What is the Scarcity Mindset and How to Overcome It
Do you often worry that you don’t have enough? This worrying could be over not having enough money or other tangible things. You may worry that if you don’t save, you may be in a position where you can’t provide for your family. This is often what is called the scarcity mindset. Many people struggle with this mindset and don’t even realize it. The truth is, this mindset can set you back financially, which then turns into a cycle of scarcity. See if you have the scarcity mindset and learn how to get out of its cycle in this article.
What is the Scarcity Mindset?
The scarcity mindset is defined by WebMD1 as the obsession over not having enough. Typically, people worry that they don’t have enough time or money. This obsession over lacking resources can turn into everything someone thinks about in severe cases. The same WebMD article over the scarcity mindset notes people who struggle with this mentality typically struggle to make decisions and focus on other things.
Although the scarcity mindset can be more or less severe depending on the case, it is important to note that it has a negative effect on everyone. It keeps people from achieving their financial goals. It holds people in an anxious state. So, if you have a scarcity mindset, it’s worth trying to adopt a more abundant attitude.
Examples of the Scarcity Mindset
If you’re unsure if you have a scarcity mindset, here are a few examples that may help you find out:
- You get the least expensive thing on the menu while out to eat, even if you don’t want it.
- You save every penny you can with no purpose or goal.
- Your family doesn’t invest the money you earn despite already having an emergency fund.
- You cling onto items because you are worried you will need them one day and don’t want to repurchase them.
- You aren’t generous or enjoy giving gifts on holidays because you feel it’s a waste of money.
How to Adopt an Abundance Mindset
The opposite of the scarcity mindset is the abundance mindset. This is the belief that you have enough, so you can invest and spend your money more freely. Don’t confuse the abundance mindset with being reckless with your money habits – they are very different. The abundance mindset encourages investing and enjoying spending your hard-earned money in an educated manner. It doesn’t encourage spending your money on things you don’t want or need. Below are some ways you can achieve an abundance mindset.
Invest Your Money Strategically to Grow Your Wealth
One of the biggest downsides of a scarcity mindset is that it’s nearly impossible to grow your wealth. The person with a scarcity mindset holds onto every last penny in a savings account because they are afraid they will lose all their money one day. On the other hand, the person with an abundant mindset will invest their earnings strategically. This could be in the stock market, a 401(k), real estate, or another form of investing.
We recommend having an emergency fund with six to 12 months worth of expenses saved up before you start investing your money. This will ensure that if something does happen, you will still have plenty of time to get back on your feet again. Once you have your emergency fund, then it’s time to start making investments to grow your wealth.
Understand What You Have Realistically
The scarcity mindset affects people of all levels of income. Even some people in the top five percent of earners can struggle with the scarcity mindset. This is why it’s important to understand what you have realistically. Do you have a stable job that is in high demand? Do you have a hefty savings account that can be a safety net for at least a year? Are you completely out of debt and your children are out of the house? If the answer is yes to these questions, it’s a great time to start your investing journey.
When you tell yourself that you don’t have enough and you need to hold onto your money “just in case,” you are limiting your potential earnings. Whereas, when you understand that you don’t need to be holding onto every penny, you open yourself up to investing and growing your wealth.
Don’t Get Tunnel Vision
Many people with a scarcity mindset have tunnel vision. They focus on one thing: Anxiety over not having enough. People with an abundance mindset are able to focus on what makes them happy and on what could potentially grow their wealth. Rather than worrying about keeping as much money as possible, open your mind to what could possibly be a good investment.
It’s important to note that an investment isn’t necessarily something that can make you money in return. When people hear this word, they typically associate it with business and finances. However, an investment can be something that contributes to your health and happiness. It could be something fun like going to the movies with your spouse or taking your kids out to dinner. Or, it could be something like buying your largest client a thank you gift. Remember, money isn’t something that you should have anxiety over. It should be something that enables you to do the things you enjoy.
Seek Help When Necessary
Going from a scarcity mindset to an abundance mindset can be a difficult process. It’s certainly not something that happens overnight. You quite literally have to retrain your brain to think differently about your finances. So, if you start to run into roadblocks, be sure to seek help when necessary. A wealth strategist is an excellent resource to turn to for this. They can help you see areas where you can save and invest your money. Additionally, they can help you understand how much you truly need to save in case of an emergency.
The Dayton and Sydney team hopes this article was helpful for you. If you are struggling with adopting an abundance mindset, our team is here to help! Contact us if you need help transforming your finances.
1 “What Is Scarcity Mentality?” Anonymous webmd.com, 2020