In today’s digital age, a new financial phenomenon affects young adults significantly: “money dysmorphia.” This term, recently highlighted in a report by Qualtrics commissioned by Intuit Credit Karma, refers to a distorted perception of one’s financial situation, where individuals feel financially inadequate compared to their peers. This feeling of inadequacy can lead to poor financial decision-making and increased insecurity, particularly among Gen Z and millennials.
The Rise of Money Dysmorphia
The study, conducted in December 2023, surveyed 1,006 American adults and found that a significant portion, 29% of respondents, frequently compare their financial situation to others, sparking feelings of inadequacy. This percentage is even higher among younger adults, with 43% of Gen Z and 41% of millennials reporting these feelings. This comparison has given rise to what is now termed ‘money dysmorphia,’ a common experience akin to the old adage of ‘keeping up with the Joneses.’
Money dysmorphia describes a distorted view of one’s finances, which can significantly impact mental well-being and financial behavior. Those experiencing this issue are more likely to feel financially behind their peers, with 82% noting struggles with economic insecurity. Despite these feelings, the survey revealed a notable divide: while nearly half of Gen Z and millennials feel financially behind, 59% of all respondents reported feeling economically stable.
The Psychological Impact of Economic Events
The roots of money dysmorphia run deep, influenced by the economic turbulence that has marked the lives of young adults. Gen Z and millennials have grown up during what many describe as ‘once in a lifetime’ or ‘generation-defining’ events. The 2008 financial recession and the 2020 COVID-19 pandemic are pivotal moments that have shaped their financial outlooks. These events, occurring during their formative years, have ingrained a scarcity mentality, where the fear of financial instability persists even when stability is achieved. It’s important to recognize that these events have had a profound impact on our financial well-being.
Psychologists note that these traumatic economic experiences have a lasting impact, contributing to a pervasive sense of financial insecurity. This anxiety is not solely confined to those who have experienced financial hardship; even individuals with relative financial stability can suffer from money dysmorphia. The constant exposure to the affluent lifestyles of peers and celebrities on social media exacerbates this distorted perception, leading to dissatisfaction with a stable, everyday life.
The Role of Social Media
Social media plays a significant role in perpetuating money dysmorphia. According to a study by Edelman Financial Engines, nearly 25% of Americans feel less satisfied with their financial circumstances due to social media. The curated, often exaggerated displays of wealth and success on platforms like Instagram and TikTok create unrealistic benchmarks for financial success. However, it’s important to remember that we have the power to control our exposure. This constant comparison can lead individuals to spend beyond their means to match these perceived standards, resulting in financial strain and further insecurity.
Credit Karma’s consumer financial advocate, Courtney Alev, describes money dysmorphia as “today’s version of keeping up with the Joneses.” She explains that this distortion between perception and reality is driven by the omnipresence of social media and our society’s obsession with wealth. The pressure to appear financially successful can lead to detrimental financial decisions, such as overspending on luxury items or unnecessary renovations, ultimately harming long-term economic health.
Overcoming Money Dysmorphia
Combatting money dysmorphia requires a proactive approach to financial management and mental health. Courtney Alev suggests several strategies to overcome this distorted perception:
- Take an Honest Look at Your Finances: Conduct a thorough financial audit to understand your financial standing. This honest assessment can help dispel misconceptions and provide a clear picture of your finances.
- Set Clear Goals: Establish specific financial goals that align with your values and priorities. Whether building an emergency fund, saving for a significant purchase, or investing for the future, having clear objectives can guide your financial decisions.
- Make a Plan: Develop a realistic budget and financial plan that supports your goals. This plan should include regular savings contributions, debt repayment strategies, and spending limits.
- Avoid Social Media Comparisons: Limit your exposure to social media content that triggers feelings of inadequacy. Instead, focus on your financial journey and celebrate your progress.
- Invest in Yourself: Prioritize personal development and financial education. Building knowledge and skills can boost confidence and help you make informed financial decisions.
By implementing these strategies, individuals can shift their focus from external comparisons to personal financial health. Distancing oneself from the constant barrage of social media content can help cultivate a sense of satisfaction with one’s economic situation and encourage more prudent financial behaviors.
The Path Forward
Money dysmorphia highlights the complex relationship between mental health and financial well-being. For Gen Z and millennials, overcoming this challenge requires a combination of self-awareness, strategic planning, and resilience. By acknowledging and addressing the root causes of financial insecurity, young adults can pave the way for a healthier, more stable financial future. As society continues to navigate the evolving economic landscape, fostering financial literacy and mental well-being will be crucial in mitigating the effects of money dysmorphia and promoting overall financial health.
