What Is “phantom Wealth” (and What to Do If You Have It)
Gone are the days when avocado toast was blamed for an entire generation’s money problems. In fact, the stereotype of “millennial money problems” may not be quite what it seems at first glance. Millennials in the United States have seen their wealth nearly quadruple since 2019, according to the Federal Reserve . And yet , time and time again , millennials report feeling financially insecure.
This gap between numerical wealth and actual financial well-being has been called “phantom wealth” – money that exists in theory but does not lead to a sense of security or freedom in everyday life. Here’s why millennials may still feel financially vulnerable, and how you can regain a sense of control over your finances.
What is “phantom wealth”
You might have a sizable 401(k) balance , equity in your home , or a six-figure salary, but you’ll still feel anxious about your finances. Typical measures of wealth—property, retirement accounts, investments—can create an illusion of financial security that quickly evaporates when we face the reality of monthly budgeting, debt obligations, and lifestyle expectations.
Several factors contribute to this phenomenon:
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Illiquid assets . Much of your net worth may be tied up in retirement accounts, home equity, or other investments that are not available without penalties or major life changes.
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High fixed expenses : Mortgage, car payments, student loans and other recurring obligations can eat up a significant portion of even significant income.
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Lifestyle inflation : As income increases , spending habits often expand , creating a constant sense of financial constraint, regardless of salary.
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Regional cost of living : A salary of $150,000 may provide enough comfort in some areas, but barely covers the needs in expensive cities.
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Future uncertainty : Concerns about inflation, market volatility and potential economic downturns can undermine confidence in even significant financial resources.
What it comes down to is that feeling financially secure means being able to spend less than you earn (even if you earn a lot). When your lifestyle requires less than your income provides, you gain breathing room in your monthly budget, the ability to handle unexpected expenses, and freedom from the anxiety that comes with living on the edge of a financial crisis. So, even though millennials have made significant strides over the past few years, the feeling of phantom wealth is justified.
How to feel real financial security
The first step to turning phantom wealth into true financial wealth is understanding your current reality. I highly recommend auditing yourself —you might be surprised to find out where your money is actually flowing.
Track your cash flow
Start by analyzing three months of expenses across all accounts. Categorize expenses and identify patterns without judgment. This kind of basic awareness is necessary before you can make meaningful changes.
Fixed recurring expenses create the most significant cash drain. Explore yours:
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Housing expenses (mortgage/rent, property taxes, insurance)
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Vehicle expenses (payments, insurance, maintenance)
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Subscription Services and Memberships
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Insurance premiums
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Debt payments
Even small reductions in these categories can significantly improve your monthly cash flow and create greater financial flexibility.
Create conscious spending priorities
Instead of trying to budget for every dollar, focus on being intentional. Ask yourself:
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Does this spending align with my core values?
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Will this purchase provide lasting satisfaction?
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Am I spending money on this out of habit, under social pressure, or out of a sincere desire?
The goal isn’t necessarily minimalism, but being mindful of where your money goes .
Replenish your stock for a rainy day
While retirement accounts and home equity are important, having cash available provides immediate financial security. Goal to build:
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An emergency fund that covers basic expenses for approximately six months.
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A separate fund of opportunities for potential investments or large purchases.
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Cash reserves for expected major expenses over the next 1-3 years
These liquid assets turn theoretical wealth into practical financial freedom.
Develop a long-term financial roadmap
A lot of uncertainty comes from simply not understanding where your finances are now and what your plans are for the future. Create a simple but specific solution plan:
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Your target retirement age and lifestyle
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Major financial milestones (financing education, buying a home, etc.)
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Income Diversification Strategies
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Approaches to tax optimization
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Estate Planning Guidelines
Review this plan annually and adjust it as circumstances change. Perhaps the most important aspect of solving the problem of phantom wealth is not to chase ever-higher income or investment returns, but to create sustainable financial habits that allow you to consistently live within your means while steadily building true wealth. By focusing on managing your cash flow, spending on purpose, and building liquid reserves, you can ignore the headlines and regain your sense of practical financial well-being.