Why So Many Americans Feel Financially Squeezed, Even When the Economy Looks Strong
Rising costs in the wrong places, shrinking buying power, and record household debt have created a historic pressure on U.S. families, one that crosses income levels.
Holly Springs, NC, Dec. 1, 2025 — If the job market is strong, wages are up, and inflation is supposedly “cooling,” then why do so many families say they’re struggling to keep up?
The answer is not found in one data point. It’s the combination of what is rising in price, how quickly buying power has fallen, and how households are filling the gap.
Together, these trends create the financial “squeeze” that millions of Americans, including many six-figure earners, say defines their daily lives.
The essentials are rising, not the extras
First, it matters which prices are going up.
Federal Reserve inflation data shows that the most significant increases are in the categories households can’t avoid:
Rent of shelter: up sharply from last year
Services: rising faster than wages
Transportation services: more expensive trips, repairs, and insurance
Services (less energy): strong, persistent increases
These are the recurring bills that shape a family’s month: the mortgage, rent, car insurance, childcare, medical care, after-school programs, and repairs.
Meanwhile, the prices that get national headlines, TVs, clothing, and electronics, have barely moved:
Video & audio products: almost flat
Apparel: flat
Durables (cars, appliances): modest increases
This mismatch explains why “inflation is slowing” doesn’t feel like relief.
Households don’t budget around TVs and jeans.
They budget around rent and insurance.
And those costs aren’t slowing down.
A century-long story: the shrinking value of the American dollar
The US historical Consumer Price Index (CPI) data, spanning 1913 to 2025, shows just how dramatically buying power has eroded over time.
A dollar in 1913 buys what $33 buys today.
A dollar in 1950 equals roughly $14 today.
A dollar in 1980 equals about $4 today.
A dollar in 2019 equals roughly $1.29 today.
Most of that decline happened gradually. But between 2019 and 2025, households lost an additional 20–25% of their buying power, one of the sharpest five-year declines in modern history.
This is the root of the confusion many Americans feel: They are earning more money in dollar terms but getting less in return.
How the squeeze shows up in a household budget
For many middle-income families, here’s what “normal” looks like in 2025:
Mortgage or rent: $2,000–$3,000+
Childcare: $800–$1,600
Car payment + insurance: $800–$1,400
Health insurance + bills: $600–$900+
Utilities and internet: $300–$500
Groceries: $800–$1,000
Gas and transportation: $250–$400
Before saving a dollar, a household can easily face $6,500–$8,500 in fixed expenses, even with two working adults.
A decade ago, rising income could keep pace with, or even outrun, rising costs. Today, the costs are winning.
Debt is filling the gap, and that’s a warning sign
The New York Federal Reserve’s third-quarter 2025 Household Debt and Credit Report shows how families are coping:
Total household debt: record $18.59 trillion
Credit-card balances: record $1.23 trillion
Mortgage balances: still climbing
Auto loans: subprime delinquencies at record highs
Student loans: delinquencies rising now that reporting has resumed
The average household isn’t crashing into bankruptcy, but it is using more credit to maintain its lifestyle.
This doesn’t point to reckless spending. It points to structural pressure, a sign that paychecks alone don’t cover the modern cost of living.
Even six-figure earners are feeling the squeeze
A national survey from late 2025 shows the squeeze is not confined to low-income households:
64% of households earning over $100,000 say six-figure income now feels like “survival mode.”
75% said they used credit cards recently because cash ran short.
52% say the American Dream feels out of reach.
These are nurses, teachers, two-income professionals, government workers, tech employees, people who traditionally formed the financial backbone of the middle class.
Their expenses climbed faster than their wages.
Their buying power fell faster than their pay rose.
And their safety margin vanished.
Why the economy looks strong while families feel weak
This is the disconnect shaping the national mood:
Economists see:
low unemployment
slowing inflation
solid wage growth
healthy GDP
rising household wealth
Households feel:
rent increases
insurance hikes
medical bills
shrinking savings
rising credit card balances
no margin for emergencies
Both can be true.
The economy is strong on paper.
Life is expensive in practice.
A new normal: not collapse, but chronic tightness
There is no sign of a consumer collapse. Banks, employers, and households are stable.
But the “squeeze” has become a long-term reality:
Families delaying homebuying
Parents cutting back on summer camps and sports
Young adults staying in rentals or living with family longer
Retirements postponed
Workers taking on gig jobs
Households are saving less and relying more on cards
Even high earners feel financially vulnerable
This isn’t a crisis like 2008. It’s a slow, grinding pressure that shapes everyday decisions.
Bottom line: The squeeze is real, historical, and reshaping the middle class
The financial stress people feel today didn’t appear out of nowhere.
It’s built on:
A century of declining buying power
A pandemic-era spike that accelerated the trend
Rising costs in the most unavoidable parts of life
Wage gains that can’t keep up with essentials
Record household reliance on debt
A national sentiment that prosperity feels harder to reach
America’s middle class is not disappearing. But it is being stretched, thinned, and reshaped by forces larger than any one month of inflation data or one year of wage growth.
The squeeze is not imagined.
It’s measurable.
It’s historical.
And it’s affecting households up and down the income ladder, whether they admit it publicly or feel it privately.
Background Sources
Federal Reserve Bank / Bureau of Labor Statistics. Historical Consumer Price Index (CPI), 1913–2025.
Federal Reserve Bank of New York. Household Debt and Credit Report, Q3 2025.
U.S. Bureau of Labor Statistics. CPI category-level data (Shelter, Services, Energy, Commodities, Purchasing Power of the Consumer Dollar), September 2025.
U.S. Bureau of Labor Statistics. The Employment Situation - September 2025.
The Harris Poll Thought Leadership Practice. Income Paradox Survey November 2025 — Survey data on financial stress, six-figure households, and sentiment around affordability.
About the Author
Christian Hendricks (christian.hendricks@hollyspringsupdate.com) is the publisher of Holly Springs Update, a local community news publication serving the South Wake (NC) area. From time to time, he pens stories and opinions of national and regional interest.