All You Need to Know about Money Dysmorphia

Keith feels like a financial failure. His Instagram feed is filled with images of influencers driving luxury cars and diving off yachts.

Despite being a Gen Zer who earns a six-figure salary, has no outstanding debt, and plenty of disposable income, Keith feels poor after scrolling through social media. To soothe his feelings of insecurity and feel successful, he uses his credit card to make expensive purchases.

Gen Xer Cheryl also has a complicated relationship with money. Her childhood was disrupted when her mother lost her job and declared bankruptcy.

As a result, Cheryl developed a deep fear of losing everything. She believes that buying anything new could lead to financial ruin. Even though her finances are stable, she constantly feels like she doesn’t have enough money and is terrified of going broke.

Keith and Cheryl, though not their real names, are real people whose financial behaviors illustrate money dysmorphia in action. Anxiety distorts how they perceive their finances.

According to Bankrate’s money and mental health survey, approximately 47 percent of U.S. adults say money negatively impacts their mental health. Money dysmorphia affects people at all income levels, including the wealthy. Here’s what money dysmorphia is and how it impacts your finances.

Money dysmorphia occurs when your perception of your financial situation doesn’t align with reality. It’s a distorted view of your finances. For instance, you might believe you’re struggling financially even though your finances are actually in excellent shape. You see dark clouds and a boat lost at sea, while the reality is sunny skies and smooth sailing.

“Money dysmorphia is when someone has a highly warped sense of their financial status. They have an inaccurate reference point for what’s normal,” explains Dr. Lanre Dokun, psychiatrist and founder of Healthy Minds NYC, which offers financial therapy.

“It’s having an unclear sense of one’s self, similar to what we see with body dysmorphia,” adds Dokun.

While money dysmorphia is a common issue, Dokun notes that the term isn’t a clinical diagnosis. Rather, it’s a useful way to describe how some people perceive their personal finances.

Money dysmorphia is primarily driven by comparing oneself to others, a heightened version of “keeping up with the Joneses.” Dr. Lanre Dokun explains that it’s a form of anxiety often triggered by self-comparison, with reality TV and social media exacerbating the issue.

“Reality TV and social media provide an up-close view of lavish lifestyles,” says Dokun. “They bring you into these homes and normalize such lives.”

The media often portrays a “normal” life that is far beyond what most people can afford, creating anxiety and leading some to believe they are financially failing.

It’s common to see social media influencers showcasing videos from million-dollar homes, taking luxury vacations, and dining at Michelin-starred restaurants. Perfectly manicured nails and professionally styled hair are the norms on these platforms. In contrast, many people struggle to afford basic necessities, let alone a glam team.

Comparison isn’t the sole cause of money dysmorphia. It can also stem from traumatic financial experiences.

“Many individuals who grew up in poverty feel a strong need to display their wealth in adulthood,” says Annette Harris, an accredited financial counselor and certified financial fitness coach, and owner of Harris Financial Coaching.

“They might spend money on expensive clothes, cars, or other luxury items to compensate for the financial insecurity of their youth,” Harris adds. “Alternatively, they might develop a fear of losing money and hoard it to ensure they never experience deprivation again.”

Not everyone with money dysmorphia spends less; some go to the opposite extreme and overspend, potentially creating a self-fulfilling prophecy of poor financial health.

“There are many people who, after seeing so much spending, think, ‘That’s how I should be spending,'” says Dr. Lanre Dokun. “So, they aren’t saving for retirement or planning for their children’s college fund. Because overspending has been normalized, some people spend more than they should,” Dokun adds.

Money dysmorphia leads individuals to make financial decisions that don’t align with their actual situation. This could manifest as hoarding money despite having a healthy bank balance or overspending to appear wealthier than they are.

Another impact of money dysmorphia is inaction. Fear can become so crippling that individuals avoid making any financial decisions.

“The shadow that money dysmorphia casts might cause some people to freeze. They avoid making any decisions concerning money, potentially missing opportunities and remaining financially underwater,” says Erika Kullberg, attorney, personal finance expert, and founder of Erika.com.

Gen Z is particularly affected by money dysmorphia, largely due to their heavy consumption of social media. They are significantly influenced by media messages, with a Bankrate social media study revealing that Gen Zers (ages 18 to 26) are the most likely to make impulse purchases after using social media.

However, money dysmorphia affects people at all stages of life. Dr. Lanre Dokun notes that many of his middle-aged clients accumulate resources to keep up with their peers. For them, this often means saving enough to send their children to prestigious schools and purchasing luxury cars or homes.

“Each age group has its own comparison point based on what their peers are doing,” says Dokun.

 You can have a good relationship with money. Here’s how to overcome money dysmorphia and maintain financial health.

Understanding the root of your financial issues is crucial for making progress. Annette Harris recommends consulting a mental health professional who specializes in financial therapy. Discussing your money challenges can help uncover hidden problem areas.

“Acknowledging your financial past can prevent it from impacting your future,” says Harris. “Talking about your money fears with someone can provide strategies to cope with issues like overspending or the need to show off wealth. It’s important to find healthy ways to manage these feelings so they don’t harm your financial well-being.”

Dr. Lanre Dokun advises working with a financial advisor to gain a clear understanding of your financial situation. You might discover that you’re doing as well as, or even better than, your peers. This can help alleviate fears about your financial future.

Lack of financial literacy can contribute to money dysmorphia. Building a strong financial foundation helps you stay focused and avoid being misled by inaccurate financial information.

“Education on financial matters can alleviate many fears and misconceptions,” says Erika Kullberg. “Creating a financial plan can help you understand your current situation and outline the steps needed to maintain or improve your financial health moving forward.”

Creating a monthly budget can be a powerful tool for managing money dysmorphia. It provides a clear understanding of your income and expenses, empowering you to make informed spending and saving decisions.

Begin by listing your monthly income and expenses, identifying areas where you can cut back, and setting savings goals. Over time, adhering to your budget can help correct any distorted perceptions of your financial situation.

Money dysmorphia, while not a clinical diagnosis, distorts your perception of financial health. By acknowledging your financial past and consulting with a professional, you can gain a clearer understanding of your finances and make healthier decisions.

If you suspect you have money dysmorphia and want assistance, consider contacting the Financial Therapy Association to connect with a financial therapist.