Is Money Dysmorphia Wrecking Your Finances?
Joy Wallet is advertiser-supported: we may earn compensation from the products and offers mentioned in this article. However, any expressed opinions are our own and aren't influenced by compensation. To read our full disclosure, click here.
In late 2023, a new phenomenon called “money dysmorphia” began emerging online and across social media. The term describes the feeling of insecurity about one’s financial standing, regardless of the actual situation.
A study conducted by Qualtrics on behalf of Intuit Credit Karma reveals that 29% of Americans experience money dysmorphia. This issue is particularly pronounced among younger generations, with 43% of Gen Z and 41% of millennials reporting such feelings.
The study highlights that the obsession with becoming rich is fueling this trend. Approximately 45% of Gen Z and millennials admit to being obsessed with the idea of being wealthy (44% and 46%, respectively).
Courtney Alex, consumer financial advocate at Credit Karma, compares money dysmorphia to “keeping up with the Joneses.” She explains, “A lot of people are examining their finances and comparing themselves to their peers, people on social media, and even celebrities, which is bringing up feelings of inadequacy.”
Of those experiencing money dysmorphia, 82% feel behind on their finances. This is a stark contrast to the 29% of respondents who don’t struggle with the same financial insecurity.
Interestingly, nearly half (48%) of Gen Z and 59% of millennials feel financially behind, likely contributing to feelings of financial inadequacy.
Despite these feelings, 59% of respondents report feeling financially stable, demonstrating the distortion between perception and reality.
Money dysmorphia’simpact on financial behavior
The study shows that money dysmorphia significantly impacts the financial behavior of younger generations. Among those who experience money dysmorphia, 37% reported having more than $10,000 in savings, with 23% having over $30,000.
This is well above Americans' median savings amount, around $5,300.
However, respondents without money dysmorphia tend to have more savings, with 52% having over $10,000 and 32% having more than $50,000 saved.
The obsession with becoming rich appears to be a significant factor in money dysmorphia. More than a quarter (27%) of Americans are obsessed with the idea of being rich. Specifically, 44% of Gen Z and 46% of millennials admit to this obsession.
Among those experiencing money dysmorphia, more than half (54%) are obsessed with becoming wealthy, compared to just 12% of those without the condition. Despite the obsession, 52% of Americans believe they will never be rich, a sentiment that jumps to 69% among those with money dysmorphia.
The financial impact of money dysmorphia is also notable. According to the study, 95% of Americans with money dysmorphia say it negatively impacts their finances. Of these, 40% report that it has held them back from building savings, 38% say it has led them to overspend, and 32% have taken on more debt. Additionally, 30% say it has prevented them from saving for a home and paying down debt.
Alex advises individuals to focus on one’s own financial situation rather than comparing it to others. “If your goal is to build up your savings, start by doing an audit of your finances to see where in your budget you can make room for savings,” she suggests.
Exceptional 4.69% APY on balances of $1,000 or more
- High-yield savings account with no monthly fees
- Secure, 24/7 mobile access to your account
- Insured up to $1 million
Here are other tips to break free from the financial impact of money dysmorphia.
Tips to break free from the financial impact of money dysmorphia
Money dysmorphia can leave you feeling perpetually insecure about your financial standing, even when the reality may be more stable than you perceive. Here are some actionable steps to help you break free from the financial impact of money dysmorphia and regain control over your financial health:
1. Assess your finances honestly
Taking a comprehensive look at your finances involves more than just glancing at your bank account. Create a detailed inventory of your assets (savings, investments, property), liabilities (loans, credit card debt), income sources, and monthly expenses. Use financial tools or spreadsheets to track your cash flow. This honest assessment will clarify and highlight areas where you can improve or adjust your financial habits.
2. Set clear financial goals
Setting financial goals gives you something to strive for and helps you stay focused. Break down your goals into short-term (e.g., saving for a vacation), medium-term (e.g., paying off a credit card), and long-term (e.g., buying a home). Use the SMART criteria—specific, measurable, achievable, relevant, and time-bound—to define these goals. For example, instead of saying, "I want to save money," specify, "I will save $5,000 for an emergency fund in the next 12 months."
3. Create a realistic budget
A realistic budget aligns with your income and lifestyle, helping you manage your money effectively. Start by listing your monthly income and all your expenses, categorizing them into fixed (rent, utilities) and variable (groceries, entertainment). Identify areas where you can cut back. Use budgeting apps or templates to help you stick to your budget. Regularly review and adjust your budget to reflect changes in your financial situation.
4. Automate your savings
Automating savings removes the temptation to spend money meant for savings. Set up automatic transfers from your checking account to a savings account each month, ideally right after you receive your paycheck. This approach ensures consistent savings and helps build an emergency fund or other savings goals without requiring constant discipline.
5. Limit social media comparison
Social media often portrays an unrealistic picture of others' financial success, leading to feelings of inadequacy. Set boundaries for your social media usage. Unfollow accounts that make you feel envious or insecure. Replace them with educational and motivational content about personal finance. Remember, social media is a highlight reel, not an accurate representation of people's financial situations.
Exceptional 4.69% APY on balances of $1,000 or more
- High-yield savings account with no monthly fees
- Secure, 24/7 mobile access to your account
- Insured up to $1 million
6. Educate yourself
Financial literacy is key to making informed decisions. Start by reading books on personal finance, such as "Rich Dad Poor Dad" by Robert Kiyosaki or "The Total Money Makeover" by Dave Ramsey. Listen to financial podcasts and attend workshops or webinars. Websites like Investopedia and Khan Academy offer free courses on various financial topics. The more you know, the better equipped you’ll be to manage your money.
7. Seek professional advice
A financial advisor can provide tailored advice based on your unique situation. They can help you create a comprehensive financial plan, offer investment strategies, and guide you through complex financial decisions. Look for advisors with credible certifications, such as a Certified Financial Planner (CFP). Many advisors offer a free initial consultation so you can assess if they're a good fit for your needs.
8. Practice gratitude
Gratitude shifts your focus from what you lack to what you have. Keep a gratitude journal and write down three things you're thankful for each day, including financial aspects. This practice can improve your mental well-being and help you appreciate your progress. Reflecting on your achievements and the resources you already have can reduce feelings of inadequacy.
9. Avoid impulsive spending
Impulse buying can derail your financial goals. Identify triggers that lead to impulsive purchases, such as stress or boredom. Implement strategies like the 24-hour rule—wait 24 hours before making a non-essential purchase to determine if you really need it. Create a list of needs and wants, prioritizing essential items. Use cash instead of credit cards to limit spending and make it harder to overspend.
10. Celebrate small wins
Recognizing and celebrating small financial milestones keeps you motivated. Set up a reward system for achieving goals, like treating yourself to a nice dinner after reaching a savings milestone. Track your progress visually with charts or graphs. Sharing your successes with a trusted friend or family member can also provide encouragement and accountability.
11. Keep your eyes on your own paper
Focusing on your own financial journey is crucial. Everyone’s financial situation is different, and comparisons can be misleading. Concentrate on your own goals and progress. Remind yourself of your accomplishments and the steps you’ve taken to improve your finances. Stay committed to your financial plan, and resist the urge to compare yourself to others.
The bottom line
Money dysmorphia can distort your perception of financial reality, leading to unnecessary stress and poor financial decisions. You can regain control by assessing your finances, setting clear goals, creating a realistic budget, and automating your savings. Limiting social media comparisons, educating yourself, seeking professional advice, and practicing gratitude are crucial to maintaining a healthy financial mindset. Avoiding impulsive spending, celebrating small wins, and focusing on your own financial journey will help you build a more secure financial future.
These actionable steps can empower you to break free from money dysmorphia and achieve lasting financial well-being.
Joy Wallet is an independent publisher and comparison service, not an investment advisor, financial advisor, loan broker, insurance producer, or insurance broker. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance.
Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
We value your privacy. We work with trusted partners to provide relevant advertising based on information about your use of Joy Wallet’s and third-party websites and applications. This includes, but is not limited to, sharing information about your web browsing activities with Meta (Facebook) and Google. All of the web browsing information that is shared is anonymized. To learn more, click on our Privacy Policy link.
Images appearing across JoyWallet are courtesy of shutterstock.com.
Writer
Lissa Poirot is an award-winning journalist and editor with a focus on finance, travel and health. Her work has appeared online and in print, and she has often been cited as a source on both. She currently resides in Pennsylvania.
Share this article
