One-third of Americans are feeling more financially insecure than ever, up from 27% last year and representing the highest cohort ever recorded, according to a study by Northwestern Mutual Planning & Progress.

Survey participants blame a one-two punch of rising inflation and wages that fail to keep pace with elevated consumer prices.

'Financial shock fatigue' and fragility are holding people back from positive feelings about their own financial security, said Christian Mitchell, Northwestern Mutual’s chief customer officer.

“The pace and scale of the financial uncertainty around them is leading to greater feelings of anxiety, analysis paralysis and an overriding sense that they're always reacting instead of controlling their own destiny,” he continued.

Over half (54%) of survey participants are bracing for higher inflation this year after the annual CPI rose 3.2% in February. Worse, 52% of adults bemoan inadequate wages that aren’t keeping up with higher inflation.

On the flip side, only a mere 9% of consumers are confident that their income is growing faster than inflation.

But the growing financial fragility isn't just a result of lower purchasing power; it is also linked to financial discipline, which has been free falling since the pandemic.

In 2024, only 45% of consumers described themselves as disciplined financial planners, a 20 point drop compared with 2020 levels.

You only live once

Since the pandemic, Americans are increasingly embracing the “you only live once” (YOLO) attitude, tossing aside the financial habits they practiced when the world was in greater flux.

While consumer savings balances soared during the 2020-2021 era, buoyed by a combination of government handouts and curtailed spending, that habit has since fallen by the wayside for many.

“During the most acute period of the pandemic, we saw a distinct rise in financial discipline, but in the ensuing years, there’s been drift. At a time when people are feeling unstable about their financial futures, we’re encouraging clients to prioritize planning and discipline like it was 2020 again,” said Northwestern’s Mitchell.

Even though households have already depleted pandemic savings and ammased record debt, many data points, including growing discretionary spending, show that they're still spending like there's no tomorrow.

Nearly two-thirds (59%) of adults polled admit spending this year will be flat or higher versus 2023, while just over one-third will cut down on spending.

Younger generations are feeling the least encumbered, with Gen Zers representing the largest cohort of higher spenders at 36%, followed by Millennials at 28%.

Northwestern’s Mitchell, however, pointed out that wealth has accelerated among Americans under the age of 40 faster than any other generation since Covid.

That's all thanks to a combination of automatic enrollment in 401(K) plans, federal stimulus checks, and student loan pauses, paving the way for them to spend and invest their money instead of saving.

“But as uncertainty levels rise, there are signs that Americans up and down the age spectrum are hunkering down,” he warned.

Roiling recession

There are plenty of reasons for Americans to feel financially insecure, not least the possibility of a recession rearing its head.

While green shoots of economic recovery have started to emerge, it has been one step forward and two steps back, preventing consumers from feeling any lasting relief in their wallets.

In response, a colossal 54% of adults in the Northwestern survey believe the U.S. economy is headed for a recession this year.

While the count is down from more than two-thirds of consumers fearing a recession in 2023, results continue to alarmingly hover in the double-digit percentage range across generations.

Economist David Rosenberg, who spearheads Rosenberg Research, tends to agree, forecasting that U.S. economic contraction is four times more probable than an expansion this year.

The reality is that as Americans whittled away at their hard-earned savings, they failed to prepare for a wave of higher costs that was in store, as the price for housing, dining out, and even healthcare has all climbed higher.

While debt levels have also risen, due in part to the rise of easy credit through products like buy now pay later, only 27% of those polled consider their personal obligations the greatest hurdle to financial security.

“My main concern is those with YOLO dreams colliding into a recession reality,” Mitchell said.

Many consumers are prepared to go in defense to combat financial insecurity. But the experts at Northwestern Mutual suggest taking a different tack.

When it comes to money matters, go on offense, even if it means enlisting the help of a financial professional.