Why are 26% of Americans living beyond their means amid this alarming trend of overspending?

More than a quarter of Americans say they spend more than they earn, one measure in recent surveys that show American household finances are under increasing pressure.

Spending is outpacing income at a higher rate, and more people are finding it difficult to pay bills

In its triennial National Financial Capability Study released over the summer, the Financial Industry Regulatory Authority (FINRA) reported that 26% of Americans say they spend more than they earn, up from a previous range of 18% to 20%. The survey, conducted in the second half of 2024, included about 500 adults from every US state and Washington, D.C., for a nationally representative sample of more than 25,500 participants.

American consumers are showing signs of stress, reversing much of the financial progress they have made since 2009, according to the survey. For the first time in its six editions, the percentage of Americans who said they had “no difficulty at all” paying all of their bills fell from a record high of 54% in 2021 to 44% in the latest poll.

“The 2024 National Financial Resilience Study reveals a troubling shift in Americans’ financial resilience,” Jerry Walsh, president of the FINRA Foundation, said in a statement. “After more than a decade of improvements, we are seeing many families – especially in the middle-income brackets – struggling financially despite stable income. This ‘clash in the middle’ suggests that rising costs are creating financial pressures on a broader segment of the population.”

The survey also found that people are less satisfied with their finances. 63% of people said thinking about their personal finances makes them feel anxious, up from 56% in 2021. Nearly 35% said they definitely or probably wouldn’t be able to come up with $2,000 for unexpected expenses, up from 30% in the previous survey.

Financial concerns affecting the mental health and sleeping habits of Americans

Many Americans don’t expect rising expenses to slow. In Northwestern Mutual’s Planning and Progress study, about 52% of adults said inflation was increasing faster than their income. Nearly two-thirds described inflation as the biggest threat to their finances this year, and 44% said it remained the biggest obstacle to their financial security.

This feeling of inflation as a concern also impacts Americans’ mental health, with 69% of more than 4,600 Americans who participated in Northwestern Mutual’s January survey saying they struggled with depression or anxiety about financial thinking, and 63% saying these concerns affected their sleep.

“Home, children, groceries and gas: All of these higher prices are having a big impact on people’s budgets, and most Americans believe these challenges will grow,” John Roberts, chief field officer at Northwestern Mutual, said in a statement.