Why Americans Feel Broke, Even When Incomes are Rising
If Incomes Are Rising, We Do We Feel So Broke?
It happens to almost all of us. You get to the end of the month and you’re out of money. It's an awful feeling and in the moment we all try to promise ourselves that we "won't do this again", but it keeps happening.
Take it another step, and you realize that you might not be able to afford a vacation this year.
You try to not dip into savings, Your retirement account isn't getting any new deposits and you feel farther and farther behind.
Why is this happening? You got a good raise this year, so why do you still feel broke? The data tell us why:
- In a Gallup poll released in April 2026, 55% of Americans say their financial situation is getting worse.
- A survey done by Capital One and The Decision Lab found that 77% of Americans are anxious about their financial situation.
- Median U.S. household income grew by 21% from 2019 to 2024, going from $68,700 to $83,730.
What’s going on here? Income is not keeping up with rising costs and social pressures magnify perceptions of falling behind others.
Rising Costs
Even with incomes going up, most cost increases are going up faster, putting people in a situation where they can now afford less even though they earn more.
- Energy prices increased 17.9 percent between March 2025 and March 2026.
- Grocery prices are up 2.9 percent from 2025 to 2026 Apparel and clothing increased by 3.8 percent since 2022.
- Imported goods are up 6.6% from 2024
- Domestic goods are up 3.8% from 2024
No one individual cost will break a budget, but if most items now cost 2% to 18% percent more, it’s easy to see how people can afford less despite earning more money.
Increased Debt
Consumer debt is also up in the United States. At the end of 2025, it hit a record $18.8 trillion. This number includes all debt types, from credit card debts and vehicle loans to mortgages. And it breaks down to over $105,000 per U.S. household. This debt puts more pressure on all of us as consumers, as we have to pay more to manage our debt just as we have to pay more for the same goods and services we need daily.
Some of the largest debts that U.S. consumers face come in the form of mortgages, student loans, and medical debt.
- The average mortgage debt climbed 26 percent since 2019.
- The average student debt increased 3.2 percent between 2024 and 2025.
- 36 percent of U.S. households had medical debt in 2024
- 21 percent had a past-due medical bill in 2024
These debts make people feel poorer because, as debts increase, that means less money spent on other expenses. According to a study by KFF, most people with medical debt have cut back on household spending to pay their debts and more than 40 percent say they or a household member has used a significant part of their savings to pay for healthcare debt.
Lifestyle Creep
Lifestyle creep is when spending rises alongside your income. It’s easy to see how this happens. You get a raise or a new job that pays more, and you suddenly have the ability to buy things that you couldn’t buy before. For example, may you only bought the store brand, but now you “move up” to brand name products because you can fit them into your budget. Another common scenario is eating out more or ordering food delivery more frequently as you earn more, because now you can afford it.
This phenomenon happens everywhere, with many different purchases and even in many different income levels. Even among Americans who earn between $300,001 and $500,000, 41% of those surveyed said that they are living paycheck-to-paycheck. As your income increases, so does your spending, and eventually you save less than you did before. This is especially true if you’re trying to keep up with celebrities, influencers, and what you see on social media.
Incomes Aren’t Rising Equally
While incomes for many Americans are generally rising, they’re not rising at the same rate.
- Between 1979 and 2022, income for the top 1 percent of earners increased 277 percent
- Between 1979 and 2022, income for the middle fifth of households increased just 26 percent
It is sometimes called the “K-shaped” economy, where higher-earning consumers are able to buy more, while lower-income households struggle to afford expenses. Income concentration and income inequality is now at a 60-year peak. This means that while the average salary may be increasing, expenses are growing at a far faster rate for many Americans.
What This Means
The fact that many Americans feel poorer is certainly a reflection of reality for most of us. When people feel poorer, they spend less and they’re more conservative with their purchases.
Solving this problem means looking at the actual numbers. How much do you earn? How much do you spend? How much are you able to save? What do you need to change in order to spend wisely and take the pressure off your own financial situation.
Take a look at another of our blogs about how to create and stick to a budget when money is tight.
Other Articles Of Interest:
Make sure to check out other great articles about money management and ways to save, including:
Zero Based Budgeting vs. Traditional Budgeting: Which Works Better For Consumers
Why Most Budgets Fail After 30 Days - And How To Succeed
How to Stick To a Budget When Money is Tight
10 Monthly Bills That You Can Negotiate
Sources
https://www.cbsnews.com/news/americans-finances-getting-worse-gallup-poll-2026
com/news/americans-finances-getting-worse-gallup-poll-2026
https://www.cnbc.com/select/how-to-take-control-of-your-finances/
https://tradingeconomics.com/united-states/personal-income
https://finance.yahoo.com/news/mapped-where-incomes-rising-fastest-225303270.html
https://www.usatoday.com/story/grocery/2026/05/14/grocery-prices-increasing-save-money/90058639007/
https://www.empower.com/the-currency/play/clothing-shoes-spending-news
https://www.hbs.edu/bigs/us-trade-tariffs-increasing-prices
https://www.cnbc.com/select/average-american-debt-by-age/
https://www.lendingtree.com/student/student-loan-debt-statistics/
https://academic.oup.com/healthaffairsscholar/article/3/8/qxaf159/8230391
https://www.kff.org/health-costs/kff-health-care-debt-survey/#c7f7c77b-dec4-4baf-bed1-78e3522b4f46
https://www.epi.org/blog/rising-inequality-is-the-root-of-affordability-problems/
https://www.usbank.com/corporate-and-commercial-banking/insights/economy/macro/k-shaped-economy.html
https://hbr.org/2025/01/research-what-explains-the-vibecession
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