Some habits are really hard to kick.
Even as I've grown older, and seemingly more practical, it's been really tough to part with a deeply ingrained scarcity mindset.
What is a Scarcity Mindset?
Living with a scarcity mindset means constantly being afraid there isn't enough. It's always worrying that time, money, or success are limited. Moving through life with this type of burden is more common, and more damaging than you might think.
Numerous studies have shown how poverty can be taxing on the mind. But what about the effects of a scarcity mindset?
Harvard University economics professor Sendhil Mullainathan and Princeton University psychology and public-policy professor Eldar Shafir's book, “Scarcity: Why Having Too Little Means So Much,” makes a few important points on scarcity.
One of them relates to our mental bandwidth, and how we perform worse on cognitive tasks when we're distracted by things like a lack of sleep, family problems, or financial issues. When our brains are overloaded with worry, it's easier for us to make poor decisions.
Does a scarcity mindset sound familiar to you?
Here's how it may be affecting your money.
Stop Obsessing Over the Latte Factor
Living below your means is an excellent way to widen the gap between your income and personal savings rate. But tracking every single penny may be expelling too much of one of your most valuable and finite resources—your level of energy.
Obsessing over frugality may be distracting from your bigger financial picture. For example, updating a spreadsheet of hourly expenditures rather than conserving precious brain power to discover creative ways to invest in your future. It's a short-term trade off for a long-term financial win.
J.D. Roth put it succinctly in his most recent blog post,
“It’s easy to fall into what I call ‘the optimization trap', to believe that tiny tweaks will make more of a difference than they actually do.”
Once I stopped trying to channel Extreme Cheapskates, I found the energy to invest in blogging, freelance writing, and social media consulting. The extra income has not only exceeded what I had previously been squirreling away, but it's also helped strengthen my skill set.
Learn to Say ‘No'
Do you struggle with saying ‘no?'
When I first started freelancing, I was quick to accept the majority of opportunities being pitched my way. But I've since realized my reaction was out of fear. Because I had recently changed careers, I loved the added layer of security with my additional streams of income.
Accepting on all of these gigs may have temporarily padded my bank account, but they weren't necessarily serving the greater, more important goal—advancing my career.
When you’re offered a new side project, networking event, or volunteer gig, be sure it truly aligns with your long-term goals before saying ‘yes.' Declining the stuff you're less interested in frees up your time and energy for better opportunities down the road.
Support Those Around You
Do you ever catch yourself feeling resentful of other people's successes?
It's normal to feel a little jealous sometimes, but it's important not to waste too much energy on these types of unproductive feelings.
Try and find ways to be genuinely happy for and supportive of them. Use their success as a way to fuel inspiration in your own work.
Don't hoard your knowledge and skills. Being protective of your talents in one of the biggest mistakes you can make. Instead, use them to lift those around you. There's more than enough success to go around.
Are you constantly focused on the things you don't have?
The scarcity mindset creeps in by reminding us of the fancy car we'd rather be driving or the designer handbag we wish we could tote to our next client meeting.
Fixating on all the things we don't have, rather than appreciating everything we do, can lead to reckless and emotional spending.
The truth is, whatever we've recently splurged on probably isn't the key to our long-term happiness. No matter how much we think we “deserve it.” And having less money will only add to our cycle of dissatisfaction.
Living with a Scarcity Mindset
A scarcity mindset isn't always a bad thing. It's healthy to prioritize what's most important when it comes to where we spend our time and money. But when we allow fear to dominate our decisions, we may find ourselves trading small wins for long-term financial victories.
Readers: Have you struggled with a scarcity mindset?