Money dysmorphia is a negative and unrealistic perception of one’s financial wellness or position. If you have money dysmorphia, you might constantly worry about your finances, even if you are doing well for your age.

One significant reason for experiencing money dysmorphia is the unhealthy comparison with others facilitated by social media platforms like Instagram, where everything appears perfect. People often post only the fabulous side of life, while keeping the troubling parts suppressed, which can lead to immense psychological damage in the future.

Additionally, you might start experiencing money dysmorphia if you read too many personal finance sites, including this one. Because Financial Samurai is 100% focused on helping readers achieve financial freedom sooner, discussions such as maxing out your 401(k) or spending no more than 1/10th of your gross income on a car may sound extreme. If you’re not doing these things, you may start feeling bad about your financial situation.

I apologize if this has caused any distress. I’ve always believed in pushing yourself beyond what is normal to achieve above-average results. However, one of the consequences of challenging readers is making some feel bad along the way.

As a result, I’ve tried to share the difficulties of my financial journey to balance things out. Real life is not perfect. There will be setbacks along the way. My hope is that we can learn from our failures and move forward.

Growing Money Dysmorphia and What to Do About It

Business Insider surveyed more than 600 adult Gen Zers about the financial responsibilities that caused them significant stress. Almost half indicated they were concerned about saving money. This concern is understandable given how expensive everything has gotten over the years.

Check out this classic inflation chart of some of our most important goods and services.

Saving for housing and college are major financial burdens, contributing to the delay in starting families for many individuals. The national personal saving rate has dropped back down to 4% after spiking to about 30% when the pandemic first hit in March 2020.

It seems Americans have difficulty saving more due to rising costs and a lack of discipline. After all, the pandemic showed that we CAN save more if we NEED to.

Money Dysmorphia and Saving Money

Curiously, knowing how little the typical American saves might make us feel like failures!

On one hand, we might feel great saving 15%, which is more than double the percentage the typical American saves. Yet, we might experience money dysmorphia when we realize the typical American saving rate shot up to 32% in March 2020 and to 27% during the second wave of COVID in 2021.

We might now feel incompetent for not being able to maintain a 30%+ saving rate, even though it’s six times higher than the long-term national average. Just as beauty standards have increased over time, so have money standards.

If you then read a post about how to retire early, you’ll see recommendations to save 50% of your after-tax income, perhaps making your 15% saving rate feel even more insignificant.

Younger Generations Feel More Money Dysmorphia Than Older Generations

In a survey conducted in December 2023 by Credit Karma, 43% of Gen Z respondents and 41% of millennial respondents reported experiencing money dysmorphia, compared to 25% of Gen Xers and 14% of respondents aged 59 or older. Meanwhile, roughly 45% of Gen Z and millennials are obsessed with the idea of being rich (44% and 46%, respectively) 

This makes sense given that younger generations have less experience with life and money. Being younger than the average person writing or discussing money makes you naturally compare upwards. When you compare yourself to someone with 25 years of saving and investing versus your five years, you might end up feeling worse about your financial situation.

However, given that money dysmorphia seems like a relatively new term, I’m not sure survey respondents really understand what it means. We’re not talking about just worrying about how to pay the next credit card bill because you went on a vacation you couldn’t afford. Instead, money dysmorphia is more about catastrophizing your financial situation, where you feel pervasive worry, even though you will more than likely be okay.

People in their mid-20s to mid-30s tend to go through more life transitions—they might be planning for a wedding, saving and investing for a house down payment, leaving the workforce to get an MBA, or planning a family. With all these big life changes, it’s natural to worry about money!

Examples of Financial Catastrophizing

When you’re young, there are more uncertainties in life. As a result, it’s easier to catastrophize about the future:

• What if I’m stuck in my dead-end job that I hate forever?
• What if I get fired and end up living in my mom’s basement during my prime dating years?
• What if I end up rich and free as a child-free cat lady or child-free cat gentleman?
• What if I spend $240,000 on an MBA only to graduate with the same paying job as I had before?
• What if I’ll never be able to afford a single-family home with a backyard?
• What if my car breaks down and wipes out my entire emergency fund?
• What if my children can’t get into a top 100 college and end up flipping burgers at McDonald’s?
• What if we sacrifice our retirement to send our kids to private grade school, only for them to graduate and end up in a public college with a 70%+ acceptance rate?
• What if my spouse divorces me and takes everything I’ve earned?

Holy crap! With all these scary questions, no wonder some folks develop money dysmorphia!

Whenever you’re going through big life transitions, it brings about introspection. Every choice you make is a risk and an opportunity for regret. Most of these negative scenarios won’t come true. However, if you live long enough, you’ll experience plenty of setbacks.

Great Example Of Money Dysmorphia

Here’s a sad fella on the app, Blind, sharing his fears about falling behind with a $1.4 million net worth at age 25.

Big Changes in My Life

I discussed having a parental existential crisis where my purpose for being is no longer needed once both kids are in school full-time. Although we have a large enough net worth to sell assets to pay for life, I’m often worried about whether our finances are strong enough to take care of our children through college.

Is this money dysmorphia? Or are my concerns because my wife and I don’t have steady paychecks, we’ve been through multiple bear markets before, calculated the crazy future cost of college, and I’m hyper-aware of how competitive and difficult life can be?

Perhaps it’s a combination of everything. It’s easy to worry about money, especially if you are an investor, because the value of stocks can disappear overnight.

How to Overcome Money Dysmorphia

Here are five ways to combat and overcome money dysmorphia.

1) Know Your Finances Inside and Out

Money dysmorphia occurs when your perception of your financial reality is skewed because you don’t clearly track your finances. Without a clear idea of your net worth and how it’s invested, you may inadvertently think you are poorer or that your finances are more at risk than they really are.

You must track your finances meticulously. The better you understand your cash flow and overall net worth, the less you will experience money dysmorphia. Personally, I’ve been using Empower to track my finances for free since 2012. Every time I log in, I see an updated net worth figure. I also see all my investments, mortgage balances, and credit card debt.

Once I linked all my accounts to Empower’s dashboard, I felt relieved knowing that almost all financial items would be tracked and updated. It’s like going from having a large grocery list in your head to writing it all down on a piece of paper when grocery shopping.

Example of How Not Tracking Your Finances Can Lead to Money Dysmorphia

You don’t want to get new tires for your car even though they are bald because you want to save money. You’re constantly in dread because you fear something else in your car will break. In fact, you’ve opted to spend an hour more commuting by taking the bus instead to save money.

But if you tracked your investments, you’d know that the $10,000 position you made in NVIDIA five years ago is now worth $280,000. You can easily afford to pay $1,000 for four new tires on your Toyota Corolla. But you fear that your diversified investments in artificial intelligence might go to zero one day, so you continue to scrimp and save on transportation safety.

2) Turn Ambiguous Goals into Clear Financial Goals

Ambiguous goals create a lot of uncertainty, which leads to catastrophizing and, ultimately, money dysmorphia because you constantly fear not having enough money. You need to create clear financial goals with specific timelines. Additionally, you should model out worst-case, realistic-case, and best-case scenarios.

Example of Turning an Ambiguous Goal into a Specific Financial Goal

Every parent knows they should save for their kid’s college education. However, not every parent knows how much to save and for how long. All most parents know is that college is expensive and tuition increases faster than overall inflation every year.

This uncertainty creates fear that parents might not ever be able to comfortably afford college. Catastrophizing might occur where parents feel like they’ve failed their kids, with community college as the only option. Then, it’s off to working at McDonald’s for the rest of their lives.

Instead, a parent can read posts such as “When to Stop Contributing to a 529 Plan,” which shares the estimated cost of college in the future and a framework of how much to invest and when to stop. Once this college savings plan is implemented, there shouldn’t be any money dysmorphia because the parent knows exactly how much to save for college.

3) Stop the Self-Comparisons

Social media hurts your mental health. You need a tremendous amount of self-esteem to not feel envious, angry, or jealous of other people’s successes. Sadly, those in their 20s and 30s have the lowest self-esteem because they have the most amount of uncertainty. Yet, these age groups consume social media the most!

You see your 20-something friends driving $80,000 BMWs and your 30-something friends living in multi-million dollar apartments or houses. Then, you start thinking what is wrong with you for not being able to do the same. You start doubting your own finances as a result.

We’re comparing our entire lives to someone else’s best lives on social media. If you can reduce your social media consumption or completely cut it off, you will reduce any money dysmorphia you have.

Example of How Comparing Yourself to Others Creates Money Dysmorphia

You see a 32-year-old colleague who quits her job at a fintech startup after an IPO and buys a $10 million house. You’re like, “WTF?! I can buy at most a $2.5 million house by putting down $500,000 and having $250,000 left over.” Even though $2.5 million is 30% higher than the median home price in San Francisco, you still feel like a failure.

It turns out, your 32-year-old colleague who became a VC comes from an extremely rich family. Her Bank of Mom & Dad bought the house for her and donated $3 million to Stanford to help her get in.

But because your colleague was an excellent stealth wealth practitioner, you had no idea. You only found out about her mansion after she invited you over for her baby shower.

4) Understand That Financial Obligations Have Changed from Previous Generations

There was once a time when plenty of working Americans got jobs for life with pensions. Today, the typical American worker changes jobs every three years and has to self-fund their retirement through 401(k), IRA, and Roth IRA contributions. As a result, there’s rightfully a lot more to worry about for a comfortable retirement.

Before the 1970s, three-bedroom single-family homes could be bought for 2-3X the median household income. Today, buying the median-priced home (~$420,000) costs about 5.5X the median household income ($76,000).

Hence, buying a home by 26 and having two kids by 28 with a stay-at-home spouse is becoming more unrealistic for today’s 20-something generation.

Example of How Following the Previous Generation Can Lead to Money Dysmorphia

Because your parents bought their first home at 26 and had you and your sister by age 30, you feel a tremendous amount of pressure to do the same. However, at 25 years old, you’re still living at home because you’ve got $30,000 in college loan debt you’re trying to pay off. There’s no way you’ll be able to buy a property next year. Even paying more than $2,000 a month on rent is tough on an income of only $58,000.

Because you’re living at home, your dating life has suffered. As a result, you feel you’ll be lucky to meet someone by 30. As a result, you continue to save like mad and take on side hustles to earn extra money.

But the reality is, you’ll be debt-free in under 18 months. You’ll also probably be making $75,000 by then, putting you on the path to buying your first home by 33 after putting 20% down. That’s two years younger than the median first-time homebuyer today. Congrats for your frugality and discipline!

5) Compare Properly if You Must

Let’s be realistic, we can’t help but compare ourselves to others. However, if you must compare, at least compare yourself to someone as similar to you as possible. We’re talking same age, same sex, same race, same looks, same number of hours worked, same job, same alma mater, same family wealth, and same personality.

The more different the person you are comparing yourself to, the more at risk you are of developing money dysmorphia.

Example of Improper Comparison That Could Create Money Dysmorphia

Let’s say you’re 35 years old and have never read a personal finance site before. Then you stumble across a post called “The Average Net Worth for the Above Average Person.” You look at a chart and see that the average 35-year-old should have a net worth of around $430,000. Meanwhile, you triple-check all your financial accounts and come up with a total of $120,000. Ugh!

Twelve years after college, you thought you were doing great. But some personal finance enthusiast who has been eating, sleeping, and breathing personal finance since 1999 says you’re way behind.

Using my guide is an improper comparison because while you were having fun partying, driving nice cars, and living an awesome life. Meanwhile, I’ve been living like a hermit and working 60_ hours a week in order to retire early ASAP. Instead, you need to compare yourself to other 20-something and 30-something-year-olds who never read personal finance sites and have a great time!

Another Example of Improper Comparison That Could Create Money Dysmorphia

Or let’s say you see in an article that a parent has saved $300,000 in their seven-and-a-half-year-old’s 529 plan while you’ve got a total of $20,000 saved. Oh shiitake! You might feel terrible until you realize the family is East Asian and will likely have to pay full freight for a mediocre college.

Meanwhile, your son is 1/16th Native Hawaiian, making him eligible for more grants and scholarships to great schools because only about 0.4% of the U.S. population is Native Hawaiian.

Don’t compare your child to those from the most competitive demographics for top college admissions with financial assistance. Instead, compare him to other Native Hawaiian kids from the same socioeconomic background.

You Probably Have Some Level of Money Dysmorphia

If you’re reading a personal finance site instead of numbing your mind by watching TV, you probably have some money dysmorphia. If you’re listening to a personal finance podcast (Apple) instead of watching TikTok dance videos, you probably have some money dysmorphia too. It’s just natural if you really care about your finances.

Since 1999, I’ve been obsessed with money because I didn’t want to work forever or return to work out of necessity. Part of my trick to building more wealth is convincing myself that I’m poorer than I really am in order to manufacture heightened anxiety to continue saving, investing, and working hard.

Treating all expenses as investments is one way I’ve tricked myself to invest more. Holding just one week’s worth of living expenses in my checking account at any given moment is another way I’ve forced myself to track my spending more carefully. So perhaps I have “artificial money dysmorphia.”

But starting at age 45, I finally started spending more and embracing my good fortune. It’s been a good journey filled with the ups of feeling rich and the downs of feeling poor. But overall, I feel blessed and plan to spend more.

Reader Questions And Suggestions

Do you feel you have some money dysmorphia? If so, where do you think it stems from?

To better manage your finances, use Empower, a remarkable wealth management tool I’ve trusted since 2012. Empower goes beyond basic budgeting, offering insights into investment fees and retirement planning. It’s free for all to use. Don’t leave your money up to chance. To build greater wealth, you must diligently track your money. 

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