107: Scarcity Money Mindset: A Healthier, Shame-Free Approach
Scarcity Mindset Psychology
While the idea of scarcity mindset has been around for a while in psychology, it’s become more ubiquitous these days with the rise in cultivating healthy mindset practices. Scarcity mindset psychology is the frame of mind where you believe there isn’t enough of a “thing” to go around. In other words, you believe that things like money, jobs, or a healthy partner are limited in supply, and for each person in your life who gets one of those things, there are fewer of those things available for you.
And in pop- and pseudo-psychology, the antidote to a “scarcity mindset” is to have an “abundance mindset.” An abundance or growth mindset is the frame of mind where you believe that there is more than enough [money, good jobs, healthy romantic partners, etc.] to go around; there is no limit to these resources. And in shame-based pseudo-psychology, the gurus of “abundance mindset” will tell you that if you struggle with feeling like there isn’t enough of a thing to go around, it’s all because you aren’t thinking abundantly.
Scarcity Money Mindset
While I don’t believe a black-or-white mindset is helpful when thinking of money mindset, I do think there are some nuggets of truth buried in the idea of a scarcity mindset that we can learn from. My preferred terms instead of scarcity money mindset are “shame-based money mindset” or an “unhelpful money mindset.” These two terms do a better job of divorcing us from feeling bad about ourselves and our relationship with money.
With a scarcity money mindset, the core belief is that money is a limited resource. In reality, it’s not a limited resource–it's just an incredibly inequitable distribution of resources. Think: we can all name 3-5 billionaires, but even trying to fathom the amount of wealth hoarded by billionaires is hard to wrap your head around. Artist Mona Chalabi created a series of drawings to help. In one of them, she writes, “If you are a microscopic flake of fingernail dust, then Jeff Bezos is a man who is 5 foot 7.”
An unhelpful or shame-based money mindset can also show up as “I’ll never ‘get’ money,” or “understanding money just isn’t for me.” I’d invite folks to try reframing these thoughts to something more helpful, like, “I’m learning more about my spending plan.” Or “each day, I get closer to where I want to be financially.”
Another common shame-based money mindset is the sunk-cost fallacy. The Sunk Cost Fallacy describes our tendency to follow through on something that we’ve invested time, effort, or money into, even if continuing to invest in that thing isn’t objectively worth it. The sunk cost fallacy means we are making irrational decisions because we are factoring in influences other than the current alternatives. (E.g., stay in a money pit house instead of selling and buy a new one; stay in a current job even if it makes you miserable because you're close to earning another 3 days of PTO)
Overcome Scarcity Mindset
Again, the common trope in shame-based money mindset is to tell someone, “just have an abundance mindset; that will help you overcome scarcity mindset. But that can feel wildly far off if you are in a place of true lack, anxiety, or experiencing fear around money. Instead, I offer something else: the good enough mindset.
Good Enough Mindset
“Good enough mindset” is exactly what it sounds like; it's the ability to combat the constant internal and external pressure of “aiming high,” and “growing more” and “scaling faster” by permitting yourself for things to be good enough for now. Think: this isn’t just about chasing more money; it’s also about all the noise we are fed about how to live a good life. Not enough exercise, not enough mindfulness, not enough rest.
Stanford professors Bill Burnett and Dave Evans found that getting comfortable with a “good enough” mindset means acknowledging where you are, and acknowledging your current progress and growth. This is vastly different than shame-based abundance mindset that berates you for not “thinking big enough.”
My personal “good enough” number is 80%. I strive to be 80% good enough at something to take action. So it could mean feeling about 80% comfortable with my spending plan to keep tracking my spending in a current manner. Or feeling like I understand 80% of the stock market to start and continue investing in my retirement.
So what about you? How can you work on some gentle, kind, money mindset reframes to have a “good enough” relationship with money?
Money and Mental Health
Money is a common cause of stress for therapy clients and a risk factor associated with many mental health diagnoses. If you are a marriage and family therapist, social worker, psychologist, or mental health counselor, there is professional development and continuing education available to help you learn more about the intersection of money and mental health. Mental health clinicians are trained to help clients with a variety of stressors, but rarely is money covered in our professional training. As shared above, there is a need for mental health clinicians to understand how money and mental health are related. In my Simple Practice Learning course “Money and Mental Health,” I teach participants how to describe at least four mental health risk factors directly related to money, describe at least four differences between a finance professional and financial therapist, describe at least three benefits of including money in therapeutic work as a mental health clinician and how to apply at least three interventions related to money in the therapeutic setting.
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It is officially August and this month's Mind Money Balance podcast theme is in the theme of Leo season and the sun being out and it being peak of summertime if you're in the northern hemisphere. So what we're going to do over these next few weeks, as we kind of get into this month's podcast theme is how can we take a sunnier approach to some scary-ish things in the world of personal finance. So a few things that I hear again and again that people want me to address are about scarcity mindset, your money story, and the fear of a potential recession, either that we're already in or that we're heading into. So today, we're going to cover money scarcity mindset, and how in today's episode, I hope I can take you through how to look at it a little bit differently and take a look at it through a healthier sunnier, shame free way.
So there's so much noise in the personal finance space about this idea of scarcity, lack or poverty mindset versus abundance mindset. And it is really challenging to think about this, particularly, because when we just break down the definition of scarcity mindset, it's this enough that there isn't enough to go around, and that this particular thing, whatever it is, is finite. And if one person takes some of it, that means there is less for everyone else. And when it comes to having a scarcity, money mindset, it is kind of the same idea--that this idea that money is a limited resource, or your skills around money is finite, it is not changeable, you can't get better at money. But let's be really clear here money in our society isn't really a limited resource. But it is incredibly, just it is incredibly inequitable in its distribution. So when we think about who has money, there are a handful of people that we can name off the top of our head, we can all name three to five billionaires in two seconds. But when we think about a non-billionaire's relationship to money, it can feel like it's a limited resource, but it's not actually limited. It's just being hoarded by a few people at the top. And when we think about how having a scarcity money mindset might impact our relationship with money, it can get a little bit deeper, not necessarily I don't have enough and then flipping into abundance, oh, there's more than enough because sometimes there isn't enough. But when we think about the thought around a scarcity money mindset, it could show up as I'll never understand money, or people like me just don't get money, or I'll never be able to save. So what's the point of saving? That's kind of the thought that I'm more interested in dissecting today, rather than this black or white, all or nothing. You either have a lack mindset or growth mindset, which I think is so gross. But I think it's important to think about how can we look at that particular thought, I can't understand money, money isn't for people like me, and how can we move towards a neutral sunnier thought?
Another thought that comes up a lot that I think is tied into this idea of scarcity mindset is the sunk cost fallacy. So this is something we all experience. But psychology has found again and again, that we tend to follow through on things if we've invested money, time or effort into it. Even if continuing to invest more time, more money, more effort into that particular thing the cost is greater than the benefits. For example, you stay in a money pit house, you keep, you know, ripping up floorboards and finding mold and then putting down new floorboards and you do the roof. And then when you find the roof then there's a new leak, and then you have to fix the leak. And then you go to put a porch out back and you realize you have carpenter ants, instead of just selling that house and saying, Look, this, the energy and money that I'm putting into this house doesn't make sense. I just have to get out well, I can and buy a new one. Most people will keep staying in that house because we've already invested time, energy and money into it. Even though it doesn't make sense to keep throwing money at something that is crumbling and falling apart. Most of us have a hard time leaving. To take a different example. Let's say you're traditionally employed and you know you're on the edge of burnout, you're frickin miserable. But you're like if I stay one more year than I'll get three more days of PTO. So the sunk cost fallacy here is that we'll stay in something even though the energy that we're getting out of it is not great because you think that maybe things will be better if you just stick it out? And I don't have evidence for this next part that I'm about to say, but it makes me think that the kind of American way of thinking about things is just grit and get through it, and then you'll be okay. And I think I wonder if Americans are more likely to get caught up in this sunk cost fallacy than other nationalities? Because we're so highly individualistic. So how can we not overcome scarcity mindset, but how can we work towards a healthier relationship with some of these very real fears? Let's start with this, I won't get money, understanding money just isn't for me, I would invite you to think of what is actually true about that, and what is actually false about that, right, we might have some proof that we aren't great at money, we missed a credit card payment, or we didn't negotiate a raise. So we got some proof that maybe you're not great at money. But then on the other hand, you always pay your apartment rent on time, that would be proof that actually you are good at money, or you sat down with somebody at your work to look at a 401 K plan that will actually be demonstration that you have the capacity to understand money. So moving from, I don't get money to I'm amazing at money, this abundance mindset might be too big a jump for our brain. So instead it becomes I'm working on understanding money, or right now, what's most important is figuring out my income and expenses. So I can then learn more about different parts of money. So that could be moving toward something that is more positive, but we have to kind of hang out neutral first. Okay.
Then, the other thing that I personally like to do when I'm finding myself in this kind of shame, latent space, less scarcity mindset, and more just like feeling badly, it's just getting comfortable with good enough. And what's so interesting is I typed in, like good enough into Google, and what came up was immediately super individualistic. And it's like, Good enough is the enemy of achieving goals. And I was like, that is so ridiculous. And so the opposite of what I'm trying to the point I'm trying to get across today. But the reality is, like, we don't get comfortable with good enough, we are so stuck, and black and white, all or nothing good or bad, that we forget that like, we can just pass. And what I mean by that is like, if you have a college degree, whether you have a 2.5, or 4.0, doesn't matter, you still have the frickin college degree, right? So we have to get comfortable with good enough mindset. And this isn't about selling yourself short or telling yourself you you can't do things. This isn't about settling. This is about saying that most of us have a constant internal voice telling us that we're not doing enough. And we have this external pressure of aim high, scale faster, grow more, go bigger, go home. And these these two things, this internal noise that we're not doing enough, and this external noise of go big or, go home, makes it really hard to just be like shit, I think I'm doing just fine. So this is not just specific to money, though, obviously, we're here to talk about money. But this enoughness can happen in so many domains of our life. I'm not exercising enough. I'm not practicing enough mindfulness. I'm not sleeping enough. I'm not resting enough. And we also have to think about how can we get comfortable with where I'm at now? And yes, of course, maybe you have a goal for saving 100 extra dollars or negotiating a bit of a raise or raising your rates if you're a therapist in private practice. It's not that we stopped setting those goals, but it's that we acknowledge where we are now, seeing if there is enoughness in it, and getting comfortable there. I've shared before on this podcast and I'll keep sharing that my personal kind of inner barometer for whether or not a project I'm doing is good enough, is like is it 80% good? Because 80% To me, that's like a solid B, that is a good enough place for me to be to start taking action because if I wait as a recovering perfectionist to get to 100% or 110% I often we'll be waiting a lot longer than getting started. And particularly when it comes to things like money waiting to understand credit scores 110% before working on improving your credit score, the longer you put off taking action because you want to do it the right way the more you're actually harming yourself. Same thing goes with something like investing, if you wait to start investing until you understand 110% Of everything about investing the money more you put off getting started in investing and starting getting some of the benefits of investing which are, which is compound interest earning money on the money that your money earns, which sounds like a tongue twister, but it's very real.
So when we think about enoughness, for our money, and the information that we have, do I have enough information to make a decision about this thing? Do I have enough information to negotiate a raise at work? Do I have enough information to open up that Roth IRA and start contributing money into a low cost index fund? And if that all sounded like gibberish, that's okay, the more exposure you have to language like this, the better off you can take those things into Google and start learning. Do I have enough trust in myself that I can raise my rates if I'm a therapist in private practice, and know that most of my clients will be okay with it. So this is super, super important, is getting comfortable with good enough. It's not about all or nothing. It's not about you either have a scarcity or an abundance mindset. It's about saying, I have enough to move through this. And and that I can can cope with this. That's how we overcome this idea of scarcity mindset is not to say, Oh, I'm going to just click my heels and hope that money rains down on me. I also think that can be really damaging. But to say I understand why my brain does this, I understand why my brain goes into thinking that certain things are limited resources. And I also understand that the answer isn't just to think happy thoughts. But actually, we can take proactive action by getting comfortable with a good enough mindset. And I hope that this quick, snappy, sunnier take on scarcity mindset helps you to take action and I would invite you to think about what's something in my personal finance life right now that I'm experiencing a less than enoughness relationship with and how can I get to good enough? What does good enough look like? Am I at a place where if I had just a touch more information or a little bit of outside accountability, I could take that wise aligned action. Okay, I hope that helps alleviate some of the anxiety around scarcity and abundance and helps you to get more comfortable moving into a healthier relationship with your money.