Inflation Tops Americans’ Financial Worries as Many Say Income Isn’t Keeping Pace: Insights from Northwestern Mutual’s 2025 Planning & Progress Study
Published on March 10, 2025
Inflation remains the foremost financial concern for Americans in 2025, with a majority reporting that their household incomes are not keeping up with rising costs. This is according to Northwestern Mutual’s latest Planning & Progress Study, which delves into the financial attitudes and behaviors of U.S. adults as they navigate an evolving economic landscape.
Inflation: A Household Strain Across the Board
The study reveals that half of all U.S. adults (51%) anticipate that inflation will increase throughout 2025, overshadowing the 25% who expect it to decrease and 24% who foresee it remaining steady. More than two-thirds (65%) identify inflation as the biggest factor threatening their personal finances this year, while 44% cite it as the primary barrier to achieving financial security.
Alarmingly, 52% of Americans say their income growth is lagging behind inflation for the second consecutive year—a staggering contrast to the mere 11% who feel their income grows faster than inflation. Even among millionaires—those with over $1 million in investable assets—only 19% report their income outpacing inflation, with 40% saying income growth is slower and 38% noting it keeps pace.
Everyday Expenses Bite Hard
Inflation’s impact is not abstract or distant; it is felt in daily essentials. A vast majority of Americans (84%) have experienced elevated grocery prices recently. Other areas seeing notable price hikes include utilities (68%), gasoline (60%), housing (52%), and childcare (15%). For Gen Z and Millennial parents, childcare costs hit even harder, with 36% reporting higher expenses in this category.
Among those facing these increases, many acknowledge a “large impact” on their finances:
- Childcare expenses: 48% report a significant effect
- Housing expenses: 45%
- Groceries: 43%
- Utilities: 34%
- 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 remains ‘sticky’—not just in the economic cycle but for individuals who encounter these price increases daily.”
Shifting Debt Trends: Medical Debt Surpasses Student Loans for Millennials
In a first for the Planning & Progress Study, Millennials no longer list college loans among their top three sources of personal debt. Instead, medical debt has emerged as a significant financial burden for this group and others. Credit card debt remains the most common form of non-mortgage debt across generations, accounting for 31% of financial obligations, followed by car loans (13%) and medical debt (8%).
When broken down by generation, medical debt eclipses student loans as a source of debt for every age group except Gen Z:
| Debt Source | Gen Z | Millennials | Gen X | Boomers+ |
|---|---|---|---|---|
| Credit card bills | 22% | 35% | 35% | 30% |
| Car loans | 10% | 13% | 14% | 13% |
| Medical debt | 8% | 11% | 8% | 6% |
| Personal education loans | 16% | 10% | 5% | 1% |
This rise in medical debt among Millennials reflects a combination of factors, including the natural transition through life stages that increase exposure to healthcare costs and the diminishing burden of student loan debt, in part aided by recent loan forgiveness programs.
Interestingly, 64% of adults now prioritize paying down debt over saving, continuing a trend from the past three years signaling a heightened urgency to reduce liabilities.
Declining Overall Personal Debt Levels
Despite ongoing concerns about debt, Americans’ average personal debt (excluding mortgages) has declined to $21,500 in 2025, down from $22,713 in 2024 and showing a significant 19% reduction since 2020’s peak of $26,621. ### Gen Z’s Spending Habits: More Willing to Splurge Despite Financial Concerns
Despite the economic headwinds, younger generations, especially Gen Z, are the most likely to increase discretionary spending this year. Forty percent of Gen Zers plan to spend more on non-essential purchases in 2025 compared to last year—far surpassing other age groups. This contrasts with 34% of all adults who expect to spend more, 34% planning to spend the same, and 34% intending to spend less.
Homeownership: Affordable No More For Many Americans
The study also highlights a sobering reality regarding homeownership. Among Americans who do not currently own homes, a majority believe they will never be able to afford buying one. This sentiment is particularly acute among Gen Z, who feel increasingly priced out of the housing market.
A Glimmer of Optimism Amid Financial Insecurity
While financial insecurity remains high nationwide, there are positive signs. Fears of a U.S. recession have lessened, and financial discipline has improved, reversing a five-year decline in money management behaviors. The study notes that less than half of U.S. adults believe the “American Dream” remains attainable for most, underscoring ongoing concerns about financial stability and upward mobility.
About Northwestern Mutual’s Planning & Progress Study
Northwestern Mutual’s Planning & Progress Study is an annual, proprietary research initiative exploring the financial attitudes, behaviors, and concerns of Americans across demographics. The 2025 edition provides a comprehensive look at how individuals and families are navigating inflation, debt, spending, and broader economic trends to secure their financial futures.
For those concerned about inflation’s impact or shifting debt burdens like medical expenses, experts recommend engaging in proactive financial planning. Insurance products such as disability insurance may help protect earning power amid unexpected challenges, while budgeting and debt management can foster resilience against rising costs.
As Americans confront persistent inflation and evolving financial priorities, informed decisions and strategic planning remain essential to achieving long-term security and peace of mind.