Inflation Tops Americans’ Financial Worries as Income Struggles to Keep Pace, Northwestern Mutual Study Reveals
March 10, 2025 — Milwaukee
Inflation remains the foremost financial concern for Americans heading into 2025, according to the latest findings from Northwestern Mutual’s 2025 Planning & Progress Study. The comprehensive survey spotlights how rising prices continue to outstrip household income growth, reshaping financial priorities and challenges across generations.
Inflation: America’s Biggest Financial Challenge
The study shows that half of U.S. adults (51%) expect inflation to increase in 2025, more than double the 25% who anticipate a decrease. A significant majority—65%—identify inflation as the top factor impacting their finances this year, with 44% naming it the greatest obstacle to achieving financial security.
Compounding concerns, 52% of Americans say their household income is growing more slowly than inflation. Only 11% report their income is outpacing price increases, while 28% believe their earnings are keeping pace. This disparity affects all economic groups, including millionaires, where just 19% report income growth exceeding inflation.
The effect of inflation is pervasive:
- 84% of Americans have seen grocery prices rise lately.
- 68% report increased utility bills.
- 60% faced higher gas prices.
- 52% experienced elevated housing costs.
- Childcare costs have risen for 15% of respondents overall, but 36% of Gen Z and Millennial parents feel this bite more sharply.
John Roberts, Northwestern Mutual’s Chief Field Officer, remarks, "Inflation is sticky not just economically but in the daily lives of Americans. Rising costs for essentials like housing, groceries, and gas are profoundly impacting budgets and financial goals."
Shifting Debt Patterns: Medical Bills Surpass College Loans for Millennials
A notable financial milestone has emerged: for the first time, Millennials no longer list college debt among their top three debt sources. Instead, medical debt has surged, reflecting a new challenge. Credit card debt remains the leading source across generations, but medical bills now outpace student loans as a major burden, except for Gen Z, who still contend primarily with education loans.
The study reveals:
- 31% of U.S. adults cite credit card debt as their primary non-mortgage liability.
- Medical debt has risen to 11% for Millennials, surpassing personal education loans at 10%.
- For Gen Z, personal education loans remain more prevalent, at 16%.
Paying down debt maintains prominence as a financial priority, with 64% of adults focusing on debt reduction compared to 36% prioritizing savings. This debt-first approach has persisted for three years, reflecting cautious financial behavior amid uncertain economic times.
Roberts explains, "Medical debt’s rise among Millennials highlights the critical role of insurance and financial planning in protecting against unexpected health costs, which can swiftly derail financial progress."
Also encouraging, average personal debt (excluding mortgages) has declined slightly to $21,500 in 2025, down from $22,713 in 2024 and notably 19% less than 2020 levels.
Generation Z’s Distinct Spending Outlook: ‘Spend Z’
Gen Z stands apart with a more optimistic spending outlook for non-essential purchases. While 29% of all adults expect to increase discretionary spending this year, a notable 40% of Gen Z plan to spend more in 2025 compared to 2024—outpacing other generations by a wide margin.
Despite inflationary pressures and lingering debt worries, Gen Z’s willingness to spend signals evolving financial behaviors, possibly aligned with rising income expectations and shifting lifestyle priorities.
Homeownership: A Vanishing American Dream for Many
The study also highlights widespread skepticism about homeownership affordability. Among non-homeowners, most believe owning a home will never be within their reach. This feeling is especially acute among Gen Z, who increasingly feel priced out of the housing market.
A Glimmer of Optimism Amid Financial Uncertainty
While inflation dominates concerns, the study notes positive trends: fewer Americans fear a recession this year, and financial discipline is improving after a five-year decline. Yet, less than half of U.S. adults believe the American Dream remains attainable for most people.
Conclusion
Northwestern Mutual’s 2025 Planning & Progress Study paints a complex picture of American financial attitudes entering the year: inflation continues to erode budgets and incomes, new debt challenges are emerging, and generational differences in spending and homeownership outlooks are stark. Still, growing financial discipline and receding recession fears offer pathways toward greater economic stability.
For Americans navigating these pressures, chief officer John Roberts advises intentional financial planning and disciplined action today to safeguard tomorrow’s goals.
About Northwestern Mutual’s Planning & Progress Study
The Planning & Progress Study is an annual proprietary research initiative by Northwestern Mutual that examines U.S. adults’ financial attitudes, behaviors, and concerns, providing valuable insights into trends shaping financial security nationwide.
For more information, visit Northwestern Mutual’s website.