What to do when your spending doesn’t match your financial reality – Diana Clement

Money dysmorphia is taunting our financial realities. Photo / 123rf

THREE KEY FACTS

• Money dysmorphia is a distorted perception of financial reality, affecting spending and saving behaviours.
• It has gained traction on social media but lacks a clinical diagnosis, explaining behaviours like wealth obsession.
• Social media amplifies these distortions, creating unrealistic expectations and feelings of inadequacy or failure.

Is your real financial situation out of whack with how poor or wealthy you feel?

Money dysmorphia is a distorted perception of your financial reality. It is surprisingly common. Your spending or saving is out of kilter with your financial situation. It’s common.

Money dysmorphia helps explain many behaviours that hold people back. The term appeared about the time of the pandemic and is a new take on body dysmorphia, a mental health condition where people see themselves in a way that doesn’t match reality, often thinking of themselves as fat or ugly.

The money version is a colloquial term that gained traction on social media and does not have a clinical diagnosis. It’s one of a number of catchy phrases invented to help make sense of difficult financial topics. I wrote about some of the best last year.

Like many new terms, the behaviour behind money dysmorphia has existed as long as humans have lived in communities. A distorted view of others’ wealth, whether in bartered goods or hoarded supplies, could trigger feelings of inadequacy, fear, or competition.

Modern money dysmorphia comes in several forms. You may feel broke, despite earning well and having savings. You feel guilty spending, even when you are comfortably off. Or you may obsess over accumulating wealth, even though it brings no satisfaction. Others believe money is limitless and spend what they don’t have.

People with mortgage-free homes often worry daily about affording retirement. Both young and old get anxious about economic headlines that feel like financial Armageddon, but in reality are part of a cycle.

Wealth obsession is another manifestation. High-achieving professionals, entrepreneurs and those with financially unstable upbringings may be driven by what others think. Their wealth looks like success, but underneath there is a fear or inadequacy, leading to dissatisfaction.

Our comparisons may be an illusion. What is happening behind someone else’s fancy shutters isn’t always what it seems. Despite high salaries, some people spend beyond their means and may be deep in debt. Their electric cars might be 100% financed and the family is one job loss away from disaster.

High earners may feel broke, while some spend beyond their means. Photo / 123rf

Many people treat their homes like piggy banks to fund inflated lifestyles. They use their mortgages as piggy banks to fund everyday spending. When credit card balances build up or they want a new car or holiday, they either put it on the card and pay it off by extending the mortgage or borrow directly against the home. Don’t compare yourself to them.

Meanwhile, the person you see shopping in an op shop might live in a mortgage-free, $8 million home. True story. I met one such person in my local op shop.

Social media has amplified money dysmorphia. Young people used to read Vogue or GQ to see how the rich lived. It is much harder now with social media. Curated content warps expectations.

There is far more stuff to buy these days and social media shoves it in your face. I have fallen for it myself, buying a [very useful] Wholly Shrink plastic compactor after being showered with social media adverts. I’m a sucker occasionally for practical inventions and good design.

For those who follow influencer feeds regularly, you’ve probably succumbed to a lot more than a plastic compactor. Remember, influencers’ claims can be misleading and motivated by the money they earn. This creates distorted expectations and leaves followers feeling inadequate or like they are failing, even when they are financially stable or progressing at a realistic pace.

Parents who have unhealthy relationships with money owe it to their children to understand the problem and not transmit it to the next generation. Passing down a scarcity mindset, or at the other extreme, unrealistic expectations about their entitlement to wealth, can leave young adults ill-equipped to navigate real-world financial challenges.

Spotting your own money dysmorphia takes self-reflection. Stop and question your thoughts. If you are mindful with money, you might end up better off than those wearing the financial emperor’s new clothes.

Although it is not a recognised condition, the underlying problem can be addressed with real psychology. Cognitive behavioural and other therapies can help. So can good financial advice from someone who is not just selling products. With a professional eye over your finances, it becomes a lot easier to have perspective.