As recent reports shine a light on millennials’ financial gains, the narrative surrounding this generation is shifting dramatically. Once labeled “lazy” and “entitled,” millennials have made substantial strides in building wealth. According to analysis by the St. Louis Federal Reserve, millennials collectively hold approximately $15.95 trillion in net worth as of 2022, a significant increase from their $3.94 trillion worth in 2017. However, the stark contrast between their growing wealth and their self-perception reveals a deeper issue: the sensation of “phantom wealth,” a term that encapsulates the dissonance many millennials feel between their financial status on paper and their daily economic realities.
The phenomenon of phantom wealth manifests most prominently in illiquid assets, such as property and retirement accounts. While the value of homes has surged—jumping 44% between 2019 and 2022—this appreciation often fails to equate to immediate financial security. Michael Liersch, Wells Fargo’s head of advice and planning, emphasizes that unless millennials are prepared to downsize their homes, they cannot effectively capitalize on their property’s increased value. The emotional and practical barriers to leveraging this wealth contribute to a prevalent sense of insecurity among younger generations, despite the ability to boast impressive figures in wealth assessments.
Brett House, an economics professor at Columbia Business School, points out the contradiction in the term “phantom wealth,” asserting that wealth either exists or it doesn’t. Still, he acknowledges that millennials have indeed witnessed a significant leap in their financial standing, surpassing expectations with median wealth estimates significantly above where they were predicted to be. This paradoxical experience of feeling rich yet not perceiving oneself as financially sound reflects the complexities of modern economic life.
Adding to the complexity of this financial landscape is the prevalence of HENRYs—an acronym for “high earners, not rich yet.” Research indicates that the experiences of millennials are not isolated; this sensation of relative deprivation affects many across generations. Even as many millennials report salary increases and an overall positive outlook toward future earning potential, the realities of inflation and economic instability weigh heavily on their financial comfort. The management of risk related to employment, healthcare, and other crucial aspects of economic well-being has shifted to individuals at a time when prices are escalating, fostering a general sentiment of being financially overwhelmed.
Sophia Bera Daigle, a financial planner for millennials, articulates this sentiment clearly: younger individuals today are grappling with burdens their parents were spared. Factors like student loan debt, high mortgage costs, and expensive child care have compressed their cash flow, making it increasingly challenging to save or plan long-term. While many millennials have made marked progress toward financial goals, they feel a daunting distance remains to achieve true financial independence.
It is essential to understand that financial security is often contingent less on the total net worth and more on one’s ability to live within their means. Experts assert that a crucial aspect of feeling secure revolves around managing expenses effectively. Rising costs can produce a sense of being overextended, fueling frustration and confusion surrounding financial management. CFP Kamila Elliott highlights that clients frequently inquire about the destination of their money amid inflationary pressures and increasing expenditures.
With constant reminders of rising living costs, millennials are often compelled to reconsider their spending habits, reflecting a reality where discretionary spending may have to be curtailed to maintain a healthier cash flow. From dining out to vacations, lifestyle adjustments are necessary to ensure a more balanced budget, allowing for a better financial future.
The millennial generation undoubtedly stands at a complex crossroads of financial opportunity and challenge. They have demonstrated commendable progress in accumulating wealth relative to previous generations, but the feeling of financial security remains elusive for many. As economic pressures mount, embracing sound financial practices and adapting to changing circumstances will be paramount for sustaining and enhancing their wealth trajectory.
Contact with financial experts can help millennials navigate this shifting landscape, ensuring their impressive progress on paper translates into tangible financial wellbeing. Ultimately, achieving a sense of financial security relies on both understanding one’s wealth and developing disciplined habits to manage expenses effectively in an ever-challenging financial environment.