The era of social media is upon us. While most of us enjoy sharing our joyous moments and memories with the world through social media platforms, a substantial number of individuals feel obligated to show off their rich possessions and lifestyle on the internet.
Now that’s fine when you are wealthy and earning well enough to back your expenses. But in reality, a lot of people showing off on social media are all glitters and no gold. And most of such individuals come from the generation of millennials.
Nonetheless, it’s not necessary that the fake rich people are broke as well. In fact, many fake riches earn higher salaries, but they also spend beyond what their salaries allow only to look richer than they really are.
Let’s find out why millennials are resorting to such behavior. We’ll also discuss the downsides of being fake rich and how to prevent yourself from falling for this trend!
Why Are The Millennials Falling Prey To The ‘Fake Rich’ Trend?
According to Levinson’s theory, the age group that millennials belong to craves a sense of accomplishment during the early adulthood phase. So, naturally, the millennials also seek to see themselves as well-established by a certain age. And a lot of millennials, who fail to do so, begin pretending to be successful and established.
In the wake of faking success by showing off worthy possessions, these individuals often display the following behaviors.
1. Living Beyond One’s Means
Living beyond one’s means refers to spending more money than an individual or a family earns or has available based on financial circumstances. According to a Bloomberg report in 2022, more than 34 million US citizens were spending beyond their means. It can happen due to a lack of a practical budget or financial plan, preventing individuals or families from effectively managing their income, expenses, and financial obligations.
For instance, a person who earns a monthly salary of $3000 but spends $4000 a month on various expenses, such as rent, utilities, groceries, entertainment, and credit card bills, lives beyond their means. Such an individual spends more money than what they have available and may rely on credit or loans to finance their lifestyle.
2. Social Media Obsession
An average American spends 2 hours and 54 minutes scrolling through the rabbit holes of social media, which translates to almost 44 days a year! It has made a lot of Americans the victim of social media obsession.
With the rise of social media platforms like Instagram and TikTok, millennials are bombarded with images and videos of people who appear to be living extravagant and luxurious lifestyles, showcasing expensive cars, clothing, and exotic vacations.
This constant exposure to “perfect” lifestyles creates unrealistic expectations and pressures on young people to project a certain image of themselves to the world, often beyond their means. To keep up with the trends and appear wealthy, many individuals overspend on luxury items by purchasing possessions beyond their financial capacity, leading them to live paycheck to paycheck or even go into debt.
3. Lack of Financial Education
Lack of financial education significantly contributes to the ‘Fake Rich’ trend among Millennials in the United States. The current education system in the US needs to provide adequate financial literacy education, leaving many young people unprepared to manage their finances effectively.
According to NGPF’s 2022 State of Financial Education Report, only 1 in 4 US high school students take a personal finance class before graduation. Furthermore, only 16% of millennials have basic financial knowledge, such as understanding interest rates, inflation, and investing.
The lack of financial education often leads to poor financial decision-making, such as overspending, taking on too much debt, and neglecting savings and investments. Many Millennials may also lack basic knowledge about budgeting, investing, and managing credit, making them vulnerable to financial scams and traps.
4. Impulsive Spending
Impulsive spending is a major contributing factor to the ‘Fake Rich’ trend among Millennials in the United States. Many young people are easily influenced by social media and advertising, leading them to make impulsive purchases to keep up with the latest trends and appear wealthy.
Impulsive spending often leads to overspending and taking on debt, as many Millennials purchase expensive items they cannot afford to maintain their desired lifestyle. According to a Businessinsider report, more than 54% of Millennials have credit card debt of up to $5,000, whereas 24% owe more than $5,000 on their credit cards.
The ‘Fake Rich’ trend encourages young people to prioritize material possessions and appearances over financial stability and security, leading to further impulsive spending and financial instability.
Can You Tell a ‘Fake Rich’ Person Apart From a Really Wealthy One?
A study conducted by Credit Karma and Qualtrics in the United States revealed that many millennials are resorting to borrowing money just to match their peers’ spending. The study found that 48% of millennials have incurred debts to buy worthy possessions to keep up with their friends’ lifestyles.
Moreover, more than 44% of respondents expressed their fear of missing out on exclusive or once-in-a-lifetime experiences, while 36% confessed that they fear being left out and feeling like outsiders if they do not spend more to keep up with their friends. Such behavior is creating more fake riches in the country.
While it can be difficult to tell a ‘Fake Rich’ person apart from a really wealthy one solely based on material possessions, certain signs and behaviors can indicate someone is living beyond their means and is not truly wealthy.
You’ll see the mismatch between their expensive car and their relatively cheap apartment or house. Wealthy people tend to invest in high-end properties, whereas Fake Rich may prioritize flashy cars over a comfortable home. You’ll also see them prioritizing brand names and dress to impress, often at the expense of their financial health.
Such people may lack impulse control when it comes to spending and talk a lot about money and possessions but have little actual knowledge or understanding of financial management. Besides, a lack of savings and a tendency to seek the approval of others is also common among them.
Faking Wealth Can Have A Severe Toll on You!
Faking wealth can severely affect an individual’s financial health and overall well-being. Here’s how faking wealth can land you into some serious trouble.
1. Increased Debt
People who try to appear wealthy may feel the pressure to keep up appearances, leading them to spend more money than they have. It can result in credit card debt, personal loans, and other types of debt that can quickly become overwhelming. In fact, on average, every millennial in the US has a debt of $27,251.
Fake riches continue to borrow money to maintain their illusion of wealth. It can result in a never-ending cycle of debt as interest charges accumulate, and the debts become harder to repay. Eventually, this can lead to financial ruin, making it difficult for people to achieve their financial goals, such as buying a house, saving for retirement, or paying for their children’s education.
2. Lack of Savings
Without savings, individuals may resort to borrowing money, taking out loans, or using credit cards to cover these expenses, which can quickly spiral into debt.
In fact, according to a report by Bankrate, 49% of Americans have either no emergency savings or it has decreased as compared to last year. The lack of savings can lead to a reliance on credit cards or personal loans, which often carry high-interest rates and fees, making it even more challenging to get out of debt.
Not just that, about 36% of Americans also have a higher credit card debt than their emergency savings. However, about 51% of the US population still have more emergency funds in their savings account than in their credit card debt.
3. Poor Financial Decisions
When you don’t have a financial cushion, you may feel compelled to make poor financial decisions. For instance, you may decide to take out a high-interest loan or use credit cards to finance your needs or wants. Such decisions can lead to increased debt, making it even more challenging to build up your savings.
Moreover, you may have to forgo essential expenditures, such as medical bills or emergency expenses, without sufficient savings, leading to financial stress and further debt.
Additionally, a lack of savings can lead to missed opportunities for investment and growth. For example, you may miss out on a chance to invest in your retirement. It can significantly impact your long-term financial stability and limit your future opportunities.
4. Pressure To Keep Up Appearances
Faking wealth can put individuals under pressure to keep up appearances as they attempt to maintain a lifestyle they cannot afford. This pressure often leads to overspending, resulting in increased debt and financial instability.
For example, individuals with insufficient savings may feel pressured to purchase expensive clothing or luxury items to maintain their status, even if they cannot afford them. This pressure can also extend to social events, such as vacations or outings with friends, leading to overspending and increased debt.
The Good Thing Is You Can Save Yourself From Falling Prey To The Fake Rich Trap
Here’s what you can do to prevent yourself from falling prey to the trap of buying extravagant, expensive stuff just so you look rich.
1. Recognize The Importance Of Financial Education And The True Value Of Money
According to a Bank of America report, 51% of millennials think they are behind their financial goals, while 33% think their friends are doing better than them financially. A lot of such people may be unknowingly spending just to look rich. If you feel you are also one of them and want to avoid falling into the fake rich trap, it’s important to seek financial education and advice to improve your financial literacy.
It can help you make informed decisions about your money and avoid making impulsive purchases that can lead to debt. Additionally, recognizing the true value of money can help you avoid comparing yourself to others and prioritize what truly matters to you. There are a lot of ways to educate yourself.
You can read financial books or watch YouTube videos about finance. For example, if you want to buy a car, you can head on to YouTube and learn about ideal financial situations when buying a car. This way, you can access your resources and the best ways to utilize them.
2. Focus On Your Own Financial Goals And Practice Financial Discipline
According to a Bankrate report, 31% of millennials think they spend more than they should. Not just that, the same report states that 10% of millennials are not sure if they are investing in a retirement plan or not. Spending more than one should and not having plans for the future can be the initial signs of falling prey to the fake rich trend.
It is essential to prioritize your own financial goals and practice financial discipline to avoid spending just to look rich. Start by creating a budget and setting aside some of your income for savings and investments. Seek advice from financial experts to develop a solid plan for achieving your financial goals. Avoid the temptation of keeping up with the Joneses and focus on your own progress.
3. Be Mindful Of Social Media Influence
As per a CNBC report, around 90% of the millennials in America admitted that social media leads them to compare their lifestyle and wealth with those of their peers. Furthermore, according to another report by Intuit Mint, around 40% of Americans admit that they have purchased things they saw on social media.
The above facts indicate how social media can greatly contribute to leading someone to the fake rich trend. Therefore, it is important to be mindful of the influence of social media and avoid succumbing to peer pressure. Embracing simplicity and focusing on your own financial goals can also help in this regard. Remember, everything you see on social media is not worth buying.
4. Don’t Equate Self-Worth With Possessions
Often, people who spend money on experiences rather than material possessions report higher levels of life satisfaction. Therefore, try to be honest with yourself and others about your financial situation.
Don’t equate your self-worth with possessions; material things do not define you. Instead, prioritize experiences over material possessions, and seek happiness and fulfillment through life experiences.
How much money do rich Americans Have?
Defining a rich person in America in terms of numbers is difficult. However, people with a net worth of $2.2 million can be considered “wealthy” in an average American society. This number varies according to your city and lifestyle. For example, a resident in San Franciso can be considered “rich” if he has a net worth of $5.1 million. In contrast, an average wealthy New Yorker should only have a $3.4 million net worth.
How much money do influencers make?
Influencers have found multiple ways of making money, sponsored content being the primary source. Depending on an influencer’s number of followers and reach on the platform, they can earn anything between $600-10000 per post. Influencers with millions of followers can end up earning in the seven-figure mark annually.
Why do millennials replicate influencers?
When influencers get rich, they go on a spending spree, flaunting everything on their social media handles. Innocent millennials who do not have access to that kind of money fall prey to this display of wealth. They, then try to push their own finances in an attempt to replicate these “influencers” lifestyles. But they fail to pay heed to the most important part – income. Most influencers earn millions from brand deals and collaborations, which isn’t the case with average millennials.
Avoid Being “Fake Rich” Now
The “fake rich” trend is becoming increasingly prevalent among millennials, who face societal pressure to present a lavish lifestyle on social media, even if it means living beyond their means.
However, millennials can break free from this trap by prioritizing financial education, setting realistic expectations, recognizing the true value of money, and focusing on individual financial goals.
Ultimately, it is not an exaggeration to say that leading a financially disciplined lifestyle is much better than falling into the deep pits of debt just to impress others. Besides, knowing that you have a financially secure and stable future, you can enjoy the peace of mind that no material possession can bring. It is essential to understand that true wealth lies in financial security, not the fleeting allure of social media fame.