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Growing up, money felt like a scarce resource. Once, in primary school, I remember being wowed after finding a gold coin on the playground. I couldn\u2019t believe someone had lost a whole dollar. Poor kid must have been looking for it, so I picked it up and hurried to give it to the closest teacher.<\/p>\n
One dollar felt like a lot of money back then. See, as a child of immigrants, I grew up watching my parents scrimp and sacrifice to scrape together financial security.<\/p>\n
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Do you find yourself feeling like you\u2019re on a never-ending chase for more money? You might be suffering from a scarcity mindset.<\/span>Credit: <\/span>Simon Letch<\/cite><\/p>\n Unsurprisingly, I developed what I now know to be a \u201cscarcity mindset\u201d around money. And I\u2019m certainly not alone.<\/p>\n In Stephen Covey\u2019s bestselling book The<\/em> 7 Habits of Highly Effective People<\/em>, he suggests that most people have a scarcity mindset. He describes it as a mindset where people \u201csee life as having only so much, as though there were only one pie out there.\u201d<\/p>\n At its core, a scarcity mindset is a perceived lack or shortage of resources. The key here is the word: perceived. You can elicit a scarcity mindset simply by thinking and feeling that you don\u2019t have enough \u2013 irrespective of the actual circumstances.<\/p>\n Here are some clues you might have a scarcity mindset:<\/p>\n Operating from a scarcity mindset has been found to drive people to make decisions that worsen their financial problems, keeping them stuck in the circumstances of scarcity.<\/p>\n This sounds contradictory. If you are in scarcity, wouldn\u2019t you make decisions to get out of it? Why would you make decisions that keep you stuck in scarcity?<\/p>\n This is because a scarcity mindset impacts your decision-making. A recent research paper published in the Social Cognitive and Affective Neuroscience <\/i>journal notes a scarcity mindset has been found to increase the experience of negative emotions like stress and lack of confidence, and negatively impact decision-making, cognitive functions (like attention, executive control and memory) and even empathy.<\/p>\n Shifting to an \u201cabundant\u201d mindset starts with intentionally changing the thoughts and beliefs that shape your world view.<\/p>\n Here are some examples of how a scarcity mindset can drive poor financial decisions:<\/p>\n In these examples, the psychological and emotional grip of scarcity doesn\u2019t allow you to make the more financially optimal decision. It feels too scary and dangerous.<\/p>\n So how do you break the cycle?<\/p>\n Most people think that when they have more, then they won\u2019t have a scarcity mindset. This presumes that the mindset comes from the circumstances.<\/p>\n This can be the case. Living in poverty for example, can create a scarcity mindset. But our brains can continue to live in scarcity long after the external environment has changed.<\/p>\n In his book Scarcity Brain<\/em>, Michael Easter points out that for much of human history, important resources were scarce. So, the drive to find and accumulate more is what kept us alive.<\/p>\n But he points out that this has changed since the industrial revolution. Now, we\u2019re surrounded by abundance. Yet, the programming of our brains hasn\u2019t changed.<\/p>\n So, it\u2019s not enough to hope that if you keep accumulating more, one day your brain will finally feel like it\u2019s enough. In fact, this is unlikely to happen if you\u2019ve spent decades training your brain to feel you don\u2019t have enough and to chase more.<\/p>\n Shifting to an \u201cabundant\u201d mindset starts with intentionally changing the thoughts and beliefs that shape your world view. It starts with questioning and unlearning the thoughts of scarcity.<\/p>\n As you do this, you\u2019ll start to notice subtle changes in your reactions and decisions.<\/p>\n Maybe you feel less scared to invest. Maybe you are less stressed about unexpected expenses. Maybe you make decisions faster, less consumed by analysis-paralysis.<\/p>\n These small changes slowly snowball over time leading to better financial decisions, which ultimately make it easier for you to create the financial abundance you wanted in the first place.<\/p>\n Paridhi Jain is the founder of SkilledSmart, which helps adults learn to manage, save and invest their money through financial education courses and classes.<\/strong><\/p>\n\n
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