The No. 1 sign that you need to update how you think about money—it's ‘a red flag': Financial therapist

While many people may experience some anxiousness around their finances, money dysmorphia is a different ballgame.

The No. 1 sign you may be struggling with it is if you constantly worry about your finances, no matter how much money you've actually got in your bank account, says Aja Evans, a financial therapist and author of "Feel Good Finance."

"Money dysmorphia is about feeling like your financial state is different than the actual reality of it," she tells CNBC Make It.

It starts to become a problem when your distorted perception of your finances disrupts your day-to-day life, Evans says. "If you feel like, 'Hey, I'm starting to isolate because I don't feel like I have the money to go out,' even though your bank account may say that there is money in your account, that is a red flag."

Hanging out with your friends or doing other activities you enjoy is important for your mental health, and isolating yourself can lead to further negative and distorted thought patterns about your money situation, Evans says.

How to combat money dysmorphia

If you think you may be struggling with money dysmorphia, first identify what internal beliefs you have about money and where they may have come from, Evans says.

Here are a few questions to ask yourself:

• Have I gone without in the past?
• Have I overspent and put myself in a precarious financial position before?
• Do I not trust myself with money?

Since money can be emotional, answering these questions can help you gain a better understanding of the feelings driving your current money habits.

From there, you need to "ground yourself in the reality of your financial situation," Evans says.

"You need to look at your numbers to understand what's coming in, what's going out and what do you need to make sure you have so that all of your basic needs are taken care of? And then, what does it look like to have some extra?"

Although there are many ways to get started, one popular method is the 50/30/20 rule. With this strategy, you set aside 50% of your paycheck for necessities like housing, food and transportation, then put 30% toward your "wants," such as shopping or entertainment, and the remaining 20% toward your emergency fund and retirement savings.

Clearly understanding where your money is going can help you develop a more realistic view of your finances, Evans says.

"Grounding yourself in the reality of your numbers is really important," she says. "That can help you move past old patterns and shift them into new ones that benefit you."

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