Is constant scrolling through online information and on social media distorting your view of what it means to be financially stable? Are you questioning your own financial health, even though you’re doing just fine? Are you making bad financial decisions?
According to a recent American poll, you could be one of the growing number of millennials and Gen Zs who are suffering from money dysmorphia.
Natasha Knox, a financial planner with Alaphia Financial Wellness in Vancouver, describes money dysmorphia as a discrepancy between how someone perceives their financial circumstances and the reality of those circumstances. It’s something she sees among some of her clients.
This distorted understanding of one’s own personal finances is amplified when they compare themselves with others, as people do routinely – online and on social media. That comparison can have a negative impact on people’s finances by triggering poor decision making.
A January, 2024, report by Credit Karma found that 43 per cent of Gen Z and 41 per cent of millennials in the United States have experienced money dysmorphia. And while the term might be newer, the phenomenon is not.
A 2016 study found that neighbours of lottery winners in Canada were more likely to accumulate debt and file for bankruptcy. These neighbours felt pressured to accumulate similar assets to the lottery winners, even when their financial circumstances drastically differed.
Kerry Taylor, a B.C.-based money expert, podcaster and the creator of personal-finance website squawkfox.com, says people used to compare themselves with their immediate circle of neighbours and friends. Thanks to the internet, that comparison circle has spread to everyone on social media – and that can skew our understanding of what is a healthy and reasonable amount of money to spend.
“When you’re making your spending choices based on what you’re seeing online, you’re not making choices based on your own reality. And so, your spending should be a function of your own income and your own situation,” she says.
Preet Banerjee, a London-based wealth management consultant, says people should understand that what is shared online is not someone’s everyday life.
“When you see people posting about going on vacation and spending a lot of money, you might subconsciously think that’s how they’re living their life day to day when, in fact, it’s just the highlights that are being posted,” he says.
David Freeman is an associate professor of economics at Simon Fraser University. Although he hadn’t heard the term “money dysmorphia,” the principle is similar to other concepts he studies as a behavioural economist.
His own research has shown that people often don’t think about all of their options when making a decision.
For example, if someone wanted to buy shoes online, he says, they should consider many things: Do they really need the shoes? What other things could they spend that money on? How much money do they have available? And could they buy it later at a better price?
“In an online environment, where the combination of extremely attractive targeted advertising and two-click shopping just makes it really easy to buy – it makes money less salient,” Dr. Freeman says. “This is a recipe for disaster.”
It is all in the news
An increased cost of living, a worsening housing crisis and food inflation are genuine problems that affect Canadians and have an impact on their mental health, and Mr. Banerjee believes that constant access to news does not help.
“When you’re bombarded with so many more signals of bad news … it can really weigh on your mind. And, when you are stressed out, when you’re feeling overloaded, it can have an impact on your ability to make decisions as well,” he says.
That can trigger a need to spend money in order to feel good. “[It] might be a short-term relief, but might lead to long-term pain,” he adds.
Back to basics
Although social-media consumption is increasing money dysmorphia, some online content creators are trying to show a more realistic and responsible side to spending, Mr. Banerjee says. “They kind of hold themselves accountable, saying, here is the other side of the story, here is how much money I have. And I cannot afford to do this.”
Viewers should curate what they see on their social-media page – and be cautious of the message. Ms. Taylor says things to be conscious of include an influencer’s lifestyle, the financial advice they give and the things they sell.
In terms of positive financial steps, Ms. Taylor says putting $100 in a TFSA regularly might not be as flashy or sexy as what some financial influencers are doing, but saving isn’t supposed to be.
“It should be steady. It should be considerate, it should be deliberate and it should be automatic, because that’s what contributes to success.”
Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.