One of the newest terms in personal finance you may have heard recently is money dysmorphia. Essentially, this means that someone has a perception of their finances that doesn’t match their actual situation. While some authors have narrowed the meaning to people feeling inadequate because of social media influence, it’s much broader than just keeping up with the Joneses.
Money dysmorphia
Historically, dysmorphia has been a term related to a person’s body, whereby the sufferer believes their body is wrong or inadequate. People with this obsess over a perceived or imagined flaw, potentially leading them to overcompensate or cause themselves injury in an attempt to correct the flaw.
Like with dysmorphia, money dysmorphia may lead to poor financial decisions, including a reluctance to save or an inability to spend. It’s often driven by societal pressures or social media comparisons, financial vulnerability in childhood, or unhealthy family attitudes towards money.
Younger people hit harder
Money dysmorphia appears to be more prevalent among younger generations, with 43% of Gen Z and 41% of millennials experiencing it, while less than a quarter of Gen X do. Almost one-third of Americans experience money dysmorphia.
A Credit Karma survey shows that 69% of money dysmorphic people don’t think they will ever be rich, and 95% say their obsession negatively impacts their finances. The result is that many are overspending and accruing debt instead of purchasing a home or investments.
Symptoms
Some of the more common symptoms of money dysmorphia include:
- constantly feeling financially unstable or on the verge of financial ruin, regardless of your actual financial situation
- hoarding money excessively, even if you’re quite wealthy
- engaging either in overspending or underspending even on basic necessities
- strain on interpersonal relationships due to your distorted money perceptions and behaviors
- obsession with the idea of being rich or achieving wealth, even if you’re already financially secure
- refusing to make financial planning decisions due to the belief that you’re not wealthy enough
Impact on financial planning
Money dysmorphia may significantly impact a person’s relationship with money:
Distorted perception of your finances. People with money dysmorphia have a skewed view of their financial situation, often feeling they have more wealth than they actually do. For instance, someone who feels wealthier than they are may choose to forego retirement planning, thinking they will always have an increasing income and can deal with that later.
Refusal to invest or plan. Money dysmorphia can cause individuals to believe they are not “wealthy enough” to engage in important financial planning like estate planning, investing, or retirement planning. Sometimes people don’t think their “tiny” investments will amount to anything, so why bother?
Excessive hoarding or anxiety. Those with money dysmorphia may obsessively hoard money due to a fear of scarcity, even when they have sufficient funds. This may arise from a childhood without money security or an event early in adulthood where financial security was pulled out from under them.
Overspending and debt. Money dysmorphia can also manifest in impulsive overspending, such as through “retail therapy”, in an attempt to cope with feelings of financial inadequacy.
Steps to take if you’re experiencing dissonance
If you find you have an issue with money dysmorphia, the best thing is to get a firm grip on your actual financial situation. Track your income and expenses, set a realistic budget, and create some financial goals even if you only have a small amount to invest. Then put these plans on automatic pilot; every month, have some of your money go into savings and investing accounts. Focusing on your situation will help you move away from the comparisons with others.
Speaking of the comparisons, try not to measure your financial success, investments, and social life against others. You don’t really know their financial situation; you merely know what you’re seeing on a screen or being told. They could easily be up to their eyeballs in debt.
Take a moment to investigate why you have a distorted view of your finances. I’ve long had a hard time loosening the purse strings, and only recently have really addressed why this may be. Give yourself a break and strive to take small steps in the direction you need to go.
We all have times when we want more or we’re concerned that we might not be saving enough. A key is knowing when you’re worried about a specific situation versus realizing that it’s an ongoing impediment to financial security. Aim for balance in your life and try to recognize that your self-worth is not solely defined by your wealth. These small steps can help you overcome the distorted view of your finances and build a healthier relationship with money.