What is financial dysmorphia and how to get rid of it.

Published 3 months ago

No one is immune from it: neither those who receive an average salary, nor those who earn millions.

Do you always feel like you have no money at all, even though you regularly receive a salary and even make some savings? Or do you constantly worry about small purchases, although you can easily afford them? Such situations may mean that your perception of your own financial situation is not true and you are susceptible to financial dysmorphia.

What does “financial dysmorphia” mean?

In psychology, the word "dysmorphia" is used to describe a mental disorder in which a person is excessively focused on one or more flaws in appearance that are barely noticeable or not at all noticeable to others. Finance specialists noticed a similar phenomenon in their field and decided, by analogy, to call it financial dysmorphia.

This is not an official diagnosis, but rather a newfangled term that refers to the discrepancy between thoughts about money and actual actions. Moreover, in this case, the long-established concept of cognitive dissonance, that is, the contradiction between ideas, beliefs and actions, would also be perfect. For example, you think you know how to save money, but your banking history says otherwise. Or you are convinced that you are not rich enough to think about buying an apartment or investing, although in fact this is not the case.

Another manifestation of financial dysmorphia is unrealistic goals, for example, saving 200 thousand in six months with a salary of 50 thousand per month. Perfectionists often suffer from this. They want to implement ambitious plans, but are so paralyzed by the fear of failure that they do not dare to make the necessary changes.

Moreover, the occurrence of financial dysmorphia does not depend on income level. Surveys in the United States show that objectively wealthy people feel that they do not have enough money and call themselves poor and very poor. And even those who earn six figures find themselves living paycheck to paycheck.

Experts believe that the key factor that explains why objective indicators of wealth and a person’s subjective feelings may not coincide is anxiety. And it is often associated not with specific numbers, but with uncertainty and lack of a clear understanding of one’s current financial situation.

When our understanding of money becomes distorted, we begin to make bad decisions. For example, we stay in a job that we hate and sacrifice our personal life for the sake of our career, because we think that otherwise we will be left without money. Or we put off starting our own business because we think we need to get rich first.

Financial dysmorphia can also become a source of ongoing stress and affect health. A study of a sample of residents of 12 European countries over 50 years of age showed that older people who consider themselves poor are much more likely to get sick and recover more slowly.

How to get rid of financial dysmorphia

To start, you can take a piece of paper and at one end mark the point to which you are striving financially, and at the other end the point at which you are now. And then you need to build a bridge between them, drawing up a clear plan linked to a timeline. For example, if you want to save a large amount, you can transfer one thousand to a savings account in the first few months, then two, after some time - three, and so on. In addition, on the way to the goal it will be useful to review and change your habits. Perhaps, to save money, you should take a taxi less often or prepare lunches for the office more often.

Here are some more ways to help you cope with financial dysmorphia and bridge the gap between where you are now and where you want to be.

Keep track of expenses in every detail

To get an accurate picture of where your money is going, write down all your expenses for 1-2 months. Analyze how much you spend on needs and how much on wants. This will give you specific information that will help you cope with the feeling that you are spending too much and are about to go broke.

Avoid unnecessary spending

Take a look at your current banking transactions again and determine which expenses are not useful and are no longer needed. Perhaps you are still subscribed to some platforms that you have not been interested in for a long time, give money for services that are no longer relevant, or pay for subscriptions that you have never used.

Automate savings

If possible, set up auto-pay in your banking app so that a certain amount from each paycheck is transferred to a savings account without your participation. When our current budget is limited, it can be difficult for us to allocate money to achieve a long-term goal. And this technique will allow you to effortlessly save for major purchases or vacations, because the process will take place out of your sight.

The size of the auto payment does not have to be large. Compound interest helps to increase even the most modest amount, when accrual occurs both on the principal amount of investments and on interest for past periods.

Stop comparing yourself to others

This does nothing to improve the situation, so it's worth focusing on your needs and financial goals. Moreover, we tend to compare ourselves with those who are richer, not poorer, than us.

In fact, everyone has some valuable and useful assets, and it is not so much their size that is important, but how to manage them. Try to focus on how to use them to your advantage rather than worrying about having less than some billionaire.

Celebrate financial victories

For example, mark the moments when you repaid a debt, successfully invested money, or reached the desired amount in your savings account. Praise yourself for the efforts you put in and the results you achieved.

Find balance

Give yourself permission to make smart, affordable purchases for pleasure without the guilt. Monitor your anxiety levels and don't let money issues completely control your life. For example, if you want to attend a cool exhibition or performance with expensive tickets and can afford it without being left completely without money, feel free to act: it will enrich you spiritually and diversify your leisure time.

If you find it difficult to cope with financial dysmorphia alone, consider seeing a psychologist.

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