Understanding Money Dysmorphia: What It Is and Why It’s Becoming a Growing Concern

In recent years, the term "money dysmorphia" has gained significant attention, with searches for the term increasing by 136% over the past year. But what exactly is money dysmorphia, and why are people becoming more concerned about it? Money dysmorphia refers to a disconnect between an individual’s financial reality and their perception of their wealth. While it is not an official medical diagnosis, it can lead to unhealthy financial habits and significant emotional distress. It manifests in two primary ways: some people feel they have less money than they actually do, leading to excessive anxiety and panic, while others believe they have more money than they do, resulting in overspending and financial difficulties. Finance expert Christie Cook of Hodge Bank explains that this phenomenon is exacerbated by factors such as social media’s influence, unrealistic comparisons, and the ongoing cost of living crisis.

The Personal and Emotional Impact of Money Dysmorphia

The emotional toll of money dysmorphia is evident in the personal experiences of individuals like Emma Hull, a 29-year-old homeowner with significant savings and investments. Despite her financial stability, Hull admits to feeling panicky when faced with unexpected expenses, such as a speeding fine, even though she can afford to cover them. She also struggles with treating herself, often second-guessing purchases due to a mindset that tells her she cannot afford them, despite her bank account suggesting otherwise. Hull has implemented strategies like setting up savings pots in her banking app to manage her finances better, but the emotional struggle persists. Her story highlights how money dysmorphia can affect even those who are financially secure, creating a sense of insecurity and anxiety that is hard to shake.

Beyond Hodge Bank: How Money Dysmorphia Affects the Wealthy

Money dysmorphia is not limited to individuals with limited financial resources; even the wealthy can experience it. Ollie Saiman, co-founder of wealth manager Six Degrees, works with clients who have accumulated more wealth than they could ever spend but still feel financially insecure. These individuals often struggle to reconcile their rational understanding of their financial stability with their emotional fears about not having enough. Saiman explains that this disconnect arises from the interplay between the left brain, which processes logic and facts, and the right brain, which is driven by emotions and intuition. For many, the fear of not having enough persists, making it difficult for them to enjoy their wealth or make spending decisions confidently.

The Causes of Money Dysmorphia

While the exact causes of money dysmorphia are not fully understood, Christie Cook identifies three key factors that may contribute to its development. The first is the cost of living crisis, which has led many people to panic-save in an attempt to feel more in control of their finances. Even those with adequate savings may feel compelled to save every extra pound, often at the expense of enjoying their money. The second factor is the financial environment of one’s childhood, particularly growing up in a household that experienced financial hardship. These early experiences can shape an individual’s attitudes toward money in adulthood, often leading to overly cautious or anxious behavior. Finally, past financial trauma, such as bankruptcy or fraud, can leave individuals with lasting anxiety about money, even if their current financial situation is stable.

Recognizing the Signs of Money Dysmorphia

Identifying money dysmorphia in oneself or others can be challenging, as it often manifests in subtle ways. According to Christie Cook, some common signs include excessive worrying about money when there is no immediate financial danger, feeling stressed or guilty about earning or saving money, and avoiding financial statements or decisions. At the opposite end of the spectrum, some individuals may exhibit self-sabotaging behaviors, such as overcompensating by covering costs for others even when they cannot afford to do so. These signs suggest that a person’s financial mindset may be misaligned with their financial reality, potentially leading to unhealthy habits and emotional distress.

Overcoming Money Dysmorphia: Practical Steps to Financial Peace

While money dysmorphia can be a deeply ingrained issue, there are practical steps individuals can take to overcome it. Christie Cook recommends tracking spending habits to gain a clearer understanding of one’s financial situation and identifying areas where there may be more flexibility than initially thought. She also emphasizes the importance of avoiding comparisons with others, as social media often presents an unrealistic picture of wealth and spending. Setting up savings pots with specific goals can help individuals feel more in control of their finances and reduce anxiety about unexpected expenses. For those who find it difficult to manage these challenges on their own, speaking with a therapist or financial advisor can provide additional support and guidance. By addressing both the emotional and practical aspects of money dysmorphia, individuals can work toward a healthier relationship with money and achieve greater financial peace of mind.