Are you worried about your money? Do you fear you’ll never get ahead or reach your goals?
You may have what’s known as a scarcity mindset. A scarcity mindset is when you never think you’ll have enough money. This can wreak havoc on your financial state as well as your mental and physical health.
When you constantly think about not having enough money, you only focus on the immediate future. In other words, you make decisions that benefit you right now but may not help you in the long-run.
Read on to find out just how damaging a scarcity mindset can be.
Your Physical Health May Suffer
Thinking only about the immediate future can affect your long-term health.
For example, buying ten packs of ramen, for instance, seems more enticing than purchasing a pint of blueberries. The ramen can last you for a few meals, whereas a pint of blueberries might be a snack or breakfast at best. I’m not going to argue with you about what tastes better, but we can all agree that ramen doesn’t have as many beneficial nutrients as blueberries or other fresh fruits and vegetables.
Using this example, think about how you shop when you feel like you don’t have enough money in the bank. You grab what you can afford. And this isn’t always the healthiest option. In fact, eating nutrient deficient meals can increase your chances of conditions like diabetes, heart disease, and obesity. According to an article by Dr. Mercola, eating highly processed food can also affect your mental health while leading to an increase in insulin and leptin levels. This, in turn, can result in insulin resistance – one of the main causes of chronic diseases.
Thinking About Scarcity Causes Stress
If you’re constantly worried about never having enough, the resultant stress alone can stymie your ability to focus on improving your financial situation and earning more money.
Harvard University economics professor Sendhil Mullainathan and Princeton University psychology and public-policy professor Eldar Shafir asked two groups (one “rich” and one “poor”) questions about hypothetical situations regarding their finances. When asked how they would cover a $3,000 car repair bill, the IQ scores of those in the “poor” group dropped 14 points, whereas there was no difference in the “rich” group.
The professors came to the conclusion that thinking about scarcity can affect cognitive performance. In fact, it was actually worse than being sleep deprived. Why? If your brain is overloaded with worry, it’s easier to make poor decisions. Not only that but constantly feeling like you’re struggling to make wise decisions can cause you to feel less confident about your ability to succeed.
If you feel like this all the time, it’s no surprise that you can’t get ahead. This can become a vicious cycle of self-loathing and low self-esteem.
What Can You Do to Overcome a Scarcity Mindset
Overcoming a scarcity mindset isn’t necessarily about earning more or spending less. It has to do with shifting your perspective on your finances. Once you feel like you have enough money (whether or not you actually do), you can focus on improving your financial state. Check out the following ways to shift your scarcity mindset:
- Create an emergency fund. With this type of savings fund, you set aside money to cover any unexpected expenses, such as a significant home repair or unforeseen medical bills. Having money set aside also means you’ll be less likely to take out loans to cover unexpected costs. Ideally, you should have three to six months of your salary saved up in an account that you can access quickly and easily.
- Automate your finances so you can save money every month. Basically, automating allows you to pay bills, transfer a portion of your paycheck into your savings account, and create other seamless ways to make saving money easier. Chime Bank, for example, makes it easy for you to save with its automatic savings program. Chime rounds up every transaction you make on your debit card and transfers this over to your savings account.
- Cultivate a gratitude practice. This will help you step away from the scarcity mindset and focus on appreciating what you have.
Developing a gratitude practice is simple. Start by writing down three things you’re grateful for. The more specific you make your list, the more effective it’ll be. From there, focus on being thankful for the things you wrote down. For example, if you are grateful for a fridge full of food, be grateful you can afford to buy groceries instead of freaking out about how little money you have in your bank account.
This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.