Scarcity Mindset: How It's Sabotaging Your Finances and What to Do About It
Do you find yourself constantly worrying about money, even if you're making ends meet? Do you feel like there's never enough, no matter how much you have? If so, you might be stuck in a scarcity mindset.
This limiting belief system tells us that there will never be enough — whether it's money, time, or resources. It keeps us trapped in a cycle of lack, preventing us from reaching our full financial potential.
What is a scarcity mindset?
A scarcity mindset refers to the belief that there is not enough of something, whether it's money, food, emotional support, or something else entirely. When we're stuck in a scarcity mindset, we focus on what's lacking rather than what's possible.
We might tell ourselves things like:
"I'll never have enough money to retire comfortably."
"I can't afford to take that vacation."
"I'm not talented/smart/lucky enough to earn more."
The scarcity mindset is rooted in fear and limits our ability to see opportunities. It's the opposite of an abundance mindset, which flows out of a deep inner sense of personal worth and security. When we adopt an abundance mindset, we focus on what's possible rather than what's lacking. We trust that there are always new opportunities and possibilities available to us.
The money psychology of scarcity
To understand how a scarcity mindset impacts our finances, it's helpful to look at the psychology behind this phenomenon. In their book “Scarcity: Why Having Too Little Means So Much,” researchers Sendhil Mullainathan and Eldar Shafir explore how scarcity affects our minds and shapes our behaviors.
The authors explain that scarcity imposes a mental tax, constantly capturing our attention and reducing our cognitive bandwidth. When we're preoccupied with a lack of something, whether it's money, time, or social connections, we have less mental capacity to give to the rest of life.
This scarcity mindset consumes what Shafir calls "mental bandwidth" — brainpower that would otherwise go to less pressing concerns, planning ahead, and problem-solving.
Mullainathan and Shafir found that this "bandwidth tax" affects all of us, regardless of our income level or social status. In one study, they asked Princeton students to play a game in which they had to make a series of financial decisions. Some of the students were randomly assigned to a "rich" condition where they had an abundance of time to make their choices, while others were put in a "poor" condition with very little time.
The researchers found that when people were rich with time, they were very judicious with their resources. But when they were time-poor, students made poorer decisions and ended up with less money at the end of the game. The scarcity mindset imposed limitations on their cognitive abilities.
How a scarcity mindset can impact your own money
When it comes to finances, a scarcity mindset can be particularly detrimental. Here are some ways this limiting belief system might be impacting your bottom line:
You're always in survival mode. When you're focused on lack, your brain is constantly scanning for threats. This puts you in a chronic state of "fight, flight, or freeze," which can lead to poor decision making. You might make impulse purchases out of fear or avoid important financial tasks because they feel overwhelming.
You're not planning for the future. When you're so focused on what you lack, it's hard to think about the future. You might neglect to save for retirement, create a budget, or plan for emergencies.
You're more likely to take on debt. Research shows that when people feel time-poor, they're more likely to take out loans and make worse financial decisions. The scarcity mindset tricks us into borrowing against our future, even when it's not in our best interest.
You're less effective in other areas of your life. Studies have found that people with a scarcity mindset are often less attentive parents, worse at adhering to their medication, and even weed their fields less well than those with more resources. When your mind is consumed by lack, it's hard to show up fully in other areas of your life.
Your cognitive capacity diminishes. Each time your mind confronts a new problem, you lose overall cognitive ability. Worrying about money saps the mental bandwidth you need for other tasks. After the 2008 financial crisis, America may have lost a lot of fluid intelligence as people walked around consumed by financial concerns.
Your decision making is impacted. Research shows that a scarcity mindset alters neural processing underlying consumer decision making. You may be more prone to impulse buys or prioritize short-term desires over long-term financial health.
How to shift from a scarcity mindset to an abundance mindset
The good news is, you don't have to stay stuck in a scarcity mindset. With intention and practice, you can shift your thinking to embrace abundance. Here are some strategies to get started:
Notice your thoughts. The first step is becoming aware of your scarcity thoughts. Notice when you're telling yourself there's not enough or that you'll never have enough. Simply observing these thoughts can help lessen their power.
Reframe your thoughts. Once you notice a scarcity thought, challenge it. Is it really true that there will never be enough? What evidence do you have to the contrary? Replace scarcity thoughts with abundance affirmations like "There is always more than enough," "I am open to receiving abundance," and "I trust in my ability to generate what I need."
Practice gratitude. Focusing on what you're grateful for is a powerful way to shift into an abundance mindset. Keep a gratitude journal and write down a few things you're thankful for each day. The more you appreciate what you have, the more you'll attract.
Give generously. Scarcity makes us want to hold on tightly to what we have. Remind yourself that there is enough to go around by giving generously. Donate to a favorite charity, tip well, or give your time to a cause you believe in. Giving helps us remember that resources are always flowing.
Surround yourself with abundance.The people we spend time with and the content we consume greatly impact our mindset. Surround yourself with people who have an abundance mindset, whether it's through social media, books, or in-person communities. Avoid media that makes you feel lacking and instead seek out inspiration that uplifts you.
Trust in your own resourcefulness. A scarcity mindset tells you that opportunities are limited. An abundance mindset reminds you that you are infinitely resourceful and capable. Practice trusting yourself to generate what you need, whether it's through your skills, network, or creativity.
Expand your horizon. Scarcity narrows our focus to what's right in front of us. Practice expanding your horizon by dreaming big and setting long-term financial goals. What would you do if you knew you couldn't fail? What legacy do you want to leave? Allowing yourself to think expansively helps retrain your brain for abundance.
Ultimately, the invitation is to move from a mindset of scarcity to one of sufficiency. Sufficiency isn't about having more than you need — it's about having enough, and knowing that you are enough.
When you live from a place of sufficiency, you make financial decisions from a place of wholeness rather than lack. You trust in your own resourcefulness and in the abundance of the universe. You know that there is enough for you and for everyone else.
This is the true power of an abundance mindset. It's not about accumulating more wealth or material possessions (although that may be a byproduct). It's about feeling a deep sense of enoughness, no matter your external circumstances.
