From the Scarcity Mindset to the Abundance Mindset

Four years ago, I wrote a very brief article on the idea of scarcity and abundance mindsets.

At the time, it was an idea that was pretty fresh in my head, and so I didn’t yet have the opportunity to really cover it with any depth. Instead, it became an idea that I regularly referred back to over the years in considering my own life and the choices I was making.

Today, I see the abundance minset at work in my own life and in Sarah’s life. It’s a wonderful expression of how my perspective on finances has changed over the past several years, and it provides some great for further cultivating choices that are life-affirming while also pointing us toward personal finance success in the future.

In this article

    The Scarcity Mindset

    I first learned about the scarcity mindset from Stephen Covey’s book The 7 Habits of Highly Effective People. Here’s what it said about the scarcity mindset:

    Most people are deeply scripted in what I call the Scarcity Mentality. They see life as having only so much, as though there were only one pie out there. And if someone were to get a big piece of the pie, it would mean less for everybody else.

    The Scarcity Mentality is the zero-sum paradigm of life. People with a Scarcity Mentality have a very difficult time sharing recognition and credit, power or profit – even with those who help in the production. The also have a a very hard time being genuinely happy for the success of other people.

    The scarcity mindset revolves around the idea that there simply isn’t enough to go around. There can be only one raise at work and if one person gets it, everyone else can’t have it. My paycheck only has a certain amount of money in it and if I don’t spend it now, it will “go away” – the “man” will take it. If I don’t party now when I’m young, I will never have the chance to party later.

    Thus, the scarcity mindset always focuses on the extreme short term of every decision. What is the most fun option right now? What uses up the resources I have right now so that they can’t be taken away later?

    It ignores the long term of every choice, too. The most fun choice in the short term often has long term consequences. If you spend all of your paycheck this week, how will you have anything for the future?

    It also creates sadness and jealousy. If someone else got that one raise at work, I didn’t get it. That other person got that special thing and I did not. A person can take from that a feeling of jealousy toward the person who got the raise or a feeling of sadness that somehow you were not rewarded with that perk.

    Personal finance is very hard with the scarcity mindset. A scarcity mindset pushes you to spend your paycheck as soon as you get it before someone or something takes it from you. A scarcity mindset causes you to be paranoid about taxes and also causes you to avoid investing. Usually, people with this mindset find ways to blame “the man” in order to explain their personal finance failures, as though the system is causing them to spend their entire paycheck well before the next one arrives.

    The Abundance Mindset

    On the other hand is the abundance mindset. Here’s how Covey describes it:

    The Abundance Mentality, on the other hand, flows out of a deep inner sense of personal worth and security. It is the paradigm that there is plenty out there and enough to spare for everybody. It results in sharing of prestige, of recognition, of profits, of decision making. It opens possibilities, options, alternatives, and creativity.

    Typically, the abundance mentality focuses on the long term. It involves a deep understanding that just because you don’t get to have something right now does not mean you won’t be able to have it later. Skipping a party right now doesn’t mean you will never be able to have a good time again. Someone else getting a raise does not mean you will never get a raise.

    It also tends to create positive feelings towards others. If you feel as though someone else’s perk is not taking away from anything you have in your life or anything you may yet receive, it becomes much, much easier to feel happy for that person. Another person getting a raise or finding a nice relationship is not a source of jealousy or internal pain – it’s a source of genuine happiness for that person, because you know that person’s perk does not take anything away from you.

    Obviously, personal finance is much easier if you have an abundance mindset. You don’t feel the need to spend money as soon as you get it because you know there will always be more of it. You become less paranoid about taxes, less afraid to invest.

    Eight Tactics for Switching to Abundance and Cultivating It

    Naturally, it makes a lot of sense to adopt an abundance mindset. Not only does it help out your financial situation and make frugality and investing both make more sense, it also helps you in many other aspects of life such as friendships, romance, career success, and skill building.

    There are many things you can do to build up and cultivate an abundance mindset, pushing the scarcity mentality off to the side and out of your life. Here are eight things I do regularly to help keep my mind in the right place.

    Have Appreciative Conversations

    Rather than talking about the things you don’t have, try to engage in conversations with friends and family about the multitude of things that you do have. Ask your friends about the things that have gone well for them in the last week. Focus on the big things they’re working on. Don’t be afraid to share the same things about yourself. Talk about personal achievements and personal successes and personal experiences and leave talk about the things you don’t have and the things you’ll never achieve out of the conversation.

    Naturally, you can’t shift entirely to this mode, but keep these ideas in mind as conversation starters. Look for times when the conversation shifts to jealous talk or discussion of material things that someone wants and then try to shift the conversation away from those topics.

    Organize Your Home and Your Life

    The simple process of getting your possessions, your time, and your information better organized does a lot to cultivate an abundance mindset. By doing this, you begin to see how many things and how much time you actually already have in your life.

    Whenever I reorganize my closet, I’m often shocked at all of the things that I find. I feel incredibly abundant and I often wind up selling off a few things. Whenever I adopt a new time management tactic, I feel incredibly productive for a while because I’ve realized how much time I actually have in my life.

    Organization exposes you directly to the riches you already have in place.

    Reduce Your Media Consumption

    Almost every form of media, in some way, revolves around cultivating desire for things you don’t have, which is a key element of the scarcity mindset. Advertisements are particularly nasty in this regard, but that’s just the first piece of the equation. Quite often, the programs themselves (or the articles, if you’re looking at written media like websites and newspapers and magazines) are written in a way to cultivate desires.

    The best way to battle that onslaught is to simply reduce your media consumption. Take an hour where you might have watched television or browsed the web and instead spend it doing something outside with your hands. Use that time to do something to improve yourself in some way.

    Share What You Have With Others

    By sharing what you have with others, you begin to see several things. First, you often feel good about what you’ve shared – you’ve improved the other person’s life. Second, you often find you don’t really miss what you’ve shared. Third, when you share regularly, people are very willing to share right back with you.

    This isn’t just about sharing money or possessions. It also includes sharing time and knowledge and connections with the people around you. Spend an afternoon helping a friend. Spend an hour walking someone through a process that you understand well. Make an effort to introduce two people you know who might have something valuable in common.

    Of course, sharing possessions or money is never a poor idea, either. Give to your local food pantry. If you see your neighbor struggling to dig a hole, lend your neighbor a shovel. If your neighbor can’t use the internet at home, let them use your wi-fi for a while.

    You have plenty, so sharing isn’t a big deal at all.

    Try to Create “Win-Win” Situations

    One of the hallmarks of a scarcity mindset is that for every winner, there must be at least one loser. Not everyone can win because there simply isn’t enough to go around.

    To combat that idea, try to create situations where everyone wins. Host a potluck dinner. Give thanks to everyone who helped you with specific thanks whenever you present your ideas. Swap tasks with people so that everyone gets a task that they enjoy or are skilled at.

    When you create situations where everyone gets to shine and everyone gets to share, everyone wins. There are no losers.

    Look for Positives in Every Loss

    Sometimes life deals you a bad hand. When that happens, the scarcity mindset will often be there whispering about how unfair it is and how other people are somehow luckier than you are.

    Guess what? For starters, the people you see as “luckier” have usually made sacrifices and seen some losses, too. For another, almost every bad deal that life hands us has a few valuable things hidden in there.

    Whenever life deals you a rough moment, stop and think about the positives that are coming out of this change. It’s likely that they don’t overwhelm the negatives, but virtually every situation offers some positives. Spend time reflecting on those positives and keep in mind that at least something good came out of this situation.

    Stop Comparing Yourself to Others

    In the scarcity mindset, all that matters is how you compare to others. In the abundance mindset, what matters most is how you compare to yourself – how you live out your own ideals in your day-to-day life.

    Social media makes this much more difficult. On social media, people often post a highlight reel of their life, showing off all of the good things going on, but avoiding the mundane things and (usually) the bad things. If you spend time comparing the whole of your life to someone else’s highlights, you’re going to naturally feel inadequate. It’s not a fair comparison.

    If you’re struggling with comparing yourself to others, cut back on Facebook and other forms of social media. Instead, focus on thinking about what you can do right now to make your life better.

    Keep a Gratitude Journal

    Finally, spend a bit of time each day noting the things that are going well in your life that you’re grateful for. Every day gives us moments that fill us with joy and show us how much life has on offer for us. Keep note of it.

    Each day, I try to write down ten things I want to remember about that day. Those things are almost always gratitude-oriented – things in my life that made that day better.

    That constant reminder of the good things in my life, done at the end of each and every day, lets me know that I have more good things in my life than I can possibly ever explore in full. That’s abundance in its truest sense.

    Trent Hamm

    Founder & Columnist

    Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.