Money dysmorphia: why people think they're poorer than they are

A CEO has taken his former employer to court, claiming he could no longer afford to work on a salary as low as £250,000, prompting fresh discussion of "money dysmorphia".

A "sibling" of the term "body dysmorphia", where people look in the mirror and don't see "what's really there", money dysmorphia is a "mind-bending split-screen view of reality", said The New York Times.

Blind spots

Researchers have found that people are much more likely to underestimate their earnings than to overestimate or have a realistic assessment of them – a study from HSBC suggested that most British people typically underestimate their earnings by 30% relative to others.

"More interesting still", wrote Helen Coffey for The Independent, the highest earners "have the biggest blind spot". Nine out of 10 workers on £100,000 or more do not consider themselves "well off", despite the fact that such a salary "immediately puts you in the top 4% of the UK".

Insidious and obsessive

Money dysmorphia is a "relatively new concept", but many people "recognise the feelings associated with it", said The Times, and Google searches for the term are up 136% in the UK since last year.

Although it's "not a recognised clinical condition", therapists believe that "warped perceptions of money" are "regularly the crux of issues such as anxiety and depression".

Speaking to the broadsheet, Lisa Leach, who has three rental properties, lives in a farmer's cottage rent-free with her husband and their children, with a joint income of up to £90,000 a year, said she still feels "skint".

But younger people "in particular" often have "unfounded worries" over lack of funds, said the Financial Times, and their "stress" goes beyond "standard concerns" about money and the economy because it's "more distorted, insidious and obsessive".

Stylist said that the "constant tug-of-war" between "financial reality and perception" means some people "overspend", in the belief that they have "more money than they do", while others "become overly frugal", making "drastic cutbacks".

Social media and negative headlines about the cost-of-living crisis have been blamed because these can make us feel like we can "either spend like a celebrity" or think that however much we have in the bank is "simply not enough to get by on".

Another factor could be "the level of financial security" that someone "experienced growing up", said Coffey, because if someone's family was "perpetually strapped for cash", they're more likely to have an "innate fear" that all "could be lost in an instant".

How to deal with it

There are four ways to tackle money dysmorphia, said The Times: "track your finances objectively; challenge negative money beliefs or emotions; set realistic financial goals and limit your comparisons to others".

Another technique is to use savings pots, said Stylist, because having "separate savings for different purposes" can "help ease financial anxiety".