What Is ‘Phantom Wealth’ (and What to Do If You Have It)

Gone are the days of blaming an entire generation's money problems on avocado toast. In fact, the stereotype of "millennial money problems" may not be quite what it seems in the first palce. Millennial wealth in the U.S. has nearly quadrupled since 2019, according to Federal Reserve data. And yet, time and time again, millennials report feeling financially insecure.

This disconnect between numerical wealth and actual financial wellbeing has been termed "phantom wealth—money that exists in theory, but it doesn't translate to a sense of security or freedom in daily life. Here's why millennials might still be feeling financially vulnerable, and how you can regain a sense of control with your own finances.

What is "phantom wealth"

You might have a substantial 401(k) balance, equity in your home, or a six-figure salary, yet still experience anxiety about your finances. The typical markers of wealth—property, retirement accounts, investments—can create an illusion of financial security that quickly evaporates when faced with monthly budget realities, debt obligations, and lifestyle expectations.

Several factors contribute to this phenomenon:

1. Illiquid assets: Much of your net worth may be tied up in retirement accounts, home equity, or other investments that aren't readily accessible without penalties or major life changes.

2. High fixed expenses: Mortgages, car payments, student loans, and other recurring obligations can consume a surprising portion of even substantial incomes.

3. Lifestyle inflation: As income increases, spending habits often expand to match, creating a perpetual feeling of financial constraint regardless of salary.

4. Regional cost-of-living: A $150,000 salary might provide abundant comfort in some areas while barely covering necessities in high-cost cities.

5. Future uncertainty: Concerns about inflation, market volatility, and potential economic downturns can undermine confidence in even substantial financial resources.

What it comes down to is that feeling financial secure is about the ability to spend less than you make (even if you make a lot). When your lifestyle requires less than your income produces, you gain breathing room in your monthly budget, the capacity to handle unexpected expenses, and freedom from the anxiety of living on the financial edge. So, even if millennials have made remarkable gains the past few years, the sensation of "phantom" wealth is pretty justified.

How to feel real financial security

The first step toward converting phantom wealth into genuine financial wellbeing is understanding your current reality. I highly recommend conducting an audit on yourself—you might be surprised to discover where your money actually flows.

Track your cash flow

Start by reviewing three months of spending across all accounts. Categorize expenses and identify patterns without judgment. This sort of baseline awareness is essential before you can make meaningful changes.

Fixed recurring expenses create the most significant drain on cash flow. Examine your:

• Housing costs (mortgage/rent, property taxes, insurance)

• Vehicle expenses (payments, insurance, maintenance)

• Subscription services and memberships

• Insurance premiums

• Debt payments

Even small reductions in these categories can substantially improve monthly cash flow and create more financial flexibility.

Create deliberate spending priorities

Rather than attempting to budget every dollar, focus on intentionality. Ask yourself:

• Does this expense align with my core values?

• Will this purchase provide lasting satisfaction?

• Am I spending on this out of habit, social pressure, or genuine desire?

The goal isn't necessarily minimalism but mindfulness about where your money goes.

Bulk up your rainy day fund

While retirement accounts and home equity are important, having accessible cash provides immediate financial security. Aim to build:

• An emergency fund covering around six months of essential expenses

• A separate opportunity fund for potential investments or major purchases

• Cash reserves for expected large expenses within the next 1-3 years

These liquid assets transform theoretical wealth into practical financial freedom.

Develop a long-term financial roadmap

So much insecurity comes from simply not understanding where your finances stand now or what your plan is for the future. Create a simple but specific plan addressing:

• Your target retirement age and lifestyle

• Major financial milestones (education funding, home purchases, etc.)

• Income diversification strategies

• Tax optimization approaches

• Estate planning considerations

Revisit this plan annually and adjust as circumstances change. Perhaps the most important aspect of addressing phantom wealth isn't in chasing ever-higher income or investment returns, but in creating sustainable financial habits that allow you to consistently live well within your means while steadily building true wealth. By focusing on cash flow management, intentional spending, and building liquid reserves, you can ignore the headlines and regain a sense of practical financial wellbeing.