Money Dysmorphia: What is it, & How is it Affecting You?

You read the blogs. Watch the videos. Read the books. You work hard and earn good money. You might even work a second job or a side hustle. Yet you feel like you are falling behind.

More and more millennials and Gen Zs report feelings of falling behind financially. They see friends online and influencers on social media showing off a world beyond what a reasonable person can expect. But because it feels so real it causes financial insecurity.

These feelings of financial inadequacy has a term for it: money dysmorphia.

Money dysmorphia can lead to destructive personal behaviors. A constant reminder you are behind compared to the imaginary world of people online can cause psychological issues that include: excessive working for extra money, hyper-frugality or over spending, feelings of always being behind, failing to make proper financial decisions, and obsessing over money.

Money dysmorphia can cause serious financial and health issues. Feelings of falling behind financially causes some people to take additional risks in investments when a simple plan of consistent investing in index funds would meet financial goals.

Another way money dysmorphia reveals itself is spending. The sufferer decides the only way to make up lost ground is to cut spending to zero. This is more than simple frugality, which is eliminating wasteful spending. Instead, spending is forced to the level of cheap. These people may neglect to change the oil in their car or skip proper hygiene or routine medical exams.

While money dysmorphia is not a medical diagnosis, it is a debilitating mental issue for those it affects.

And it doesn’t stop at spending. Often people become obsessed with their wage and compare their income to others. This is not the normal comparing of income either. This is an obsession where comparing your wage moves beyond peers to other professionals and a comparison with other areas of the country.

Money dysmorphia is a growing problem destroying peoples lives and families. Today we will discuss redirecting the harmful behaviors affecting people with money dysmorphia.

How Money Dysmorphia Started

The blame is often placed at the feet of social media and influencers. While social media has played a vital roll in the growth of money dysmorphia, it started before social media reached the heights it has today. And I was involved in creating the problem.

A decade ago a popular blogger, Mr. Money Mustache (MMM), found a new accountant. I found myself front and center of a massive financial movement called FIRE (financial independence/retirement early). Because my relationship with Pete Adeney (the writer of Mr. Money Mustache) was public, everyone wanted a piece of me.

The idea of financial independence made sense to me. The early retirement part I felt was overplayed. Evidence soon arrived to prove my premonition.

MMM enjoys 7-10 million page views every month. A large number of these people wanted my firm to prepare their taxes and for consulting.

While my tax practice is small, I did handle additional tax clients. But what will interest you are the consulting clients that started coming in.

People would send me their details and a list of questions so I could prepare for their consulting session. A few minutes into the consulting session the new client would break down in tears. They would confess they feel like a complete failure because they have not yet retired and they are 32.

You read that right. People paid me rates higher than most attorneys charge to confess they did not yet retire and they are over-the-hill at age 32.

The entire MMM blog is built on saving hard and retiring early. Pete managed to clock out at age 30. It was and is a large part of his schtick. And some people suffered mightily for it. Working for the man a single day after your 30th birthday became a criminal offense for some. There are even gatherings around the country where these people meet. Many of them reaffirm their perceived financial failure when they see others ahead of them in net worth or spending more on nice things.

I was there in the beginning when money dysmorphia started and was yet to be given a name. I saw, and continue to see, the problem from the inside. Rather than provide answers one-on-one to consulting clients, I will provide solutions to money dysmorphia here.

Redirecting Spending Behaviors

Money dysmorphia expresses itself in spending behaviors and mental health. We will address spending behaviors first.

Feelings of falling behind financially in your demographic is often a call-to-arms. There are plenty of resources providing statistics on where the “average” or “median” person stands.

The crisis mode kicks in when we feel we are falling behind. We may be tempted to take excessive risks with investments to “catch up.” Chasing a hot stock is a good example of this.

Some people become hyper-frugal while others may overspend to keep up with the lifestyle of their favorite online influencer. Both behaviors make your financial situation worse.

Overspending is a problem many have, even those without money dysmorphia. There are solutions.

You need to turn spending into a game you control. It is normal to want to spend money. Poor financial behavior is as old as money.

The natural desire is to spend money. Redirecting your thought process from spending on consumption to spending on investments in growing assets is the key.

Rather than shopping, set goals for how many shares you want to own of an index fund. Or, you can set value goals. I want a $XXX,XXX account value.

Make debt retirement a primary goal until you are out of debt. Spend on debt reduction.

Always open your wallet for spending on necessities. You still need to eat nutritious food. Your health is a primary goal. Deferred maintenance eventually moves from deferred to “do right now.” Changing the oil in your car is an example. Replacing a leaking roof another.

You have to turn it into a game. Humans are genetically wired to spend what we have. Before there was money people traded goods and services. If I traded one type of food for another I needed to eat it before it spoiled. The primitive parts of our brain still think this way: spend it or lose it.

We need to short circuit that old part of the brain to take control of our lives. After debt is eliminated and acceptable levels of consumption attained, it is time to funnel excess monies into income producing assets. That is what you will spend on going forward: income properties, your business, or, for most readers, piling money into index funds.

Make a promise to never take off the pile. That means you can only spend the income stream. No killing the goose that lays the golden eggs, with one exception. Emergencies may require excessive spending. Health is a prime example. The health of you and your family is worth more than any investment plan. If medical treatment is necessary, it must become the primary goal.

Recovering from Money Dysmorphia

The mental health surrounding money dysmorphia is the hard part to tackle. Usually I can convince people to redirect their spending to income producing assets. Mentally wrapping your head around what you have or earn compared to the Joneses is more difficult.

First, accept that your personal situation is not anyone else’s. Statistics cover either the entire country or a large geographic area. Wages vary widely based on location.

Second, the amount of financial support you received in life is different from the people you see online and in social media. Some people get lucky or are in the right place at the right time. Not many people had the opportunity to do what Bill Gates or Steve Jobs did when they started out. They were in the right place at the right time and ran with it.

The path to healing inside is to accept that you are different. You are not Pete. You are not me. Pete retired at 30. BUT!!! Still runs his blog. I write this blog post at the ripe age of 60! And I have never felt like a failure. I enjoy my work. I enjoy helping people. The work I do is not to pad an already large investment account. If I did that I, too, would have money dysmorphia. Instead, live your life on your terms. You are not Pete or me. You are you.

Never compare yourself to others. Compare yourself with who you were yesterday. Ask, did I grow today? Did I learn something? Did I make progess?

If the answer to these questions is yes then you have NOTHING to be ashamed about. If you answer no to any of the questions it only means you need to work on learning something new today. Simple as that.

The worst thing you can do is beat yourself up. You will have financial setbacks. There will always be people who have more, or at least appear to have more. But if you have enough, who cares! The richest guy is often miserable because he is a slave to his desires for more. Don’t be the richest person in the room that also feels financially inadequate.

Shoot for “enough.” Pay off debt, invest. Once you replace part of your income there is no reason to get down on yourself, regardless your age. Once your investments throw off an income stream greater than your income from work you have reached financial independence.

Lastly, I somehow need to convince you to never compare yourself to others. The best way to do that is to recommend a book. This book is a powerful must-read. I can’t tell you the title here for reason that will become clear when you click the link to the book on Amazon.

It’s like that. My two daughters are Gen Z. They never compare themselves to anyone else. They look in the mirror and compare to who they were yesterday and work on improving every day. You have nothing to be ashamed of if most days you see some growth. Nobody else’s lifestyle matters. You are living your life from now on.