Money dysmorphia: When your mind tricks your wallet

RTÉ News​

25-05-2025

You've got a steady income, a roof over your head, and maybe even some savings - but why does it never feel like enough?
Welcome to the age of money dysmorphia - a mindset where your financial reality never quite matches how secure, or insecure you feel.
Much like body dysmorphia distorts how people see their physical appearance, money dysmorphia warps an individual's perception of their financial health.
Some might feel financially secure because they drive a new car, go on regular holidays, or host lavish events, but in reality, they may be carrying substantial debt, have little savings, and lack long-term financial planning.
"At the heart of this is emotional pressure fuelled by social comparison," said Nick Charalambous, Managing Director of financial advisory firm Alpha Wealth.
"Platforms like Instagram and TikTok often create unrealistic expectations, where people see polished lifestyles and feel the need to 'keep up' even if that means borrowing to fund it," he said.
What problems can money dysmorphia cause?
One of the most immediate and damaging consequences of money dysmorphia is its potential to fuel excessive borrowing.
People with money dysmorphia may take on debt in an attempt to match the financial image they perceive others have.
Here in Ireland, borrowing is on the rise.
Figures published just last week show that €2.5 billion worth of personal loans were drawn down last year - a record high.
Borrowing isn't inherently bad as it helps people get on the property ladder, invest in education or improve their homes.
However, Mr Charalambous said it becomes a problem when it's being used to maintain lifestyles rather than build financial stability.
"The issue arises when people borrow without a clear repayment plan or use credit to fund 'wants' instead of 'needs'," he said.
"This creates long-term strain that can snowball out of control particularly with high-interest loans or credit card debt."
In particular, he warned about the consequences of Personal Contract Purchase finance, known as PCP.
"It offers low monthly payments that appear affordable, but often come with a large balloon payment at the end.
"Many people roll into new deals without ever owning the asset, essentially renting a lifestyle they can't afford," he said.
Is borrowing during global uncertainty wise?
Borrowing during times of global uncertainty can be especially risky, as fluctuating interest rates and market volatility can quickly turn manageable debt into a financial burden.
In uncertain economic climates - marked by inflation, geopolitical tensions, or recession fears - borrowers may find themselves facing rising repayment costs or reduced income, making it harder to stay afloat.
"In uncertain times, caution is key," said Mr Charalambous of Alpha Wealth.
"Ireland has low financial literacy levels compared to other European countries and many people are not maximising their savings or investing efficiently," he added.
At Alpha Wealth, they see some clients with large sums sitting in low-interest deposit accounts while they take out expensive loans.
"If people built better saving habits, they would need to borrow less," he said.
Before taking on any new debt, Mr Charalambous encourages clients to ask - "is this a want or a need?"
"Weddings, for example, are joyful occasions but spending tens of thousands on one day, while taking out loans to do so, may not be the smartest financial decision," he added.
He said it's about making decisions that don't cause you to spend extravagantly beyond your means - which may affect you into the longer-term.
How to avoid money dysmorphia?
Simply put, don't let your finances be driven by emotion.
Everyone has a certain amount of money to work with - Mr Charalambous said it's how you manage it that makes the difference.
"Whether you're dealing with debt or unsure where to start, don't bury your head in the sand," he said.
Money dysmorphia is a powerful reminder that financial perception does not always align with financial reality.
Taking a proactive, informed approach to managing your finances can replace anxiety with confidence and help shift focus from comparison to progress.
In uncertain times, the experts say clarity - not emotion - should guide your financial decisions.