Do you compare finances to others, feel inadequate? It may be ‘money dysmorphia’

Do you think you don’t make enough money? Have you become more conscious of the wealth you have in recent years? The answer is probably yes. You are not alone.

Seeing someone post about their latest iPhone or vacation on Instagram can make you envious. There’s LinkedIn to make you feel that you could do far better in your career. It all boils down to money and the desperation to make more of it. This obsession is coupled with a feeling of underperformance. The result is a distorted view of one’s finances.

The feeling is so common that it has a term – “money dysmorphia”.

How common is ‘money dysmorphia’?

“Money dysmorphia is the distorted view that we have of our financial reality, and it causes us to make poor decisions,” Ali Katz, an attorney who specialises in family and financial planning, told Business Insider.

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Nearly one-third or 29 per cent of Americans experience it, according to a recent report by Credit Karma, a multinational personal finance company. They often compare their financial situation with others and feel inadequate.

Money dysmorphia is more common among the younger generation, says the report. Roughly 43 per cent of Gen Z and 41 per cent of millennials struggle, as they compare their finances with others and feel behind.

What’s shocking is that those who experience money dysmorphia have above-average savings, the Credit Karma report found. They are also likely to admit that they are obsessed with the idea of being rich.

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Nearly 40 per cent of the survey respondents who admitted to struggling with money dysmorphia said they had at least $10,000 (Rs 8.27 lakh) in savings and 23 per cent of the group had over $30,000 (Rs 24.84 lakh). This is significantly above the median savings account balance, which is just over $5,000 (Rs 4.14 lakh) in the US, Credit Karma pointed out.

“Money dysmorphia is kind of like today’s version of keeping up with the Joneses,” Courtney Alev, consumer financial advocate at Credit Karma, was quoted as saying by CNBC. There is a “distortion between perception and reality”.

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Is social media to blame?

Fearing for finances is not new in the US. The World War II generation of Americans lived with the Depression-era scarcity mentality.

“A scarcity mentality is a valid way to experience the world. An upbringing in which finances were tight will have a lifelong impact on how one thinks about and interacts with money. The trouble with money dysmorphia is that it can distort the thinking of someone whose lived experience is not one of scarcity but of stability,” writes Erin Lowry in Bloomberg.

Like the war, millennials and Gen Zers have faced a “once in a lifetime” event – the COVID-19 pandemic. But one big change is that today’s youth have constant access to information – the 24X7 news cycle and social media.

Inflation in the US has remained high and job cuts continue to grab headlines. The US economy is healthy but the word recession crops up now and then. This impacts the confidence of consumers. But social media has a big part to play.

“What we found was a really strong connection between feeling badly about your money situation and how much time you spend on social media,” Isabel Barrow, director of financial planning at Edelman Financial Engines told CNBC.

According to a study by the US-based financial services firm, one-quarter of consumers feel less satisfied with the money they have because of social media. This can lead some to overspend on big-ticket items like luxury goods or vacations.

“There’s this perception that you have to portray yourself as successful and that means having an expensive watch or nice car and that is so untrue,” Carolyn McClanahan, certified financial planner and founder of Life Planning Partners in Florida was quoted as saying by CNBC.

According to her, feeling financially inadequate has been a “problem for a very long time but social media has taken it to a whole new level”.

How does ‘money dysmorphia’ affect mental health?

In psychology, “dysmorphia” often refers to patients who feel irrationally critical about their bodies, according to a report in Fortune. However, financial dysmorphia is not a strictly clinical term. It’s more like “cognitive dissonance,” feeling a gap between where you are and where you should be, financial therapist Lindsay Bryan-Podvin told Lifehacker.

The feeling of now being ‘rich enough’ hurts mental health. It can cause people constant and undue stress.

The Credit Karma survey shows that 69 per cent of respondents say they will never be rich and 95 per cent say their obsession negatively impacts their finances.

The preoccupation with money has come in the way of accruing savings and buying or investing in a home. Instead, it has led them to overspend and take additional debt.

How can one battle this obsession?

Some Gen Zers are taking an unconventional approach called “loud budgeting”, described as a rebellion against excessive spending. TikToker Lukas Battle emphasises that this is not about lack of resources but a conscious decision to resist societal pressures of extravagant spending, reports moneycontrol.

Another way to stop obsessing over your finances would be to identify a problem and that it is not based on facts. Hiring a financial planner or seeking financial therapy can be useful.

And Lowry suggests a radical approach in his Bloomberg column – staying away from social media.

With inputs from agencies