Are you stressed about money?
You may have money dysmorphia and not even know it. And this may cause you to make bad financial decisions.
What is Money Dysmorphia?
Money dysmorphia is when you have a distorted view of your finances. This phenomenon is similar to body dysmorphia, where individuals perceive flaws in their physical appearance that may not be objectively present.
Having a distorted view of your body image can lead you to make harmful decisions with your body. And having a distorted view of your finances can lead you to make harmful decisions with your money. So it’s important to know whether you’re being affected by money dysmorphia.
Symptoms
Money dysmorphia can show up in different ways:
- Constantly feeling like you don’t have enough money, regardless of how much you actually have
- Hoarding money because you’re scared of running out
- Feeling anxious or depressed about your finances
- Overspending even when you’re struggling financially
- Not using your savings because you think it’s never enough
Prevalence
Money dysmorphia can affect people at any income level.
However, money dysmorphia is more common among younger generations.
A study by Credit Karma finds that:
- Nearly one-third of Americans experience money dysmorphia.
- Around 43% of Gen Z and 41% of millennials experience it.
- In contrast, 25% of Gen X and 14% of people aged 59 and older experience it.
One big reason for this trend is the impact of social media.
Young people aren’t just comparing their financial success to friends and family anymore; they’re comparing themselves to celebrities and influencers worldwide. Seeing these unrealistic lifestyles on platforms like Instagram, TikTok, and YouTube can make people feel more insecure about their own finances.
The Psychology Behind Money Dysmorphia
Comparison Culture
You might constantly compare your finances to others, similar to the idea of “Keeping Up with the Joneses.” The problem is that you’re often comparing your everyday life to someone else’s highlight reel. This can lead to:
- Feeling inadequate
- Having unrealistic financial expectations
- Experiencing stress and anxiety about money
Social Media Influence
Social media plays a big role in money dysmorphia, especially for younger people. Platforms like Instagram, TikTok, and YouTube show:
- The extravagant lifestyles of celebrities and influencers
- Unrealistic images of wealth and success
- Constant streams of luxury goods and experiences
Childhood Experiences
The way you handle money as an adult can be influenced by your childhood experiences. For example:
- If you grew up in poverty, you might feel a need to show off wealth as an adult.
- You might buy expensive items to make up for past financial struggles.
- Alternatively, you might hoard money because you’re afraid of losing it.
These early experiences can lead to unhealthy financial habits and contribute to money dysmorphia as you grow up.
How Money Dysmorphia Affects Financial Behavior
Money dysmorphia can greatly influence how you handle money, often leading to choices that don’t match your actual financial situation. Let’s look at how this condition can impact your behavior in three main ways:
Overspending
Money dysmorphia can trigger you to overspend even when you can’t afford to do so:
- You may go into credit card debt to buy non-essential goods or services.
- You may overspend to keep up with what you see on social media.
For example, you might spend $500 on a jacket not because you need it, but to maintain a certain image. Later, you might feel anxious, realizing that money could have covered essential expenses like utilities and groceries.
Excessive Saving
On the other hand, money dysmorphia can also make you hoard money, even when you have enough. This behavior is driven by an irrational fear of financial insecurity.
You might:
- Constantly worry about future financial problems
- Live in a “worst-case scenario” mindset
- Focus on saving money over personal comfort and necessary expenses
This can stop you from enjoying life or investing in your well-being. For instance, you might avoid vacations, opt for cheaper but less effective healthcare, or work too much without taking breaks, which can lead to burnout.
Missed Opportunities
Money dysmorphia can also cause you to miss important financial opportunities:
- If you’re saving excessively because you’re worried about financial insecurity, you might miss chances to invest and grow your wealth.
- Fear of spending might stop you from buying necessary items or experiences that could improve your life or career.
- Anxiety about money can lead to inaction, making you avoid financial decisions and potentially miss out on beneficial opportunities.
Risky Investments
Money dysmorphia can also push you toward risky financial decisions. In trying to meet unrealistic financial standards, you might:
- Invest in excessively risky ventures
- Participate in get-rich-quick schemes
- Make impulsive decisions based on fear or anxiety
These actions can leave you without savings for the future, as you chase unrealistic financial goals.
Generational Differences in Money Dysmorphia
Let’s take a look at how money dysmorphia impacts Gen Z and Millennials, Gen X, and Baby Boomers.
Gen Z and Millennials
Younger generations are the most affected by money dysmorphia. Here’s what we know:
- 43% of Gen Z and 41% of Millennials experience it.
- Around 45% are “obsessed with the idea of being rich.”
- Nearly 70% don’t believe they’ll ever be rich, despite their focus on wealth.
This mindset can lead to:
- Difficulty building savings
- Overspending and accumulating debt
- Negative impacts on their finances, as 95% of those affected have reported.
Gen X
Gen X is less affected but still experiences money dysmorphia. About 25% of Gen Xers report having it, placing them between the highly affected younger generations and the less affected older ones.
Baby Boomers
Baby Boomers are the least affected, with only 14% experiencing money dysmorphia. This might be due to:
- More established financial situations
- Less exposure to social media
- Different attitudes towards money and wealth
It’s clear that younger generations are more impacted by money dysmorphia. This highlights the need for financial education and support, especially for Gen Z and Millennials, as they navigate today’s complex financial world.
Overcoming Money Dysmorphia
To overcome money dysmorphia, it’s important to address the root causes and develop healthier financial habits. This can help you improve your relationship with money and reduce anxiety.
Financial Education
Learning about money can ease many fears and misunderstandings. To boost your financial knowledge:
- Learn the basics of budgeting, saving, and investing.
- Create a financial plan to see where you currently stand.
- Set realistic financial goals that align with your values.
Creating a monthly budget is a key step in managing money dysmorphia. It helps you clearly understand your income and expenses, enabling you to make informed decisions about spending and saving. This process can empower you to take control of your finances and reduce the stress associated with money management.
Download our free Personal Budget template here: https://clearvalueinvesting.com/education/tools/#financial_templates
Check out our video on Money Dysmorphia:
