The high cost of financial imposter syndrome

Why so many millennials feel like financial frauds and how to cope

May 24, 2021 | Editorial | Budgeting | Spending Habits
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Fake it ’til you make it

You’re probably familiar with imposter syndrome. The phenomenon where no matter how successful or competent you are at your job, you still feel like a fraud. Odds are, you’ve felt it. Up to 82% of people report feeling like an impostor at some point or another. And millennials are coping with another type of imposter syndrome — one that has to do with their wallets. Financial imposter syndrome happens when someone doubts their ability to make good financial choices or has unfounded fears of financial ruin. Questions like: “Am I saving enough?” “Could I be doing more?” and “What am I missing?” are common worries, even when logic and your bank balance suggest you’re doing just fine.

The worries are inflated, but their consequences can be very real. Making decisions, trusting your instincts, and following through with important financial planning becomes more difficult. Financial imposter syndrome can prevent former low-wage workers from spending money to take proper care of themselves, even after they start earning more. Routine doctor’s appointments or organic groceries can continue to feel out of the question after years of existing paycheck to paycheck. But in the long run, living in poverty (or spending like you do) can actually end up costing you more.

Feeling like a fraud or outlier is particularly common among women and people of color. With fewer role models of financial success that look like them to emulate, confidence falters. Meanwhile, decades of systemic bias and exclusion in the workplace takes its own toll.

Millennials and money — it’s complicated

Millennials' fraught relationship with their finances can be traced to the 2008 financial crisis. Either early in their careers or still in school, millennials entered a difficult job market with few reassuring past work experiences to fall back on. A decade later, millennials lived through their second recession and learned the meaning of a K-shaped recovery. While some millennials WFH and even saved money, others are still struggling to find their financial footing. This stark divide shows up clearly in today’s employment rates. The highest-paid workers (who earn more than $60,000 a year) have gained back all their lost jobs, but employment among the bottom third of earners is still down 30% from pre-pandemic levels.

Prospering through a pandemic led well-off millennials to feel a mix of guilt and gratitude. Some questioned if their good fortune was deserved, exacerbating feelings of financial imposter syndrome. On the plus side, financially stable Americans acted on their guilt to help close the K. Food delivery services saw tipping increase last year, as those sheltering in place showed their appreciation for frontline workers with their wallets. Instacart tips nearly doubled, and tips across Grubhub and Seamless rose nearly 15% early on in the pandemic.

Bottom line

So you think you’re a financial fraud, now what? There are a few ways to put self-doubt to rest. Talking openly about financial imposter syndrome with friends or peers can separate valid fears from unwarranted insecurities, eventually helping you pre-empt negative thought patterns. Mentors can also help you reconcile these feelings, reminding you that while financial imposter syndrome is widespread, it’s not always based in reality. To better understand how you’re really doing financially, see how your net worth (the value of your assets minus liabilities and debts) stacks up against other Americans your age.