The Scarcity Mindset and DebtIn Grayson’s recent article, he talked about why a scarcity mindset will keep you poor.  Boy, did that post ring a bell with me.  All throughout the article, I recognized characteristics and behaviors that had plagued my husband and I for years.  So I thought I’d share today how our (former) scarcity mindset was a key factor in getting us into big-time debt.

The Jekyll/Hyde-ness of the Scarcity Mindset

The scarcity mindset is a double-edged sword. Since it plays into your fears of not having what you need, it can:

A) cause you to spend money you wouldn’t normally or shouldn’t spend, out of a fear of not having what you need

B) keep you from making financial decisions that might actually help you to build wealth, out of fear of losing what you have

For years – almost two decades – my husband and I fell prey to this scarcity mindset.  We’d start comparing ourselves to others and allowing fear to creep in.  Then, we’d make purchases that would dispel that fear, such as a new vehicle, something new for the house, new clothing or whatever.  Then, we’d panic about the money we’d just spent and start being overtly miserly, living in a state of panic until the credit card balance or car loan started to get down to a reasonable level.  Over and over we’d repeat the cycle, getting in and out of debt.

So, the scarcity mindset causes you to hold onto money you should be putting into smart wealth-building, and convinces you to spend money that could be used for wealth-building on instant gratification purchases often made out of fear: fear of not being accepted, fear of not having your needs supplied, or fear of not being perceived as successful.

These fears can add up to lots of debt real quick.  Maybe it’s because you’ve spent thousands of dollars on food stockpiles that you’ll never use because you’re afraid of not having enough.  Or maybe you’ve filled your house with the latest and greatest of everything – by use of credit card – because you’re afraid of being perceived as unsuccessful.  Or sometimes people buy themselves lots of “stuff” in the name of showering love on themselves if they feel rejected by someone or by their own low self-esteem.

Fixing the Problem

If you’re making poor money choices due to a scarcity mindset, there is a solution.  Along with Grayson’s tips in his earlier article, try:

  • Reminding yourself that having a secure financial situation is one of the most loving and success-building things you can do for yourself
  • Making a list of what truly matters to you. For example, is having that shiny new car really on your list of top priorities, or is financial freedom more important to you?
  • Stopping to think before each and every financial action, and asking yourself: Is the financial decision I’m about to make one that promotes a scarcity mindset or one that promotes a prosperity mindset?
  • Making a financial plan.  By having a financial plan, you’ll be pre-planning what you do with every dollar you earn, thereby minimizing your chances of spending it in the panic mode that a scarcity mindset can cause.

A scarcity mindset absolutely can be detrimental to your financial life: we learned that first-hand.  But it doesn’t have to be.  By learning to recognize your reactions to the fears that a scarcity mindset can promote, and by learning to overcome those fear-related reactions with positive actions that build wealth, you can ensure that your scarcity mindset is being replaced with a more beneficial prosperity mindset.
Image via VinothChandar

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  1. Having a financial plan is so very key to defeating every kind of financial obstacle. Without one you are really just a rudderless ship adrift with really no chance of success/ I recommend to everyone that they have a written financial plan!

  2. Laurie, you’re so right (per usual)! B resonates with me–consciously avoiding fear over losing what we’ve saved is a challenge for me. Luckily Mr. FW helps me see that we’ll be better off with cash invested, in 401Ks, etc rather than just languishing in a savings account. Thank you for this!

    1. Good for you for consciously choosing to combat that fear, Mrs. FW!! And the teamwork aspect is so important too: it helps when your spouse is there to put things into perspective.

  3. Love this, Laurie! The Jekyll and Hyde reaction to scarcity is spot-on. I’ve worked with people where their scarcity mindset had a stranglehold on them. They were so paranoid of others getting ahead of them and it makes me sad. Who cares? I mean as long as you are creating the life you want which should be personal to you anyway, who cares if someone has a bigger home if you have the home you want and allows you to do the others you love – right? The saddest part is they so often don’t even recognize how fortunate they truly are. Glad you and Rick have flipped the switch are developing an abundant mindset!

  4. I’ve never thought of it that way…but it makes sense. The goal should be to focus on what makes you happy, what fulfills you, and what will make the future better. All decisions should be based on that and not what other people have or don’t have.

  5. Great post, Laurie! I personally think that scarcity is a joke and it’s not even a relevant economic theory. Of course, this is coming from an economic nerd. HAHA. Scarcity, in regards to microeconomics as you mentioned here, is just a silly mindset that isn’t even accurate. I love that you wrote on it. This is great!

  6. There have been so many times I thought about purchasing a big ticketed item solely for the purpose of pleasure. I didn’t need the product most of the time at all but the thought of having it felt awesome. I knew deep down I didn’t need it and having financial freedom is definitely more important to me. Any time I buy something, I make sure to wait a good week or two just to make sure if I really need it, and most of the time I never end up buying it.

    1. That’s a smart plan, Alexis. So many times when we see something we think we really want, the emotion of the purchase goes away with time, and we forget about the item. Great way to save money!

  7. I have made several mistakes in the past by overspending on the things which offers no real value. Now I have become more responsible towards money and now paying debt is my priority. I understand one thing from my mistakes, if you want to solve a problem, then you have to face it.