Do your finances give you anxiety? Understanding 'money dysmorphia' and its impact on Gen Z (2024)

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Money dysmorphia is an emerging phenomenon where individuals have a distorted view of their financial status, often perceiving their financial situation as worse than it is.

This condition affects people across all income levels, including the wealthy. Gen Z, those born between 1997 and 2012, are particularly susceptible to this condition, influenced heavily by social media and societal pressures.

New York-based personal finance website Bankrate quoted Dr. Lanre Dokun, psychiatrist and founder of Healthy Minds NYC, who explained, “Money dysmorphia is when someone has a highly warped sense of their financial status. They have an inaccurate reference point for what’s normal.”

This concept is akin to body dysmorphia, where individuals have a distorted view of their physical appearance.

What causes money dysmorphia?

The primary cause of money dysmorphia is self-comparison, often exacerbated by social media and reality TV. Dokun noted, “Reality TV and social media give people an on-the-ground perspective of these lavish lifestyles. It brings you into their homes and sort of normalises this kind of life.” This constant exposure to idealised lifestyles can create a sense of inadequacy and anxiety.

Annette Harris, accredited financial counselor and certified financial fitness coach, added that traumatic financial experiences from the past can also contribute to money dysmorphia. “Many individuals who grew up in poverty feel a strong need to show off their wealth in adulthood,” Harris told Bankrate.

“Alternatively, they may develop a fear of losing money and hoard it instead to ensure they never go without again.”

What impact does money dysmorphia have on your financial habits?

Money dysmorphia can lead to extreme financial behaviours. Some individuals may overspend to project an image of wealth, influenced by normalised overspending seen on social media.

“There are a lot of people that, because they’ve seen so much spending, think, ‘That’s how I should be spending,’” said Dokun. Conversely, others may hoard money out of fear, even when financially secure.

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Erika Kullberg, attorney and personal finance expert, highlighted another consequence: inaction due to fear. “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,” Kullberg told Bankrate.

Why is Gen Z the most affected by money dysmorphia?

Gen Z is significantly impacted by money dysmorphia, primarily due to their high consumption of social media. A Bankrate social media study found that Gen Zers are the most likely to make impulse purchases influenced by social media.

Amanda Clayman, financial therapist, told Business Insider, stating, “We can never know all of the intimate details of a person’s financial picture and their history. We are creating a pattern that tells a story based on the incomplete information that we’re picking up.”

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Clayman also noted that young adults are undergoing significant life transitions, such as weddings, buying homes, and career changes, which can amplify financial anxiety. Nearly half of young adults experience money dysmorphia, with many feeling an internalised sense of financial insecurity, even in the absence of actual financial problems.

How can you overcome money dysmorphia?

To combat money dysmorphia, it’s crucial to acknowledge and understand the root causes of your financial anxieties. Harris recommended consulting with a mental health professional specialising in financial therapy to address these issues. “Acknowledging your financial past can prevent it from affecting your future,” Harris advised.

Developing financial literacy is essential for gaining a clear and accurate understanding of your financial situation. Kullberg said, “Education on financial matters can relieve many fears and misconceptions.”

Working with a financial advisor can provide an objective view of your financial health, helping to alleviate unfounded fears. “You might find that you’re doing just as well as, or better than, your peers,” Dokun suggested.

Establishing a monthly budget can help manage money dysmorphia by providing a clear picture of your income and expenses. This practice can lead to more informed financial decisions and reduce anxiety over finances.

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Money dysmorphia, while not a clinical diagnosis, significantly impacts individuals’ perceptions of their financial health, leading to detrimental financial behaviours. Gen Z is particularly vulnerable due to social media influence and significant life transitions.

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