Almost One Third of Americans Have Money Dysmorphia: Is Social Media To Blame?

If you’ve never heard of money dysmorphia, you’re not alone. The term seems to be a relatively recent phenomena, although the concept is not. It’s a modern-day take on the age-old phenomenon of feeling pressure to “keep up with the Joneses”. Except now we all think we know exactly how much money the Joneses have, because they tend to flaunt it online.

We more commonly hear the word dysmorphia — generally used by mental health practitioners — as part of the phrase “body dysmorphia”, defined as a disorder where patients see their own bodies as significantly worse than they objectively are, and tend to constantly compare their own body with that of others who, to their mind, have a much more attractive appearance.

Money Dysmorphia

“Money dysmorphia” then, can be defined as a situation where an individual has a self-perception around their finances (including a constant comparison with other people’s finances) that doesn’t tie in with objective reality. You may be money dysmorphic if you’re convinced that all your friends and family members are doing better than you financially. And that’s an understandable belief to have.

Browse your social media feed and you’ll see friends, relatives, colleagues and perfect strangers doing fun — and often very expensive — things with their lives. They’re on vacation, buying a new car, having an extravagant wedding, wearing a designer dress, or taking their kids to Disney World on a random Tuesday.

That’s the thing about social media of course. We post the highlight reel. The red-letter days. The wedding, or the trip, or picking up the keys to the new car or home. We don’t post the days that we’re home eating Ramen in sweats to pay for it all. And we don’t tend to post about the mortgage, the car payments or the days the credit card bills come due.

That can lead to us assuming that people can afford everything they post. And if we can’t? We must be much worse off financially than they are, right? We must be quite poor compared to these rich friends, acquaintances, and strangers.

That’s why we’re prone to become a little detached from reality, , with a recent report from Credit Karma finding that 29% of Americans now have money dysmorphia. The figure is even higher among younger generations, with 43% of Gen Z and 41% of millennials experiencing the phenomena.

What’s more, for the purposes of the above study, the researchers defined money dysmorphia as “having a distorted view of one’s finances that could lead them to make poor decisions”. We’re not (just) talking about something that can impact self-worth and mental health. We’re talking about something that can actually lead to bad financial decisions.

Worryingly, money dysmorphia can prevent people from optimizing their income and building wealth because they don’t perceive themselves as having enough money to engage in financial planning, invest for the future, or even investigate how to decrease things like tax liability.

While a wealthy person will do everything they can to optimize the money they have, a middle class person with money dysmorphia may wrongly assume they don’t have enough money for it to really matter how they manage it.

Ali Katz, an estate lawyer and founder of the Family Wealth Planning Institute, talking to Ryan Emery of CNBC, defines money dysmorphia as:

“A distorted view that we have around money that causes us to make poor decisions,”

Katz reports that many of her clients see themselves as not being wealthy enough to have to think about estate planning, when in fact everyone who has dependents should be thinking about making provisions for what happens to them if they pass away, even if they own minimal assets and have a very modest net worth.

Many people with money dysmorphia are so detached from reality that they see themselves as poor when they’re actually better off than their peers. The above report found that 82% of those who showed signs of money dysmorphia say they feel behind on their finances (compared to 29% in the group who didn’t seem to suffer from it).

That’s where things really get interesting though. Because the study was done on people who — overall — had a high income and a higher savings rate than average. Those in the “money dysmorphic” group tended to have higher than average savings with 37% having at least $10,000 in savings and 23% of those having more than $30,000 in savings.

In the non-dysmorphic high-income group however, savings were even higher — with 52% reporting savings of $10,000 or more, and 52% of those reporting savings of $50,000.

This, of course, makes sense. If you pay a lot of attention to those around you, and feel you’re not as financially well off as them, a couple of things can happen. You can decide to spend a lot, like them, to fulfil your need to “keep up with the Jonses” resulting in lower savings. You can also tend to think that you don’t really earn enough to make a big impact by saving and investing, and be more likely — overall — to spend instead.

Perhaps ironically, the images of wealth and prosperity on social media may be predominantly all the money dysmorphic people spending money they should probably be saving, and doing it conspicuously so that no-one guesses at their insecurity around money. While the non-dysmorphic may be more inclined to stay off the socials — or at least not be overly influenced by what they see on there — and build their wealth instead.

The big picture is more complex, of course. But if you feel like you’re behind your peers financially, and you spend a lot of time on social media, it may be time to shut down the apps, look at your real net worth, and have a chat to a financial advisor. You may be making poor financial decisions based on a false — or at least somewhat distorted — reality.

Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen