Middle-Income Americans Face Financial Uncertainty Amid Inflation

The economic landscape of 2025 continues to present significant challenges for middle-income Americans, with inflation remaining a dominant concern. According to Primerica’s latest Financial Security Monitor™ (FSM™), the lingering effects of inflation are shaping how middle-income families manage their money and plan for the future. Despite some signs of cautious optimism, the financial stress remains palpable, with many feeling that their income is not keeping pace with the rising cost of living.

The Primerica Household Budget Index™ (HBI™) provides a snapshot of the financial well-being of middle-income households. In December 2024, the average purchasing power of middle-income families rose to 100.9%, a modest 1.1% increase compared to a year ago. This slight improvement was driven by falling gas prices and a 4% year-over-year increase in income. However, these gains have not translated into a significant improvement in financial sentiment. Glenn J. Williams, CEO of Primerica, noted, “Small improvements in the purchasing power of middle-income Americans are not impacting how they are feeling about their financial futures. They are still feeling the pinch of not being able to make ends meet over the past few years.”

The data from the FSM™ reveals a grim picture. About 65% of respondents stated that their income is not keeping up with the cost of living, marking the 14th consecutive quarter this figure has remained at or above this level. Inflation remains a dominant concern, with about half (51%) of respondents feeling stressed about the rising cost of living. This financial stress is further exacerbated by the fact that a majority (55%) of respondents reported they would be worse off or the same financially in the next year, with a majority (55%) rating the condition of their personal finances negatively.

Generational differences also play a significant role in financial sentiment. About 57% of middle-income Americans report feeling stressed about money and finances, with notable differences across generations. Millennials, Gen X, and Gen Z report significantly higher stress levels compared to Baby Boomers. Importantly, those who work with a financial professional are more likely to feel hopeful and confident about their financial future.

The economic challenges faced by middle-income Americans are not limited to inflation. Credit card debt and concern over it are rising. More than one-third (35%) of middle-income Americans say their credit card debt has risen in the past three months, and less than one-third (31%) are paying off their credit card in full each month. Nearly half (44%) are more worried about their credit card debt than they were a year ago, the highest level of concern since the question was first introduced in March 2023.

In response to these challenges, middle-income Americans are turning to various strategies to mitigate the impact of inflation. Investing in inflation-linked bonds and commodities, such as Treasury Inflation-Protected Securities (TIPS) and gold, can help hedge against inflation risks and preserve the purchasing power of investments. Certain industries, such as energy and healthcare, are more resilient to inflation and may offer stable returns. Dividend stocks in sectors like consumer staples, utilities, and telecommunications can provide a steady income stream and help investors maintain their purchasing power during inflationary periods.

However, the effectiveness of these strategies in the long term depends on various factors, including market conditions, individual risk tolerance, and financial goals. Diversification across various asset classes, sectors, and geographies can help investors achieve a balance between inflation protection and growth opportunities. Regular portfolio rebalancing can ensure that investments align with an individual's risk tolerance and financial goals.

In conclusion, the current economic climate, particularly the lingering effects of inflation, significantly impacts the financial decision-making processes of middle-income Americans. They are employing strategies such as seeking traditional financial advice, working with financial professionals, and investing in inflation-protected securities and real assets to mitigate these challenges. However, the road to financial stability remains uncertain, and middle-income Americans will need to continue adapting to the changing economic landscape.