Money Mindset: How a Scarcity Mentality is Making You Poor

It is agreeable that we all love money. The fear of poverty pushes the poor and rich alike to do as much as they can to acquire more money to lead a better life. For many, happiness and money are interlinked. 

But as much as everyone is actively working to possess more money and evade poverty, have you taken a step back to think about why some people are so good at it while many others constantly oscillate between being broke and having some money?

Experts boil down this difference to one key element of success - mindset - which they say accounts for 80% of success, with skills only contributing 20%. In her book Mindset: The New Psychology of Success - which was the culmination of 30-year quantitative study Stanford University Psychologist Carol Dweck found that ability wasn’t the key to success. Rather, the key is in the belief that ability can be developed – an abundance mindset.

As such, developing the right, positive financial mindset can be the difference between your current financial situation and you achieving your longer-term financial goals. 

What Is Money Mindset?

Money mindset is your set of individual beliefs and attitude(s) about money which shape your decisions about earning, spending, investing and generally everything about handling your money. 

Your attitude towards money affects how much you think you are worth, how much you think you can earn, what you can or cannot do with money, whether to invest, take debt, if to give away money as well as your perception of the rich and poor. For example, do you think “money is the root of all kinds of evils”?

For many, beliefs about money are picked up from childhood experiences - typically, we are programmed from a young age to think of money as a finite resource, a rare thing that you cannot afford to make mistakes with. If the environment we continue living in reinforces this belief then, this ‘scarcity’ mentality might be carried over into adulthood. 

On the other hand, if one grew up in a financially secure environment, an ‘abundance’ mentality will very likely persist in their adulthood.  

Scarcity Mindset

“Most people are deeply scripted in what I call the Scarcity Mentality. They see life as having only so much, as though there were only one pie out there. And if someone were to get a big piece of the pie, it would mean less for everyone else.” – Stephen Covey

This is essentially what a scarcity mindset looks like as coined by Stephen Covey author of the 7 Habits of Highly Effective People where he also coined the ‘abundance’ mindset. With this mindset, one thinks that whatever is available cannot be enough, leading one to hog everything in an effort to ‘save’ for the future. A scarcity mindset results in stress, fear and anxiety.

‍How to identify if you have a scarcity mindset

If you are the kind that is worried more about not having enough every day despite having given your very best towards achieving financial stability, then you could be having a scarcity mindset. Here are some few signs;

1. You believe that situations are permanent and there is nothing much you can do to change them.
2. Fear of change - you would typically take longer to accept and adapt to change and spend time complaining about it.
3. Being envious of others - You are overly competitive and resent the success of others.  When you are envious of the success of others and the nicer things they have, you throw gratitude out of the window. It does in no way change your current circumstances.
4. A know-it-all attitude - with a scarcity mindset, the motivation to learn and grow is very low. This severely limits your ability to improve your financial situation.
5. Regularly using self-defeating words of scarcity - you harbour thoughts and use words that demotivate you from pursuing growth such as ‘it is what it is’, 'I'm not smart enough’, or ‘I can’t handle this’.‍

Abundance Mindset

In contrast, an abundance mindset is one where there is belief that there is plenty for everyone out there. 

Stephen Covey defined it as “a concept in which a person believes there are enough resources and successes to share with others.”

With an abundance mindset, you are in the driver’s seat of your private, financial and work life. You believe you have more control over what happens in your life, energised and positive with an outlook that you are working towards something bigger than yourself.

Do you know that person at work or elsewhere that you have interacted with who energises and inspires others? They likely have an abundance mindset. 

‍Some characteristics of an abundance mindset include

• Excitement about challenges, change and growth
• Big picture thinking - clarity of mind and ability to see different perspectives
• Eager, non-judgemental learners i.e thinking like a beginner
• Creative agency
• A can-do attitude - “I always have a choice”
• Practicing gratitude
• Practising abundance affirmations
• As opposed to defeatist thoughts and using words of scarcity
• Living in optimism and genuinely celebrating the success of others
• A proactive approach to life as opposed to being reactive
• Generosity

How Can a Money Mindset of Abundance Help Me Grow My Wealth?

In wealth creation, the reality is that you have to spend to attract that which you seek.

For those with an abundant mindset, they will not worry about spending their time, money and other resources to learn how to make money. If there is an opportunity, they will jump into it as long as it has promise.

In Kenya, there is a common saying that money is money no matter the source. This is the attitude that an abundance mindset allows. It does not matter if you make money from garbage collection or working an 8-5 job in a blue-chip company.

The abundance mindset allows one to forego instant gratification to put up a fund for the future and be very content that they don’t have a designer watch or the nicest house in the neighborhood.

‍Moving From a Scarcity to an Abundance Mindset

The good news is that anyone can transition from a scarcity to an abundance mindset if they so wish. The very first step is to focus on what you already have. This means you need to start seeing opportunities and not limitations. Instead of frowning over the transferrable skills you lack, put the solid skills you’ve earned into use. 

You also need to start unlearning a lot of what one has grown accustomed to when it comes to money. There is a need to be open to learn new things and gain new experiences around money. So, surround yourself with people with an abundance mindset. 

Since a scarcity mindset makes one overly competitive - that is, if one wins, another loses - start creating win-win scenarios. Understand what this would mean for both of you and how to achieve it, brainstorm and collaborate. You should do this both in your professional and personal life.

Practice gratitude in your daily life. You could keep a daily gratitude journal that helps you appreciate the good things happening in your life. Gratitude will give you the impetus to chase your next goals, and importantly help you see possibilities that the tunnel thinking of a scarcity mindset blinds you from.