People need money in their daily lives. Money, while not everything, is essential for living. Without the right mindset and habits, individuals may encounter issues with money management, potentially affecting their financial status. Experts have introduced the term “money dysmorphia” to describe a distorted perspective on one’s financial situation and how to address it.
According to a report by the Huffington Post, Danielle Desir Corbett, a personal finance expert and host of the podcast “The Thought Card,” defines “money dysmorphia” as an abnormal or distorted view of one’s financial situation.
She explains: “Your perception of your financial situation differs greatly from reality. Money dysmorphia can stem from various reasons, including past financial traumas, social pressures, economic crises, or deep-rooted childhood experiences.”
A recent survey conducted by Credit Karma, a financial company in the United States, found that 29% of Americans suffer from money dysmorphia, with the majority being young individuals.
The survey results indicate that 43% of Generation Z and 41% of Millennials exhibit money dysmorphia. In comparison, only 25% of Generation Z and 14% of individuals aged 59 and above experience money dysmorphia.
Among those who have experienced money dysmorphia, 82% feel that their financial status lags behind. Overall, 29% of respondents stated that they do not have such financial insecurity.
Courtney Alev, a consumer financial consultant at Credit Karma, describes money dysmorphia as a comparison game with affluent individuals, where the inability to “keep up” can lead some to feel inadequate.
Elizabeth Ayoola, a personal finance expert, believes that biases about one’s financial situation often result from comparing oneself to others seen on social media or worrying about economic news.
She says: “When individuals have money dysmorphia, they may perceive their financial situation more subjectively than objectively.”
Ayoola explains: “Money dysmorphia often leads people to believe that their financial situation is worse or better than it actually is. This may manifest as excessive saving due to feeling behind peers or overspending because of a false sense of financial security.”
She mentions that individuals with money dysmorphia may experience intense emotions when witnessing friends’ financial success, leading to unhealthy financial behaviors such as overspending during vacations.
Money dysmorphia can cause individuals with good financial conditions to save excessively and those with poor financial situations to overspend, ultimately hindering them from achieving financial goals or enjoying success.
Dasha Kennedy, a member of the Financial Health Committee at National Debt Relief, mentions that some individuals with money dysmorphia may fear spending money, even on necessary items. After making purchases, including essential items, they may feel anxious or guilty.
Kennedy highlights common signs of money dysmorphia, such as obsessively checking bank balances, avoiding financial discussions, comparison with others, distorted views on wealth, fear of financial bankruptcy, being overly critical of financial decisions, and feeling pressured about future financial situations.
Especially for the younger generation, they tend to connect their feelings about their financial status with what they see and present on social media. Many avoid addressing debts or seeking assistance, perpetuating a cycle of financial instability.
Alev suggests several methods to overcome money dysmorphia, including honestly assessing your financial situation, setting clear goals, creating plans, and most importantly, avoiding comparisons with others.
She says: “If your goal is to increase savings, start by auditing your finances to identify areas where you can cut back. From there, set up automatic payments with each paycheck to help you stay accountable and gradually increase savings.”
Additionally, set realistic financial goals and seek useful personal finance education resources. Consider seeking advice from financial planners or therapists, or seek support while pursuing your goals.
Corbett recommends staying in touch with a trusted friend to brainstorm ideas, vent emotions, and receive encouragement. You can also observe your daily thoughts about money. If social media increases financial insecurity, limit its consumption and spend time listening to personal finance programs or reading books to bridge the knowledge gap.
Another helpful approach is to evaluate your financial situation objectively and then assess your performance.
Kennedy concludes by emphasizing the importance of treating oneself well. Understanding that spending on necessities and things that bring joy is acceptable. While being financially cautious is good, it should not lead to constant abstinence from purchases.
She says: “When you excessively worry about finances, you need to acknowledge it. Finding a balance is key.”