Americans are bracing for continued economic headwinds in 2025, with half expecting inflation to rise further and a majority believing their incomes can’t keep pace. That’s from Northwestern Mutual’s newly released 2025 Planning & Progress Study. For the credit and collection industry, it’s a clear signal that consumer finances remain tight — and that new and existing debt could rise, especially as individuals juggle higher prices and lingering economic concerns.
Why It Matters:
- Ballooning Costs: Inflation weighs heavily on consumer wallets, from the grocery aisle to utilities and childcare. More than half say inflation is the No. 1 barrier to financial security.
- Debt Shifts: Medical debt has overtaken student loans as a top source of non-mortgage debt for Millennials, pointing to new challenges in underwriting, collections, and financial planning.
- Housing Hurdles: The majority of Americans without a home believe ownership is permanently out of reach. For Gen Z, nearly half remain pessimistic, highlighting potential opportunities (and risks) in lending and alternative financing products.
By the Numbers:
- Inflation Fear: 65% cite inflation as their dominant financial concern.
- Slowing Incomes: 52% say their income growth lags behind rising prices; only 11% think they’re outpacing inflation.
- Medical Debt Rising: 11% of Millennials list medical bills as their top debt source — edging out student loans (10%).
- Homeownership Doubt: 53% of non-owners believe they’ll never afford a home, though Gen Z is slightly more optimistic than older cohorts.
- Declining Debt: Americans’ average personal debt (excluding mortgages) dipped to $21,500, down from $22,713 last year.
Zoom In:
- “Spend Z”: Despite student loan concerns, 40% of Gen Z expect to spend more on non-essentials this year, surpassing all other generations. Yet fewer than one in five say their earnings outpace inflation, indicating potential strain on future debt loads.
- Recession Relief: Fears of an imminent U.S. recession have softened — 48% now expect one versus 67% in 2023. Alongside that, there’s a modest uptick in Americans labeling themselves “disciplined planners.”
