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High inflation has prompted even wealthy Americans to rethink their spending habits.
But one group — affluent millennials — are more likely to lie or exaggerate their finances to appear financially successful, according to a recent survey from Wells Fargo.
That’s for 34% of affluent millennials compared to just 20% of Gen X or 4% of baby boomers.
More than half of wealthy Americans have cut back on luxury purchases after the pandemic. Additionally, most said they would wait until items were marked down before they bought them.
Yet wealthy millennials — with $250,000 to more than $1 million in investable assets — will try to appear wealthy.
Wells Fargo found that 29% of affluent millennials admit they sometimes buy things they can’t afford to impress others.
Meanwhile, 41% of affluent millennials admit to financing their lifestyles with credit cards or loans, compared to 28% of Gen Xers and 6% of baby boomers.
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More than half – 51% – of wealthy millennials say their efforts are working, with people believing they are richer than they are.
But they are paying a price, with 40% reporting that they have taken on more debt than they would like.
Affluent millennials are being hit hard by inflation, a high cost of living and the resumption of federal student loan payments, if they’re still carrying debt, said Emily Irwin, managing director of advice and Wells Fargo planning.
“But they want to have a reflection of, ‘We’ve worked hard, and therefore we’re successful, and we can still do everything we want to do,'” Irwin said.
Money is still a taboo topic
Despite the displays of wealthy lifestyles seen on social media, two-thirds of individuals surveyed are reluctant to talk about money, according to Irwin.
“It seems like a really quiet journey that individuals have,” Irwin said.
Women are especially hesitant to discuss financial topics, other than income.
Meanwhile, men are reluctant to talk about their income, although they are willing to discuss most other financial topics, including investments, balance sheets and debt.
Silence around money can encourage illusions about how much money other people have, according to Irwin.
No matter what someone’s financial picture is, it’s easy to draw conclusions from what they describe on social media, Irwin said.
“There’s this tension between appearance and appearance and taking on debt,” Irwin said.
While people may be willing to describe a certain lifestyle — and the balance sheet needed to support it — it’s important to remember that that may or may not be true behind the scenes, he said.
Not spending money is the key to becoming rich
Most of people’s behavior comes from their money stories – How did they grow? How do they raise money? And how does that impact their spending and saving habits today?
People who are trying to show off wealth tend to come from poor homes and also don’t have that much money or net worth, says Brad Klontz, a certified financial planner and expert in financial psychology and ethical behavior. Klontz is also a member of the CNBC FA Council.
“It’s just not representative of how most people get rich and how most rich people spend their money,” Klontz said.
The richest individuals don’t show you their wealth on Instagram or show you their designer labels and Gucci belts, he said. Instead, they are often enthusiastic about savings.
“The only way to grow your net worth is to not spend your money,” Klontz said.
Before buying discretionary, ask yourself a few questions first, Irwin suggests.
First, do you have enough cash flow to support the expenses?
Second, do you have enough money saved for emergencies?
Also, are you paying yourself into a retirement plan, through an employer or self-directed IRA?
“Those are the kinds of things you want to know when you first put on your oxygen mask,” Irwin said.
“Only after we can really think, ‘Hey, is the splurge worth it, given the overall financial picture?'” he said.