Even though you are doing your best to actively manage your finances, do you ever think that you might not have enough money to pay all of your bills, enjoy life, and save for a meaningful retirement? Do you feel lonely, isolated, or even terminally unique? Do you make financial decisions out of fear? Does the thought of early retirement and drawing down your assets make you feel like panicking? Do you project about the future and only see things getting worse? If you do, you might have a Scarcity Mindset.
Living in Fear
If you have ever studied Economics, you learned that Economics is the study of limited resources. The Scarcity Mindset is rooted in the fear of not having enough. The scarcity mindset manifests itself in extreme self-centeredness. It is based on an obsession with not having enough resources to meet both your needs and your wants. No matter what course of action a person takes who has a Scarcity Mindset, the glass always appears to be half-empty.
Why do people have a Scarcity Mindset
People who have a Scarcity Mindset are focused on loss aversion. Many people who have this mindset were once underprivileged or are currently struggling financially. Everyone has limited cognitive space in their brain. People who have the scarcity mindset have unmet needs. These unmet needs cause the brain to focus on these deficits instead of focusing on the tasks that are at hand. It is not based on a lack of intelligence, but a constant interruption in the flow of thoughts.
The Scarcity Mindset causes one to focus on the short-term. It draws attention to the urgent. A sell-off in the stock market would cause a person who has a Scarcity Mindset to panic and sell low because the recent loss will wipe out their finances. They lack the foresight to see the correction as a short-term blip on the radar. People who are stuck in this mindset also think that current situations will never change or improve.
The consistent mental obsession with not having enough rapidly drains the brains battery. The focus on scarcity is mentally exhausting. The brains finite mental resources are always in a state of debating trade-offs. For example, it is exhausting to debate if you will have enough money to cover future expenses. It is a mental debate that can occupy a person’s whole day. The Scarcity Mindset truly is a form of suffering. Other decisions become clouded because of this mental fatigue. Because of this lack of mental energy, people are more prone to make poor decisions since their mental debates can lead to irrational solutions.
The symptoms tied to having a Scarcity Mindset are easy to identify in your life. Hoarding things because of the fear of running out is a major symptom of the Scarcity Mindset. Complaining about your general living situations is another symptom because there is a lack of satisfaction in your life. Living in chaos as the result of people pleasing, addiction, lack of production, or self-deprivation.
Barrier to Wealth
Having a Scarcity Mindset is a barrier to building wealth. If your mind is consistently producing a negative message, it is difficult to make positive financial strides in your life. To succeed as an investor, you need to be able to think long-term and can handle some degree of short-term market risk and uncertainty. If you panic based on daily volatility, it will not be good for your investment returns and only add to your mental anguish.
How to Change the Scarcity Mindset
The Scarcity Mindset is all in your head. It is not easy to break away from this mindset. It is possible, however, if you are willing to work on changing your thought process.
- Write a list of everything in life you are grateful for. This list should include everything including food, housing, health, friends, family, and work. If it is a source of gratitude, add it to the list. Review this list at least once per day and more often if you are feeling negative.
- Don’t compare how you feel too how others are living. Don’t compare yourself to others on any level. Don’t try to keep up with neighbors, friends, or siblings. Live your own life.
- Build your self-esteem through positive actions. Take a class. Volunteer to help people who are in worse financial or physical shape than you are. Take on extra responsibilities at work.
- Focus on the present moment. Don’t project into the future where there is fear. Don’t rewind to the past to feel resentments. Keep your mind focused on what is currently in front of you. Refocus as many times as you need to during the day.
- Look at setbacks as a learning experience. Repeating the same mistakes, but expecting different results is a sign of insanity. When you make an error, learn from it. Try a different approach when faced with a similar situation.
- Build closer friendships. If you want to gain a friend, becoming a better friend. People are not going to come looking for you. It is up to you extend your hand and keep reaching out to others.
- Avoid negativity. Avoid the political and financial media. There are great things happening in the world. You just will not find information about those things in the media because they do not sell. Check out this blog’s Resources Page for unlimited positive blogs, forums, and podcasts.
- Reduce clutter and add order to your life. Embrace minimalism. If you own things that you no longer use, give them away. Whatever those things might be, they might be more useful to others. Some examples are old books, clothes, sporting goods, or electronics.
Don’t beat yourself up if you feel you have a Scarcity Mindset or some of the symptoms. The good news is that you can change this mindset. It will take time and effort, but you can do it. If none of the above suggestions are helping, seek professional help from a therapist. After you break away from the Scarcity Mindset, you can start working on developing an Abundance mindset. That is when life starts to become more of an adventure than an obsessive based existence.
Do you feel that you have a Scarcity Mindset?
What are some of the steps that you have taken to change how you think?