Inflation Tops Americans’ Financial Concerns as Income Struggles to Keep Up, Northwestern Mutual’s 2025 Study Reveals
March 10, 2025 – Milwaukee, WI – Inflation remains the foremost financial worry for Americans as the 2025 Planning & Progress Study from Northwestern Mutual highlights widespread concern that household incomes are not keeping pace with rising prices. The study also uncovers significant shifts in debt priorities, spending habits, and homeownership outlooks across generations, shedding light on the evolving landscape of American financial security.
Inflation: The Persistent Economic Challenge
According to the study, 51% of U.S. adults anticipate inflation will increase throughout 2025, more than double the 25% expecting a decrease and the 24% predicting it will remain stable. The impact of inflation reverberates nationwide, with two-thirds of Americans (65%) identifying it as the dominant financial issue likely to affect their finances this year. Even more concerning, 44% consider inflation their number one obstacle to achieving long-term financial security.
More than half of Americans (52%) acknowledge that their household income is growing slower than inflation, a figure that has remained steady for the second consecutive year. In stark contrast, only 11% say their income is rising faster than inflation, while 28% feel their earnings are keeping pace. Notably, inflation’s reach extends to the wealthy as well, with just 19% of millionaires—those holding over $1 million in investable assets—reporting income growth outpacing inflation.
Everyday Expenses Hit Hard
Americans are feeling the pinch across numerous essential spending categories. A striking 84% have experienced elevated grocery prices in the last quarter, while 68% contend with higher utility bills. Gas and housing costs affect 60% and 52% of respondents respectively, and 15% report increased childcare expenses—with the figure climbing to 36% among Gen Z and Millennial parents. Many say these rising costs are having a "large impact" on their finances, with childcare (48%), housing (45%), and groceries (43%) posing the greatest strains.
John Roberts, Chief Field Officer at Northwestern Mutual, offered insight into these findings: “Inflation is sticky not only for economists but for individuals too. Higher prices on necessities like housing, groceries, and fuel continuously affect budgets, making financial planning more critical than ever. Americans must balance enjoying today while protecting tomorrow through intentional fiscal strategies.”
Shifts in Debt: Medical Bills Surpass College Loans Among Millennials
Marking a significant generational milestone, Millennials no longer rank college loans among their top three sources of debt. Instead, medical debt has emerged as a new formidable financial challenge for this age group. Overall, credit card debt remains the largest non-mortgage financial burden across Americans, accounting for 31%. Car loans follow at 13%, and medical debt occupies third place at 8%, surpassing personal student loans at 7%.
Interestingly, medical debt outranks student loans among every generation except Gen Z. The study also notes a growing urgency around debt repayment: 64% of adults say they prioritize paying down debt over saving, continuing a trend that has strengthened over the past three years.
Roberts commented on this trend, saying, “The shift from college loans to medical debt among Millennials reflects their life stage, where medical expenses become more prominent while student debt diminishes. This highlights the critical role insurance plays in managing financial shocks and protecting earning potential during unforeseen health challenges.”
Decreasing Personal Debt but Growing Financial Discipline
Despite rising inflation and debt concerns, Americans’ average personal debt, excluding mortgages, has decreased slightly to $21,500 in 2025, down from $22,713 in 2024 and significantly lower than 2020’s high of $26,621. This reduction accompanies increasing financial discipline, with many Americans showing improved habits amid economic uncertainty.
‘Spend Z’: Gen Z’s Dispersion in Discretionary Spending
While most adults expect to maintain or reduce spending on non-essential items in 2025, Gen Z bucks the trend. Forty percent of Gen Z plan to spend more on discretionary purchases this year compared to last, far exceeding other generations where only 19% to 34% anticipate increased spending.
Despite concerns about costs and debt, younger Americans appear poised to inject optimism and consumer activity into the economy. Early indications also show Gen Z reporting relatively stronger income growth than older generations, although details on this remain forthcoming.
Homeownership Remains Out of Reach for Many
Home affordability continues to be a pressing issue for Americans, particularly those who do not currently own property. The majority of non-homeowners believe they will never be able to afford a home, with Gen Z especially feeling priced out of the housing market. This sentiment contributes to a broader decline in faith regarding the attainability of the American Dream, with less than half of adults believing it to be within reach for most people.
Economic Optimism Grows Amid Persistent Insecurity
Encouragingly, fears of a U.S. recession have begun to ease compared to previous years, aligning with increased financial discipline among consumers. However, feelings of financial insecurity remain high across segments of the population, underscoring ongoing challenges in achieving stability.
The full findings from Northwestern Mutual’s 2025 Planning & Progress Study provide a comprehensive snapshot of how inflation, debt, and shifting financial priorities are shaping Americans’ economic behaviors and outlooks. As many grapple with rising costs and evolving fiscal pressures, the study underscores the importance of deliberate financial planning to navigate an uncertain economic landscape.
For more information on the 2025 Planning & Progress Study and resources on managing personal finances in an inflationary environment, visit Northwestern Mutual’s official site.
Smart Money Mindset will continue tracking and analyzing financial trends impacting American households in 2025.