WHILE money dysmorphia is not officially recognised as a clinical disorder, experts suggest it has significant psychological impacts. Should it be classified as a diagnosable condition, and what criteria would be necessary for such recognition?
Taylor’s University Mental Health and Well-being Impact Lab deputy director Dr Hiran Shanake Perera says the reason money dysmorphia sounds like a mental health disorder is because of the word “dysmorphia”.
He points out that dysmorphia, often used in clinical contexts, typically refers to an abnormality or distortion, such as in body dysmorphic disorder, which involves serious psychological symptoms and is classified as a mental illness.
“Now we are applying this term to money, which is a basic commodity that everyone uses. Having worries or fears about not having enough of it is entirely valid because our daily lives literally depend on it.
“So the question becomes, should worrying about something so fundamental be considered a mental disorder?
“In my view, no, it should not be classified as a diagnosable condition. Being concerned about financial security is a rational response, not a pathological one.”
However, he says when someone is constantly struggling to accept their current financial reality and experiences persistent anxiety or stress that interferes with daily functioning, that’s where it crosses into the territory of psychological impact.
“But this isn’t unique to money. The same kind of distorted thinking can apply to success, productivity, or personal achievements, areas where people can also feel they are falling short and become overly obsessed.
“That said, we need to be cautious about labelling every emotional struggle as a mental disorder. We already have enough mental disorders that are emerging.”
Perera says it is important to have a better understanding of how certain behaviours and thought patterns like those seen in money dysmorphia can negatively impact mental health and well-being, even if they don’t meet diagnostic criteria.
“The key factor here is daily functioning. If someone’s preoccupation with money leads to poor decision-making, chronic stress, or avoidance of responsibilities, then yes, it has psychological consequences. But that doesn’t necessarily mean it should be classified as a clinical condition.”
On how money dysmorphia affects financial decision-making, mental health and overall well-being, Perera says he researched the brain’s response at the neuronal level when people make decisions while feeling financially secure, versus when they feel financially constrained.
“I found a clear link between perceived financial security and cognitive functioning. Which is, when a person feels like they don’t have enough money, they tend to develop what we call a scarcity mindset.
“This mindset causes the brain to become overly focused on what is lacking. For example, if someone is struggling to meet their daily needs, their thoughts are often consumed with questions like, ‘How can I make more money? How do I provide for my family? How do I feed my children?’”
He says because the mind is constantly preoccupied with such worries, there is little cognitive space left for other important financial decisions like planning, saving or investing.
“Based on my expertise in human cognition, I can confidently say that our cognitive capacity [or mental bandwidth] is limited. When that capacity is taken up by stress and anxiety, our decision-making suffers.
“This leads to a cycle of poor financial choices, not because of a lack of intelligence, but because of mental overload.”
When it comes to money dysmorphia, a similar mechanism is at play but the key difference is that the person does have enough money to meet their needs, but their perception tells them otherwise.
“Their mind is still stuck in a loop of perceived scarcity. This distorted view can result in extreme behaviours like being overly frugal to the point of denying themselves or their families basic comforts, despite having the financial means.
“Being mindful about money, budgeting, and avoiding overspending are good habits. But when someone starts hoarding, refusing to spend even on essentials, or experiencing constant anxiety about money despite financial stability, it begins to affect their quality of life.
“It can damage relationships, cause emotional distress, and result in unnecessary self-deprivation. Over time, this mindset may lead to chronic stress, poor mental health, and social withdrawal.”
And that is when professional help is needed.
“Not because the person is truly financially unstable, but because their perception has become rigid and self-defeating. They may need psychological support to reframe how they think about money, security and self-worth.”
