Almost half of young people suffer from financial dysmorphia. But the vicious circle of ideas that prevent you from saving money can be broken, expert advises

Not many people would want to have just a little bit more money. For more hobbies, for nicer holidays, for supporting your children... There are always opportunities to spend money on. However, many people don't realise that their actual financial situation is different than they think. The overwhelming feeling of inadequacy and "poverty" can affect even those who are actually quite normal in terms of income. If you feel that the people around you are living a comfortable life with lots of money, but you can't save up for a new car or a holiday overseas, this phenomenon may apply to you too.

Financial dysmorphia is a psychological condition in which a person has a distorted view of their finances, which can lead to poor decisions. According to a study by Credit Karma, up to half of the young population - millennials and Generation Z - suffer from it. It affects around 41% of millennials and as many as 43% of individuals in Generation Z.

Wealth on the networks

What's to blame for financial dysmorphia is social networking and the associated trend of coveting wealth. The combination of these two phenomena results in young people feeling financially anxious and stressed, even if they have tens of thousands saved in their accounts.

"A lot of people compare themselves to their peers, people on social media and even celebrities when assessing their financial situation, which creates a sense of inadequacy," explains financial advisor Courney Alev. "This disconnect between perception and reality can prevent people from taking action to achieve their financial goals."

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The problem is that when we see on social media that someone is living a life of luxury, flying on holiday, driving an expensive car or wearing designer clothes, it gives us both the impression that this is a normal lifestyle and the need to achieve this apparent norm. But when we can't afford it, we feel inadequate and stress about not having enough money. When in reality, we may have perfectly normal amounts of money.

Wealth and luxury can be an affectation

The first step out of financial dysphoria is to realize that what we see on social media is not a representation of everyday reality. "What we see on social media is a highlighted selection of the best of a given person's life. It's just a facade, the same as when you drive past a giant house with a BMW in the driveway," points out financial advisor Helena Baker.

According to Baker, on the one hand, it's completely unrealistic to compare ourselves as "mere mortals" to the luxurious lives of celebrities - even though it can sometimes act as inspiration and motivation - and on the other, we get caught up in the deception of social media. "They never show us the whole picture of someone's life. Not everything is what it looks like," she points out, noting that we can always find only brief snippets on Instagram, Facebook, X and others. Moreover, they are carefully selected and often edited to show an idealised perfect reality. Or rather "reality". We then mistakenly get the impression that everyone around us is just constantly prospering and living in luxury.

Spending as an attempt to fit in

Which makes perfect sense, because we ourselves don't put the mundane, ordinary and uninteresting majority of our lives on the net either. And perhaps if we showed the moments when we don't, we'd reap the criticism that we whine and should work harder.

The distorted idea of normal financial circumstances manufactured by social media then leads to young people trying to fit in and impulsively spending on things they don't need just to feel like they have an adequate lifestyle. To make themselves feel rich in the manner of their internet idols.

But even so, the feeling of wealth doesn't come because the spending shows up elsewhere, for example in savings. And when they save, they feel they can't buy anything. As a result, they feel that they are constantly falling behind, and the vicious circle of financial dysmorphia continues.

How to break the vicious circle

As one help, Baker advises taking stock and being grateful for what you've already achieved and what you can buy. "We always focus on what we don't have. Sometimes you just have to take a step back and be grateful for what you have. For example, for money for food or for a roof over your head."

But since that's a given for many and an insufficient goal compared to the ideal of wealth on the Internet, another observation may work. "I've also noticed that the younger generation likes to wear fancy clothes and drive expensive cars, but they don't realize that all those things can be borrowed by people on social media and they don't actually own them," Baker says. "It goes back to the fact that not everything is what you think it is."

But Baker also has advice directly on how to manage your finances. The key is to take an honest and detailed inventory of them. Map out income and expenses without evaluation and set realistic financial goals. Then, Baker advises creating a plan for how you'll reach your goals and start executing it. Instead of a "budget," he prefers to actually talk about a "spending and investing plan."

"Making a budget feels like your hands are tied, but creating a plan allows you to still buy what you want while still putting some money aside." The easiest way to have an accurate idea of your options is to arrange automatic payments for everything you need, which are sent out after you get paid. This makes it easy to see how much you have left and how much you can spend.