Millennials face financial challenges unlike any other generation, with worries about high housing costs, impending student loan payments, compounding interest on credit card debt, and more. However, they are still the generation that is most obsessed with money and likes to show it off.
A recent Wells Fargo survey found that more than half of affluent Millennials say they have been “significantly affected” by the cost of living crisis, but 59% are asking others to be financially successful. I feel that being visible is important. This is another sign of “financial dysmorphia” (as Intuit Credit Karma has named it), where people become so obsessed with the idea of getting rich that they lose sight of the actual state of their finances. I'll put it away.
More importantly, Wells Fargo's research actually focused on “wealthy” Millennials with annual incomes of $250,000 or more. This means it's not just low-income young people who feel the need to catch up to the Joneses, so to speak. More than 40% of the roughly 1,000 respondents said it was important to have visible signs of wealth, such as buying luxury cars, clothes, or a place to live. In contrast, only 21% of Gen Xers, 8% of Baby Boomers, and 7% of Silent Generations feel the same way.
“The fact is that affluent millennials are working hard and achieving financial success,” says Emily Irwin, managing director of advice and planning at Wells Fargo. luck. “But they are struggling with this external image, and as a result, they are more likely to present themselves in a less introspective image.” [of] their actual financial situation. For some, it can even become a 'fake it till you make it' mentality. ”
According to research from Wells Fargo, even some of the wealthiest millennials face financial dysmorphia, with more than 40% having to rely on credit cards or loans to finance their lives; On the other hand, it is shown that he is accumulating debt. According to LendingTree, the national average debt for credit card holders in the fourth quarter of 2023 was $6,864. And Millennials are among the consumers most struggling with unpaid balances.
“Millennials have seen the largest increase in delinquency rates, and their delinquency rates are now firmly above pre-pandemic levels,” New York Fed researchers said in a November 2023 press conference. “These increases are somewhat surprising given the strong labor market and overall economy.”
Social media fuels spending anxiety among millennials
But given how easily and how often Millennials are influenced by social media, whether in the form of advertisements or subtle (or not-so-subtle) nudges from influencers, , it's not really surprising how much money Millennials are spending.
“We live in a hyper-sexualized, distracted, and visually controlled society, where everything is now narrowly tailored to the confines of an infinite scroll,” said First Foundation Bank. said Christopher M. Naguibi, executive vice president and chief operating officer. luck. “Endless photos and videos are placed in front of the viewer's eyes. It is human nature to want to be equally beautiful, well-traveled, and above all wealthy.”
And data shows that wealthy Millennials are no exception. According to a Wells Fargo study, nearly 30% of people say they buy things they can't afford to impress others or “fit” into a certain lifestyle, and an additional third said they lie or exaggerate about their financial situation to maintain appearance.
“For Millennials, being the first generation of the internet, 'keeping up with the Joneses' means more than just eating the best food in your neighborhood or neighbourhood; it has to align with the consumption levels of a wider range of people. “It means they feel pressure to become better,” said Jonathan Earnest, an associate professor of economics at Case Western Reserve University. luck. “This also means that Millennials may enjoy more benefits from owning luxury goods, as they have a larger online presence and are more visible to colleagues than just their peers. Because your friends, family, and followers will admire you.”
But Irwin warns that this “pretense” is not sustainable.
“It's a vicious cycle because most people are reluctant to talk about their actual situation, and instead the image of 'I'm living my best life' gets spread,” Irwin says. “It would be great if the trend of sharing what you've done to be financially responsible now caught on. Everyone should be able to 'put their cards on the table' and not take criticism or embarrassment.” How free!”
Millennials aren't letting inflation, debt, and student loans get in the way of a luxurious lifestyle
Despite being highly educated and carrying significant student loan debt, millennials are avoiding these long-term costs and choosing instead to live in the moment, experts agree. .
“Coupled with the fact that Millennials as a whole are likely to value luxury goods more after working hard to become the most educated generation in American history, small splurges on luxury goods are It's understandable that it seems like a trivial expense considering the circumstances of “Student loans and housing costs can seem at first glance insurmountable,'' Ernest says.
But in some cases, relatively low yields on savings accounts may make it make sense for Millennials to make big purchases like buying a home, even when mortgage rates are high.
Millennials “may have rationalized that it makes more sense to buy their dream home than allocate their funds to a savings account that doesn't yield high interest rates,” Irwin said. “And assuming they have money set aside for emergencies and don't have revolving debt like credit card debt, that might make sense.”
When it comes to tips for combating money-related dysmorphia, experts agree that thinking long-term about your purchases can make a difference. Irwin said he urges millennials not to make “consumer decisions” or “expensive purchases” by buying new items, and also encourages millennials to consider long-term financial planning. It is said that there are some people.
“Considering the opportunity cost of paying off a high-interest loan and spending a dollar today in terms of lost ability to earn interest on investing tomorrow means that Millennials are realizing that the cost of their next luxury purchase is really It helps you reconsider whether it's worth it,” Ernest says.