Dysmorphia, or dysmorphophobia, in psychology refers to a mental disorder where individuals with normal or attractive appearances obsess over minor body features, causing significant emotional distress and anxiety. This condition is also known as body dysmorphic disorder. Unlike body dysmorphia, financial or money dysmorphia isn't officially recognized as a mental disorder. However, it has been widely discussed in social media and publications, from tabloids like the Daily mail to serious business outlets like Bloomberg. Conceptually, it is similar to body dysmorphia but related to finances—where relatively well-off individuals excessively worry about their income and feel nearly impoverished.

According to Credit Karma, which introduced the term, 43% of Gen Z and 41% of millennials experience this anxiety. Even older generations report similar feelings, with 25% of Gen X and 14% of those aged 59+ expressing discomfort about their financial situation due to comparisons with others.

This distorted view of money leads us to make poor decisions," says Ali Katz, a real estate attorney and founder of the Family Wealth Planning Institute, in a comment to CNBC. Katz worries that clients who don't consider themselves wealthy avoid financial commitments and real estate investments, making poor financial choices based on a skewed perception of their wealth. She notes that this often stems from comparing themselves to others: "My clients in the US think they aren't rich. But globally, Americans are quite affluent. According to the World Economic Forum, 62% of the world's population lives on less than $10 a day, and 85% on less than $30. But we don't compare ourselves to these people; we compare ourselves to Jeff Bezos and Elon Musk.

Avoiding real estate purchases is not the only, or perhaps the most harmful, poor financial decision stemming from financial dysmorphia. It also drives impulsive and extravagant spending, as people buy items and services they can't afford to feel closer to the image of the truly wealthy. This persistent sense of poverty negatively impacts mental health, causing chronic stress that's hard to overcome.

Interestingly, 37% of respondents with financial dysmorphia reported having over $10,000 saved, and 23% have more than $30,000 in savings, significantly above the average American savings of around $5,300.

Where does this anxiety come from?

According to a study conducted by Qualtrics on behalf of Intuit Credit Karma, over a quarter (27%) of Americans consider themselves "obsessed with becoming wealthy," with this sentiment especially strong among Gen Z (44%) and millennials (46%). There is a correlation between financial dysmorphia and this obsession — 54% of those anxious about their income also desperately want to be rich. Among those who don't feel poor, only 12% admitted to being obsessed with wealth.

Dreaming of wealth might seem harmless, but as Nvidia CEO Jensen Huang noted in a Stanford speech, high expectations can lead to emotional instability, whereas low expectations contribute to resilience and success.

According to the Credit Karma study, 69% of respondents experiencing financial dysmorphia don't believe they'll ever be wealthy, and 95% say that their obsession with getting rich negatively affects their finances.

A 2023 Bloomberg survey revealed that even objectively well-off individuals feel they aren't earning enough. Of over 1,000 respondents earning at least $175,000 annually, 25% described themselves as very poor, poor, or struggling. Millennials believe they need at least $525,000 per year and $1.7 million in the bank to feel financially secure. In contrast, Gen Z aims for $128,000 annually and $487,711 in savings, Gen X for $130,000 with $1.2 million saved, and boomers for $124,000 with nearly $1 million in the bank.

When there's too much money but not enough

Gideon Drucker, a financial strategic planning expert at Drucker Wealth, regularly observes signs of financial dysmorphia among his well-earning clients in their 30s and 40s. "By any objective measure, they are wealthy," Drucker told Business Insider, "but they don't feel that way."

According to Drucker, this often happens with people who have what he calls "dangerous amounts of money," earning between $250,000 and $750,000 annually. Those who earn less than $75,000 typically budget strictly, while those making around $5 million a year are unlikely to spend it all unless they engage in extreme behaviors. However, individuals in the "dangerous" range can afford many luxuries but risk having no savings for retirement, leading to anxiety over their financial future and a need to spend excessively to maintain a "rich" lifestyle.

Drucker says that the feeling of not having enough money arises because these individuals compare themselves to others, specifically how they think wealthy people should behave. Additionally, financial dysmorphia and anxiety often stem not from the actual amount of money in their accounts but from uncertainty and a lack of clear understanding of their finances. "It's the unknown that creates this anxiety — much more than the actual numbers," he explains.

Conspicuous Consumption and Vague Goals

In a Wells Fargo study, a significant trend is evident: 59% of millennials believe that appearing financially successful to others is as important as actually earning well. "Fake it until you make it" is the motto for many wealthy millennials, says Emily Irwin, Managing Director of Advice and Planning at Wells Fargo. To avoid feeling poor, they seek visible signs of wealth, such as expensive cars, clothes, or homes in prestigious areas. According to Wells Fargo, 40% of high-earning millennials still rely on credit to maintain their desired lifestyle. This trend is less pronounced among other generations, with only 21% of Gen X and 8% of boomers engaging in conspicuous consumption.

Experts note another factor contributing to this anxiety. Millennials and Gen Z have experienced once-in-a-lifetime events like the pandemic and major geopolitical upheavals at a young age. Erin Lowry, author of the "Broke Millennial" series, writes in a Bloomberg column that the "scarcity mentality" and the expectation that another crisis could hit at any moment create an unhealthy narrative, especially amid social media posts flaunting luxury. She suggests that rather than fixating on vague goals like "getting rich," it would be more practical to calculate specific financial needs and timelines for achieving them.

One of the main factors influencing millennials' and Gen Z's attitudes towards money and wealth is their constant access to information, including news and social media content. Unlike previous generations, Gen Z has never known a world without a 24/7 media flow and search engines that provide instant fact-checking and continuous access to almost any information.

What do social networks have to do with it?

Social media plays a significant role in creating financial anxiety, according to Courtney Alev, a financial advocate at Credit Karma. "Many people compare themselves to peers, social media personalities, and even celebrities, which fosters feelings of inadequacy and insufficiency," she says. "This gap between reality and perception can hinder people from taking steps toward their financial goals." Carolyn McClanahan, a financial strategist and founder of Life Planning Partners, emphasizes the danger of social media, stating, "Financial dysmorphia has been an issue for a long time, but social media has taken it to a whole new level.

A study by Edelman Financial Engines also found that about a quarter of respondents feel less satisfied with their earnings due to social media. "We found that anxiety about financial situations is strongly linked to the amount of time spent on social media," says Isabel Barrow, Director of Financial Planning at Edelman Financial Engines.

The study also found that content featuring conspicuous consumption often leads to a desire to keep up with digital role models, resulting in impulsive spending. About 33% of respondents admitted to overspending on luxury items, vacations, or expensive home renovations due to social media pressure. This effect is stronger among those who spend more time on social media—51% of those who spend over three hours a day admitted to overspending, compared to 16% of those who limit their time to one hour. Additionally, 74% of respondents believe their acquaintances portray themselves as wealthier on social media than they are in reality.

Barrow, who deleted her social media accounts, encourages users to reduce their time on social networks and remove payment details from devices and platforms to minimize impulsive purchases. "Sometimes we need to create obstacles for ourselves," she advises.

Social media and influencer culture can exacerbate financial dysmorphia because we see images of people living glamorous lives and spending lavishly," Scott Lieberman, founder of Touchdown Money, told GoBankingRates. "But we don't know the truth about how they got that money or how much debt they have.

However, this doesn't stop Gen Z from dreaming of becoming influencers. In a 2023 survey, nearly 60% of Gen Z respondents said they would quit their jobs to become bloggers if the income was sufficient to maintain their lifestyle. Three out of ten said they would even pay to become influencers, with most considering it a respectable career.

However, another survey revealed that, contrary to their reputation for valuing freedom and self-expression over a stable income, Gen Z became more willing to sacrifice independence from the corporate world for a high salary post-pandemic. Nearly half of Gen Z respondents (41%) would stop working from home if it meant a promotion, 37% would give up their hobbies, and 31% would forgo socializing with friends for a higher salary. Researchers note that earning more than their parents is extremely important for Gen Z.