Keith feels like a financial failure despite his substantial income and solid financial standing. His Instagram feed is filled with glamorous images of influencers flaunting luxury cars and lavish vacations.

Although Keith earns six figures, has no debt, and enjoys a comfortable amount of disposable income, scrolling through social media makes him feel inadequate. To cope with these feelings of insecurity and to validate his sense of success, he often makes pricey purchases with his credit card.

Cheryl, a Gen Xer, also struggles with financial anxiety. Her childhood was disrupted when her mother lost her job and went bankrupt, which instilled in Cheryl a deep-seated fear of financial instability.

Despite having a well-managed budget, Cheryl is constantly worried about losing everything. She believes that buying anything new could lead to financial disaster, causing her to feel as though she never has enough money and living in fear of going broke.

Though Keith and Cheryl are not their real names, their experiences reflect the concept of money dysmorphia. Their financial anxieties distort their perceptions of their financial realities.

What is money dysmorphia?

Money dysmorphia refers to a distorted perception of your financial situation. It’s when your view of your finances doesn’t align with reality, leading you to believe you’re struggling financially despite being in a strong position. It’s akin to seeing a storm on the horizon when in reality, the weather is clear and calm.

Dr. Lanre Dokun, psychiatrist and founder of Healthy Minds NYC, describes money dysmorphia as having a significantly skewed understanding of one’s financial status. “It’s an inaccurate sense of what is normal, similar to how body dysmorphia affects one’s perception of their physical appearance,” says Dokun.

While the term “money dysmorphia” isn’t a clinical diagnosis, it effectively describes how some individuals perceive their finances in a distorted way.

Causes of money dysmorphia

Money dysmorphia often arises from comparing oneself to others—a heightened form of trying to “keep up with the Joneses.” Dr. Lanre Dokun explains that it’s a type of anxiety triggered by self-comparison, exacerbated by reality TV and social media.

“Reality TV and social media immerse people in extravagant lifestyles,” says Dokun. “They provide a glimpse into these opulent lives, normalizing them.”

The media’s depiction of a “normal” lifestyle often far exceeds what most people can realistically afford. This disparity can cause anxiety and lead individuals to feel like they’re falling short financially.

Social media frequently showcases influencers in million-dollar homes, on luxury vacations, and dining at high-end restaurants. Meanwhile, many people struggle just to cover basic expenses. The contrast between these glamorous portrayals and one’s own financial reality can intensify feelings of inadequacy.

Beyond comparison, money dysmorphia can also stem from past financial trauma.

“Individuals who grew up in poverty may feel compelled to flaunt their wealth as adults,” says Annette Harris, an accredited financial counselor and certified financial fitness coach. “They might spend on luxury items to compensate for past financial insecurity or, conversely, hoard money to avoid the fear of losing it.”

How money dysmorphia affects financial habits

Not everyone with money dysmorphia reacts the same way; some may overspend rather than under-spend. This tendency can lead to financial instability and reinforce negative financial outcomes.

“People often see a lot of spending on social media and think that’s the norm,” says Dr. Lanre Dokun. “They may then spend excessively, neglecting important financial goals like saving for retirement or their children’s education. Overspending becomes normalized, and some individuals end up spending far beyond their means.”

Money dysmorphia distorts financial decision-making, causing people to act contrary to their actual financial situation. As Dokun and financial counselor Annette Harris explain, this might involve hoarding money despite having ample funds or overspending to create a façade of wealth.

In some cases, money dysmorphia can lead to financial inaction. Fear of making wrong decisions can become so paralyzing that individuals avoid financial choices altogether, missing out on opportunities and remaining in financial difficulty.

“The fear induced by money dysmorphia can be so overwhelming that some people freeze, avoiding financial decisions,” says Erika Kullberg, attorney and personal finance expert. “This can result in missed opportunities and persistent financial challenges.”

Who’s most affected by money dysmorphia?

Gen Z is particularly impacted by money dysmorphia due to their extensive use of social media. They are heavily influenced by media portrayals of wealth and success.

However, money dysmorphia affects people across all age groups. For example, Dokun notes that many of his middle-aged clients feel pressured to accumulate wealth to match their peers. This often involves saving for their children’s education and investing in luxury items like high-end cars or homes.

“Different generations compare themselves to their peers based on their own life stages,” explains Dokun.

How to overcome money dysmorphia and maintain a healthy financial lifestyle

You can cultivate a positive relationship with money. Here’s how to overcome money dysmorphia and achieve financial well-being.

Acknowledge your financial past

Understanding the root of your financial issues is crucial for moving forward. Harris suggests consulting a mental health professional who specializes in financial therapy. This can help uncover underlying problems and provide insights into how to address them.

“Acknowledging your financial history can prevent it from shaping your future negatively,” says Harris. “Talking through your money concerns with a professional can help you develop strategies to manage issues like overspending or the urge to flaunt wealth. Finding healthy ways to handle these feelings is essential for maintaining financial well-being.”

Speak with a financial advisor

Dokun recommends partnering with a financial advisor to get an accurate view of your financial situation. You might discover that your financial standing is comparable to or even better than your peers’. This insight can help alleviate concerns about your financial future.

Build financial literacy

Lack of financial literacy can contribute to money dysmorphia. Building a solid financial foundation can help you avoid being misled by incorrect information.

“Understanding financial matters can dispel many fears and misconceptions,” says Kullberg. “Creating a financial plan will help you assess your current situation and outline the steps needed to maintain or enhance your financial health in the future.”

Get in the habit of building a monthly budget

Creating a monthly budget can be a valuable tool for managing money dysmorphia. It helps you gain a clear view of your income and expenses, enabling you to make informed decisions about spending and saving.

Begin by listing your monthly income and expenses, pinpointing areas where you can reduce costs, and setting savings goals. As you adhere to your budget over time, you may notice that your perception of your financial situation becomes more accurate.

In Conclusion

Money dysmorphia, while not a clinical diagnosis, can skew your perception of your financial health. Recognizing your financial history and seeking guidance from a professional can help you gain an accurate view of your finances and make healthier decisions.

If you suspect you might be experiencing money dysmorphia and need support, consider contacting the Financial Therapy Association to connect with a financial therapist.