'Money dysmorphia' is crippling Brits across the UK - but many don't know they have it
Have you ever caught yourself scrolling endlessly through Instagram late at night, envying the extravagant lifestyles your followers showcase on social media? You're certainly not alone.
The urge to "keep up with the Joneses" can trigger money dysmorphia – where our understanding of financial reality becomes warped, leading to overwhelming feelings of anxiety, guilt, and stress around spending and saving.
Matthew Parden, CEO of money management app Marygold & Co, explains precisely what money dysmorphia involves, the elements that contribute to it, and practical approaches to help tackle and conquer it.
What exactly is 'money dysmorphia'?
Parden explains: "Money dysmorphia is effectively when the distorted perception of one's financial health, how you feel about your money, doesn't necessarily reflect the reality. This can be emotionally driven, shaped by irregular patterns or social pressures to keep up."
READ MORE: 'I live in London for £480 a month including bills and there's just one rule'
Money dysmorphia can trigger both overspending and excessive saving, depending on how the individual perceives their situation.
"We've worked with anxious savers, avoidant savers and people who like to spend, so there's lots of different types of personality and money dysmorphia can manifest in all of them," shares Parden.
Warning signs of money dysmorphia
So, what are some warning signs or red flags that someone might be experiencing money dysmorphia?
Parden reveals: "Feeling uncertain or anxious about money, even though there is no apparent or immediate shortfall in money, could be a sign of money dysmorphia. It could be that you avoid checking your bank statements or balances and this could be because of stress, or it could be because of a fear of what you might see in there."
The money expert continues: "Another sign could be fluctuating between periods where you're spending a lot and reining it back and spending a little, so you kind of vacillate between overspending and underspending. Money dysmorphia could be when you are playing down your success, payments or debts and you feel that you've fallen short, that what you have isn't not enough – even though it might be sufficient."
Social media and society's contribution
Do social media and societal pressures contribute to money dysmorphia? The short answer is yes. Social media and societal pressures can exacerbate feelings of inadequacy regarding personal finances.
Parden explains: "Social media presents a curated version of life, where people are only showing the best side of financial life without providing the context. You don't see the debt, the lack of savings, the stress – that is all hidden.
For more stories like this subscribe to our weekly newsletter, The Weekly Gulp, for a curated roundup of trending stories, poignant interviews, and viral lifestyle picks from The Mirror's Audience U35 team delivered straight to your inbox.
"It does kind of amplify these 'norms' and create unrealistic expectations. It provokes spending which is really emotionally driven and creates a constant pressure to keep up, so that even if your financial footing is secure, you still feel that you've got some way to go. And that in itself can lead to insecurity and a distorted sense of your own financial situation and reality."
What repercussions can money dysmorphia have?
"Money dysmorphia can often make people avoid getting involved with money and that means they are avoiding financial planning and organisation of their financial life," Parden explains. "This can lead to missed opportunities like having a safety net reserve of cash," shares Parden.
"You don't have any savings because you are constantly spending, you may feel like you haven't ever got enough and will consistently avoid doing it. That in itself can lead to anxiety, a sense of failure and can affect your mental and physical health."
How to conquer money dysmorphia?
Ignorance isn't bliss, particularly when it comes to your wallet. It's time to take control and get savvy with your finances.
Parden advises: "Take a step back and work out what it is that may be impacting your relationship with money," suggests Parden. "Just start with small, repeatable steps, like taking 10 minutes out of every week to look at your finances and understand what you're doing and where your money has gone and what is coming up.
"If you recognise an issue there, try not to judge yourself. Just do regular gentle reviews of your finances because that helps you start to engage with it and might help reduce the fear. It might also help you move towards bridging that gap between how you feel about your finances and actually what is true in your finances."
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Setting clear, achievable long-term goals, spending within your means, and investing consistently, while giving your money time to grow through the power of compound interest, can help get you there. Ultimately, FIRE shouldn't be about austerity for the sake of it. It's about taking control of your finances and making deliberate choices today, so you have more freedom tomorrow. The half your age rule The "half your age" rule is another handy way to boost your FIRE savings. It suggests that when you start saving for retirement, you should aim to contribute a percentage of your pre-tax salary equal to half your age. So, for example, if you start saving at age 22, aim to contribute 11 per cent of your salary. If you start at 30, aim for 15%. Factor your pension contributions into this calculation as well. Under the current auto-enrolment rules, workers must pay at least 8% of their qualifying earnings into their workplace pension every year. 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Reduce your spending - cancel Amazon Prime, Netflix and any subscriptions you don't use. Make lunch at home. Only buy what you need. Before you invest, build an emergency fund of £1,000. Pay off high interest debt such as credit and store cards. Invest in a low fee, simple global index fund like the Vanguard FTSE Global All Cap Index Fund. Do it in a tax efficient way (stocks and shares ISA or SIPP). Don't forget your pension. It's sensible to see if you can increase contributions into your workplace pension scheme. 'We saved £1million in 10 years using the FIRE method - we've retired to travel the world' HUSBAND and wife Katie and Alan Donegan saved £1million in just 10 years by following the FIRE savings method. They retired when Katie was 35 and Alan was 40, and now travel all over the world from Rio de Janeiro to California. "You don't have to be stuck in a job you don't like," said Katie. "That is what truly inspired us. "People just assume retirement is an age, but it's actually a monetary target." The couple got into the FIRE savings method in 2009. At this point, Katie, now 40, worked as an actuary, while Alan, 45, was a landscape gardener. Both were fed up of the daily grind, and couldn't stomach the idea of working into their 60s, so they started researching how they could retire early. That's when they began to strip back their spending and start piling money into the stock market. When they first started FIRE, they earned about £50,000 between them, but this soon rose to £150,000 as their careers progressed, which helped to fast-track their savings. Katie said: 'Usually, when people earn more their spending goes up too. 'Ours only went up a tiny amount. We worked hard to push up our earnings and keep expenses down. 'We never upgraded from the small two-bed flat we bought. 'We downgraded to a smaller, second-hand car. 'We never turned the heating on. We wore extra layers, used hot water bottles and made it a bit of a game. 'We saved over £40,000 in ten years simply by taking our own salads to work each day.' Alan invested the cash using ready-made funds, where the hard work is done for you by an expert. "Choose a platform such as Vanguard Asset Management or Interactive Investor and invest in one simple index fund. It's surprisingly easy and simple to do." As the couple do not have children, saving for an early retirement was much easier. By 2019, they had hit the target of saving 25 times their annual spend - which was £1million. Since then, they've managed to invest an extra £265,00 - £182,000 of which was from the sale of their property and £83,000 from the sale of Alan's business. Thanks to the power of compound interest, their pot now stands at nearly £2.2million. This supersized savings pot is held in global index funds, one of the most diverse kinds of portfolios where your money is invested in thousands of companies across 49 countries. They have crunched the numbers and believe that if they withdraw £40,000 a year to live off, this is enough money to last them for their entire retirement. They say this is more than enough money to be able to travel across Asia, America and Mexico. The couple now rent places on Airbnb or stay in hotels, depending on their location. This has included a five-star suit in Bogota, Columbia which costs just £42 a night. Other locations have included West Palm beach in Florida for £112 a night or Poland for three months last year where they paid £38 a night. 'I retired 28 years before the state average," said Alan. "I clawed back 28 years of my life. I couldn't think of a better use of cash. 'If you're in your 20s, 30s, 40s or even 50s, you can make it to being a millionaire.' How ANYONE can adopt the FIRE rules to improve their finances Before embarking on FIRE saving, really assess if it's right for you. Laith adds: "A lot of FIRE saving can be a bit joyless. "It requires sacrifices now, sometimes very high sacrifices, as the idea is that you put away a lot of money. Then, in retirement, you live quite frugally. "There's no point in your life where you are enjoying affluence. That might perfectly fit some, but it's not for everybody." If you feel like FIRE is too difficult to achieve, you can still follow the principles of the method to boost your savings. You're not in a position to save half of your income, but investing just £25 a month can help grow your savings to a healthy size. If you invested £25 into the FTSE 100, for example, which is the collective name for the 100 largest UK companies by value, you could turn £25 into £4,465 after 10 years. Over 20 years, that pot would grow to £12,609. That's assuming that your investment grows at a rate of five per cent a year after charges. A great principle of FIRE is to pay off your debts as quickly as possible. By focusing on paying off your debts, you end up saving yourself a lot of money in interest repayments. For example, if you were focusing on paying off a £150,000 mortgage debt and making £200 worth of over-payments a month, you'd clear your debt seven years and six months early, saving you £33,130. Before making over-payments, check if your lender lets you do this penalty-free. Most let you make over-payments worth 10 per cent of your outstanding mortgage debt per year.
