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Breaking Through the Money Scarcity Mindset
When I was a young child, my parents didn’t have a whole lot of money. My parents worked very hard to keep food on the table, clothes on our backs, a roof over our head, and a few gifts under the tree each Christmas, but we never had the resources to go on very many vacations and there were many things that we did not have.
My father worked in a factory that offered varying working conditions. Sometimes, he worked his regular hours and we got by. Sometimes, he’d get offered some overtime and things were good. Other times, he would get laid off and we wouldn’t have any steady income for a while.
To balance that out – and because my father is basically incapable of sitting still for very long – he always kept a number of side businesses going. He grew a huge garden and sold some of the extras, for one, but his big one was a small-scale commercial fishing business.
Now, for those of you who are unfamiliar with the fishing business, it can be about as variable as you can imagine. You can fish all day long and catch virtually nothing, and then a week or two later you can haul in so many fish that your boat is on the verge of sinking.
What all of this added up to was a highly variable income for our family. There were times where there was very little income coming into our house, like when my father was laid off from the factory and the fish weren’t biting. At other times, though, money flooded in, when he’d be working overtime and fishing on the weekends and the nets were full.
During those times where the money flowed well, my parents often spent extravagantly. I remember my father once buying me a brand new video game out of the blue, something that never happened. I remember one particular Christmas where we had piles of gifts. I remember going to a local department store with my father when I was really young and I remember him buying me several action figures, and I remember practically being in disbelief at that opportunity.
It was a natural, understandable response to other times when money was tight.
However, it wasn’t the best response, and here’s why.
If you operate under that sense that money is scarce and you need to spend it when it’s available, you’re going to have difficulty ever saving a lot for the future. When my family went through those periods with plenty of money, they naturally wanted to celebrate a little because they had just been through a rough time.
However, the hard times would have been easier had my family saved more during the easier times. There would have been less stress and it would have been much easier to keep things running smoothly.
This is exactly the mindset that I had when I first started earning a healthy income. Just like when I was a child, I would see money sitting in a checking or savings account as money that needed to be spent now before it disappeared.
Why did I do that, though? Why did I have this feeling that I needed to spend every dime that I had available to me?
The book The 7 Habits of Highly Effective People by Stephen Covey offers a great theory that explains all of this. Here’s a quote from that book that outlines what I’m talking about:
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 Abundance Mentality, on the other hand, flow 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.
To put it simply, when I behaved as though my money would run out quickly if I didn’t spend it, I was buying into a scarcity mentality. Although I didn’t really understand it this way, I had this belief that I was effectively limited by each paycheck and each dollar that went into my wallet. There was this certain pool of money out there, created by my last paycheck, and if I didn’t spend it now and live now, my opportunity to do so might vanish.
I did view the world as though it were one big pie of resources. I had this one piece of that pie, but since that pie is a limited resource, so is my one piece. I am going to be beset on all sides by people who want more of the pie and are going to get it by taking from my piece, so I’d better spend it now. Today is the day to live, because tomorrow, my piece of the pie might be taken right out of my hands!
Often, people describe that mindset in terms like “you only live once” and “live for today, not for tomorrow.”
What I’ve come to learn over the last several years is perhaps the single most valuable lesson I’ve learned about personal finance, and it also spreads into many other aspects of life, too. It’s such a simple thing, but when it really clicks in your head, it makes everything easier.
The truth is that the world is an abundant place, a place that rewards you when you invest yourself in it. You can invest your money, your time, your energy, your caring, your friendship. When you invest those things, they grow over time and provide more for you than you ever put into them.
A while back, I wrote an article on strategies for cultivating an abundance mindset. Here are those strategies in a nutshell:
Have Appreciative Conversations
Organize Your Home and Your Life
Reduce Your Media Consumption
Share What You Have With Others
Try to Create “Win-Win” Situations
Look for Positives in Every Loss
Stop Comparing Yourself to Others
Keep a Gratitude Journal
While those ideas are great, what they really excel at is taking the seed of an abundance mindset that’s already in your head and help it grow, pushing aside thoughts of scarcity.
But what do you do before that?
What do you do if you’re locked into a money scarcity mindset? You have a sense that your finances can be better, but when you see money in your accounts you feel almost compelled to spend it before it disappears. You believe that the only way to get ahead financially in the world is to push someone else aside and take their piece of the pie. You’re constantly looking at strategies for getting rich quickly, such as network marketing systems. You are constantly jealous of the things that other people have.
How do you break out of that mindset in the first place? Never mind cultivating new perspectives – how do you stop thinking like that?
Here are four strategies that may help.
Look at the Things You Already Have in Abundance
There are many things you already have in your life that exist in incredible abundance. No matter what you do, you can’t possibly consume all of those things.
Think of the air you breathe. The feeling of your heart pumping blood through your body. The digestive action of your stomach. The warmth of sun on your skin. The endless variety of sights and sounds in the world around you.
Those things are boundless. You have these things in unlimited supply because of the infinite abundance not only in the world, but within you. The systems of your body are infinitely complex, yet they constantly give of their abundance to keep you alive. The sun shines with far more energy than everything on earth, but it just constantly gives its energy to the world. The air you breathe is in such abundance that even if you panted wildly for the rest of your life, you wouldn’t use it all up, and the plants and the trees would always make more.
If those things are boundless, then perhaps there are other things that are boundless in life as well. Surely there must be – after all, many people have found incredible wealth on this earth. People have made incredible discoveries about how the world works and continue to find new ones every day.
There is infinite abundance in so many areas of life if we simply look around and see them.
Look at Those Who Have Shared With You
If you go back through your life, you’ll almost always find examples of people who gave freely of themselves for you at some point.
Maybe it was a sports coach who stayed after practice to help you figure out the hiccups in your swing.
Maybe it was an academic advisor in college who spent hours listening to your troubles and being a mentor for you when you were struggling.
Maybe it was a supervisor at a previous job who went out of her way to help you figure out a good career path and then helped you take the next step forward, even though it wasn’t particularly helpful for her own career.
Maybe it was just someone in the community who stepped up to help you out in a moment of real need, not expecting anything in return.
Look back at those people. Were their lives made worse by giving freely to you? Likely, they weren’t. Most of the time, you’ll find that people who give so freely of themselves wind up with pretty good lives. They often have more than enough money to keep themselves happy and are surrounded with a huge network of friendships and relationships and a strong place in the communities they participate in.
Why is that? It’s simple – whenever they give freely of themselves, they end up receiving far more than they give in the long run. It’s not a strict transactional thing; instead, it’s more along the lines of someone getting an opportunity because they have a reputation of helping and caring for others. Someone is able to build a new friendship because they chose to give at the right moment instead of being selfish.
Remember, it really doesn’t matter what someone gives you in return in that moment for being unselfish. It’s not the transaction in that moment that matters.
Instead, it’s just a positive ripple in a pond that you share with a lot of other people. Your positive choice helps others in ways you can’t possibly see, and that ripples outward. Sometimes your name is connected with it, but often it’s not. Regardless, however, the whole community you’re in is lifted up and made better by your choice, and people who are in better positions due to the help of others are more likely to offer help in return – again, over the long run.
Realize That You’re Going to Lose Sometimes and That a Scarcity Mindset Makes the Effects Worse
One of the surest signs of the scarcity mindset is a strong fear of “losing.” People who are tied to the scarcity mindset are deeply afraid of coming out on the short end of the stick financially, emotionally, professionally, and otherwise. They are very wary of exposing themselves to any kind of risk, take defensive stances often, and use any capital they accumulate quickly because it might be “taken away” from them in some fashion.
The thing is, even if you act in that kind of defensive way and even if you pre-emptively spend your capital as fast as you can, you’re still going to wind up with the short end of the stick sometimes.
Why? “Losing” is just a part of life. It happens sometimes. You have big unexpected expenses. A friend doesn’t come through for you. You lose out on a big promotion or even lose your job. Those things can happen no matter what you do.
In fact, keeping a scarcity mindset makes this phenomenon worse, in two different ways.
First, it’s harder to ever “win” if you don’t expose yourself to a bit of risk sometimes. You can’t earn returns on your capital if you don’t invest that capital, and investing means risk. If you invest your money, it means risk. If you invest your time and energy and emotions, it means risk. However, if you do everything you can to avoid that investment out of a fear of loss, you will never earn the kinds of wins you are hoping for.
Second, you are more exposed to the bad effects of “losing.” If you don’t have any money in the bank because you spent it all out of fear of it “going away” or someone taking it from you, then you have nothing left when an actual bad event occurs. You don’t have the money to handle a car problem or a job loss or anything. The same thing is true with almost every other aspect of life – if you haven’t given of yourself in terms of time or energy or caring, why would others be there for you when you need them?
Another aspect of the scarcity mindset is the idea that if you come out on the losing end of the stick, you’re going to lose everything. You view your life as a house of cards and if someone pulls out a card, things are going to collapse. The idea of a job loss or a relationship failure creates apocalyptic visions in your head.
The truth is that even when things don’t turn out as you’d like, life goes on. Even in the worst scenarios, you still have your freedom. You still have clothes on your back and you’ll have a roof over your head somewhere. You can still feel the warmth of a sunny day and feel good when you hear a song that strikes your soul. You sit on wealth that can never be taken away from you – no matter what, you’ll have many things.
Accepting an abundance mindset into your life isn’t as scary as you might think because even if you do lose, you’re still left with a pretty good life. You still have more good things going on than you could possibly ever fully enjoy.
Take Baby Steps
The final strategy I can suggest for getting rid of a scarcity mindset is to take baby steps away from it.
No one is going to realistically wake up one morning and have a complete alteration in their world view and behavior (sure, it happens sometimes, but it’s rare and it’s usually just the culmination of a number of things). Instead, most change happens a step at a time, with one little change leading to another little change, then another, then a little bit bigger change until one day you wake up and realize things are completely different.
So, try something different. You may find it useful to try these things in a new environment or a new community, one where people don’t have a predefined viewpoint on you.
You can take a first step with your own finances. Simply automate a small savings program, putting aside money for your future self. Doing that is an act of abundance, because you’re essentially giving money to your future self, who obviously won’t be able to give you anything in return.
What you’ll find is that the simple act of giving money to your future self through saving has a ripple effect. It takes away some of the stress of everyday life. You’re no longer as worried about bills coming in or about the day-to-day stresses of your job. Not only that, when your future self actually uses the money, the money you set aside will have grown thanks to interest.
Take another step by mentoring someone, no strings attached. Give that person honest and detailed advice about how they can take positive steps in their career or personal life or hobby or whatever area you’re mentoring. Don’t expect that the person will ever do anything for you in return – just do it because it puts someone else on a more positive path.
You might never see a direct return from doing this, but you will notice some positives no matter what happens. Mentoring often helps you clarify your own ideas about success, helping you move forward. Each time you mentor someone, the next mentoring experience becomes easier.
What you’ll also find is that, over time, if you do it often enough, doors start to open for you. The people you mentor pay you back in subtle ways that you don’t see, by contributing to a positive reputation for you. They put in a good word for you in some conversation that you never hear. They give a positive report about you when someone is feeling out candidates for promotion. They also form the bedrock of a stronger community that you’re involved in, one that is able to support you in better ways.
Final Thoughts: The “Seed” Mindset
I like to think of the “scarcity” mindset as the harvesting mindset, and the “abundance” mindset as the seed mindset.
Think of yourself as a farmer (back in the days before hybridized and patented crops). In order to stay in business, you have to save some of the crops that you harvest in order to grow crops next year.
A person with a scarcity mindset will save only the barest amount of seeds for the following year. They’ll sell as much of their harvest as they can because that’s what they have in hand right now and there’s no way to know what future years will be like.
A person with an abundance mindset will save plenty of seeds for the following year, and will plant them thickly.
In the following year, some of the seeds will grow and some will not. The scarcity farmer might actually see a higher percentage of his seeds grow, but he had so few left to plant that he had a weak harvest. The abundance farmer might plant lots of seeds that never bloom, but even with a smaller percentage, he still has a field that produces far more than the scarcity farmer.
Spend at least some of your resources planting seeds for the future. You’ll never regret it.