing, highlighting widespread concern about sustained cost increases.
Two-thirds of Americans (65%) rank inflation as their top worry with regard to what will impact their finances in 2025. Additionally, 44% cite inflation as the single greatest obstacle to achieving long-term financial security.
Despite varying income levels, inflationary pressures are felt across the board. The study notes that just 11% of Americans report their household income is growing faster than inflation, while 52% say their income growth lags behind inflation. Even among millionaires—defined as those with over $1 million in investable assets—only 19% say their income grows faster than inflation, with 40% saying it grows slower.
Inflation’s Impact: From the Grocery Aisle to Childcare
The repercussions of inflation are evident in everyday expenses. An overwhelming 84% of Americans have noted higher grocery prices recently, while 68% and 60% report rising costs for utilities and gasoline, respectively. More than half (52%) acknowledge increased housing costs, and childcare expenses have spiked notably for younger parents, with 36% of Gen Z and Millennial parents reporting elevated childcare costs.
Among those experiencing these price hikes, many say the financial burden is significant. For example, 48% view increased childcare expenses as having a large financial impact, followed by 45% citing housing, and 43% pointing to grocery costs.
John Roberts, Northwestern Mutual’s Chief Field Officer, commented, “Houses, kids, groceries, and gas: all these rising prices are straining household budgets. Our study clearly shows inflation remains ‘sticky’ at the individual level, meaning it continues to weigh heavily on people’s minds and finances. Navigating this requires intentional financial planning today to protect tomorrow’s goals.”
Shift in Debt Trends: Medical Debt Surpasses College Loans for Millennials
The study also reveals significant changes in Americans’ debt profiles. For the first time, college loans no longer rank among the top three sources of debt for Millennials. Instead, medical debt has risen to prominence, reflecting changing financial pressures for this generation.
Credit card debt remains the leading form of non-mortgage debt across generations, with 31% of adults carrying such balances. Car loans are the second most common (13%), followed by medical debt (8%), which has overtaken education loans (7%) for the general population.
For Millennials specifically, medical debt now exceeds personal student loans as a source of financial strain. This shift likely reflects a combination of factors, including the payoff of education loans, rising medical costs, and recent student loan forgiveness policies.
The survey also highlights a persistent prioritization of debt repayment over savings, with 64% of adults placing greater emphasis on paying down debt rather than building savings—a trend consistent for the past three years.
Debt Levels Show Slight Decline
Despite concerns, average personal debt (excluding mortgages) decreased to $21,500 in 2025 from $22,713 in 2024 and represents a 19% reduction since 2020. This decline suggests some consumers are successfully managing or reducing their debt loads amidst economic challenges.
Gen Z’s Spending Outlook: ‘Spend Z’ Emerges
Interestingly, Gen Z stands out among the generations for their spending intentions. Forty percent expect to increase spending on non-essential items in 2025 compared to last year, which is notably higher than all other age groups. This group’s optimism about spending is coupled with a greater likelihood that their income is keeping pace with or exceeding inflation, although the full details on this aspect were not detailed in the study summary.
Housing Affordability and Financial Insecurity Persist
The study also points to widespread feelings of financial insecurity and concerns about housing affordability. Among those who do not own homes, the majority believe homeownership will never become a realistic option, particularly within Gen Z, who feel increasingly priced out of the market.
Despite these challenges, there is a silver lining: fears of a U.S. recession are receding, and Americans report improved financial discipline compared to the downward trend seen over the past five years.
Conclusion
The 2025 Planning & Progress Study from Northwestern Mutual paints a complex picture of America’s financial landscape. Inflation remains a dominant worry as income growth struggles to keep pace with rising costs. Meanwhile, changing debt dynamics, particularly the rise of medical debt among Millennials, and shifts in spending patterns among younger generations, underscore evolving economic realities.
John Roberts summarized the findings, saying, “While inflation and financial insecurity continue to weigh heavily on Americans, improved financial discipline and cautious optimism about the economy offer hope. The challenges we face highlight the vital importance of comprehensive financial planning to navigate today’s realities and prepare for a secure tomorrow.”
About the Study:
Northwestern Mutual’s Planning & Progress Study is an annual proprietary research initiative that explores Americans’ financial attitudes, behaviors, and long-term security across different generations. The 2025 iteration reflects the latest trends and insights shaping financial decision-making today.
For more details or to access the full study, visit Northwestern Mutual’s official website.
This article is provided by Smart Money Mindset, delivering timely insights on financial trends impacting everyday Americans.