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The Scarcity Mindset Might Be the Reason You’re So Weird About Money

Repeat after us: Hoarding $$ in your bank account is not the way. ByAmy Marturana Winderl

Shutterstock / Wondermind

We’ve all had moments in our lives where we feel like we don’t have enough or there will never be enough. It’s what leads us to feel ashamed while eating a $20 salad—even though we love them—or buy cheap clothes that disintegrate in the washing machine. 

When the idea of scarcity takes its hold, we can behave in ways that don’t align with our values or goals. That’s NBD if it means skipping lattes for drip coffee more days than not. But when it fuels money anxiety, that can change how we live on a grand scale.

What we’re talking about is known as the scarcity mindset. Whether you came across the term in a social post or a self-help book, you might already know that this way of thinking can make you feel like there’s a limited amount of money to go around.

While this could theoretically push you to work harder and budget tighter, financial therapists say it’s more likely to be the cause of your complicated feelings about money.

Here, they explain what a scarcity mindset looks like, the ways it can influence you, and how to break free.

What is a scarcity mindset?

“A scarcity mindset is a belief system in which a person consistently feels there is never enough of a key resource,” explains Megan McCoy, PhD, LMFT, a certified financial therapist and assistant professor of personal financial planning at Kansas State University. Most of the time, that resource is money. But it could also make you feel like there’s not enough time, opportunity, or even romantic partners.

In the context of money, a scarcity mindset doesn’t only happen to people going through a financial crisis or trying to make ends meet. It can happen to pretty much anyone. “It is not something that is necessarily reflective of the reality of the situation,” says financial therapist Stephanie Zepeda, PhD, LMFT, program director and associate professor of family therapy at Our Lady of the Lake University. Still, “you feel a sense of deprivation or fear, and a focus on what could go wrong.”

For example, you could have a 12-month emergency fund stashed and max out your retirement accounts every year, but still feel anxious about an $8 coffee.

Other people’s money or success can also trigger your scarcity mindset tendencies, says Dr. McCoy. Say you see someone get a promotion, find a high-paying job, or inherit some money. You might instinctually interpret their win as your loss, making you feel jealous and disappointed in yourself, Dr. McCoy adds. 

The concept of a scarcity mentality was first coined by Steven Covey in his book, The 7 Habits of Highly Effective People. Decades later, Princeton University psychology professor Eldar Shafir, PhD, and Harvard University economist Sendhil Mullainathan, PhD, investigated the idea for their book Scarcity: Why Having Too Little Means So Much. The researchers studied different groups of people—including fruit and flower vendors in China, shoppers at a mall in New Jersey, and sugar cane farmers in India—and found that greater feelings of scarcity negatively affected cognitive performance. 

They suggested that perceived scarcity could influence people to prioritize short-term concerns over long-term planning and problem-solving, Dr. McCoy explains. 

The bottom line: Feeling like you’re deprived of a resource—often money—may alter the way you think about that resource and the decisions you make around it.

What causes a scarcity mindset?

Fear and anxiety are at the core of this mentality, says Dr. Zepeda. And it often comes up after a trauma or “wound,” she explains. 

Sometimes this happens when you’re a kid. Maybe your parents stressed the importance of being frugal at all costs, fought about money, or frequently told you they couldn’t afford things. Maybe they said you aren’t like other people who wore certain brands of sneakers or jeans. The message: Paying for stuff you like means financial hardship is imminent. 

Even if your family was relatively chill about finances, a money emergency like debt, bankruptcy, and getting laid off could shake your sense of security. When that happens, your entire world turns upside down. “That’s a huge one because you’re taught that money isn’t always there and you can lose it even if you have it,” explains Dr. Zepeda.

How can I tell if I have a scarcity mindset?

The biggest tell is that anxiety influences how you spend (or don’t spend) your money. But it’s not just sticking to a budget or creating an emergency fund. When fear drives your decision-making, as it does with a scarcity mindset, you’re more likely to make irrational choices, says Dr. McCoy. 

For example, if your finances are actually in pretty good shape, a scarcity mindset might convince you that you need a five-year emergency fund at the ready, just in case. So, instead of going to dinners with friends or buying a new winter coat, you stay home and save up. Financial therapist Aja Evans, LMHC, author of Feel Good Finance, says some of her clients with a scarcity mindset have kept enormous amounts of money in savings accounts because they’re afraid of spending it or investing it.

Let’s say your finances aren’t in the greatest place. Maybe you have debt or lost your job recently. A scarcity mindset can lead you to play smaller in life, says Evans. Maybe you avoid negotiating during the job interview process because you’re scared they’ll go with someone else. Or the fear of seeing your checking account dwindle keeps you from paying your bills on time. 

Basically, the biggest difference between smart financial planning and a scarcity mindset is that you become obsessed with the idea that something could go wrong. Then, you live your life from that perspective, Dr. Zepeda says. 

Another sign of a scarcity mindset is not appreciating the stuff going right, she adds. Paying your rent on time is a win. So is having a job and paying down debt little by little. But if all you see is the outstanding student loan balance and the deduction from your checking, that’s not helping you in the long run. 

Saving, investing, and planning for the future is important, but we also have to feel safe enjoying our money, Evans says. 

Some other signs you’re operating with a scarcity mindset:

• Persistent anxiety about running out of resources, even when finances are stable
• Avoiding financial realities, like not opening bills, because you fear bad news
• Feeling guilty or nervous about spending money on non-essentials, despite having the funds to do so
• Feeling resentful or threatened when others achieve promotions, raises, or other successes
• Feeling anxious when the group wants to divide the dinner and drinks bill equally
• Having a hard time getting rid of random stuff like boxes or bags, clothes that don’t fit, or expired food
• Going out to eat but making every menu choice based on how much it costs
• Never visiting an expensive store because it's “not for people like you”
• Narrowing your ideas of what's possible for you to enjoy
• Constantly negotiating with yourself: If I buy this thing, I won’t do XYZ other thing

How to deal with a scarcity mindset

Breaking free of this perspective isn’t easy, and it can take time. But with a better grasp of your financial situation and an understanding of your fears, you can take back control. Here’s how. 

1. Sit with your feelings.

Because a scarcity mentality usually stems from a loss or a traumatic event, it’s helpful to validate that experience. When you acknowledge where this perspective came from and how it impacted you, it can be easier to move through it, says Evans. 

So allow yourself to feel all the feelings that come with those experiences, she says. This is similar to the practice of radical acceptance, or accepting stuff we don’t like and changing our response based on that reality. By acknowledging what you went through and honoring your feelings, you’re in a better place to make healthy changes. 

2. Take a good, hard look at your finances.

A lot of the time, people with a scarcity mindset don’t know how much money they have, says Evans. Or, at least, they don’t have the full picture. 

Review your income, expenses, and savings. If you notice that you’re in an OK place (think: emergency savings, money stashed away for retirement, a checking balance that will keep you afloat this month), ask yourself why you’re still scared, whether that fear is warranted, and (if so) what realistic strategies could ease those concerns. 

Say your financial picture isn’t so great. Sometimes the things you worry about are legit, says Evans. Still, a scarcity mindset isn’t going to help you rebuild your bank account over the long term—or make you feel better once you do. Instead of leaning into fear, come up with a plan or revisit the one you already have in place. Ask: Is there a more logical or empowering way to approach what’s scaring me?

The answer might be starting small, like putting $20 away each week or month, Evans suggests. The goal is to just feel a little safer and more secure.

3. Challenge your beliefs about money.

After that reality check, Evans suggests reviewing your attitude about money. If these ideas have roots in your past, ask if they still apply to your life now. 

Perhaps you opened a Gap credit card at 18, wrecked your credit score, and gave up on credit cards forever. As a grown adult, could you be more responsible and rebuild your credit? Probably! 

Or maybe you still assume scrutinizing every purchase leads to financial success. Cue the montage of Venmo requesting $7 for coffee or doing way too much math to calculate your share of the group dinner. Based on your finances, would that extra $30 to $50 a month make a difference? Maybe it does, but maybe it doesn’t. 

4. Affirm yourself.

Reminding yourself out loud that you have navigated financial challenges before and can do it again quiets the voices in your head saying, “But what if?” And who doesn’t love a realistic affirmation?

Evans suggests reminding yourself that you’ve made it this far by taking care of yourself, providing for your family, or whatever else you’ve been capable of doing with your resources. Try something like, I can afford to do the things I enjoy while being financially responsible or I have never missed paying my gas and electric bill. No affirmation is too small.

Finding gratitude for the ways you take care of yourself is easy to skip when you’re scared or anxious about your finances, Evans adds.

5. Develop an ambivalent mindset.

If you’re in the depths of the scarcity mindset algorithm, you may have heard the antidote is an abundance mindset, going full YOLO/carpe diem/the-money-will-show-up-somehow mode, says Dr. Zepeda. 

But that’s just as damaging as living in fear, she explains. “When you just trust that the extra money will come but it doesn’t, that crushes your hope,” she explains. The truth is, no matter how well-prepared you are, things can go wrong. So being honest and taking a balanced approach is the only way through.

Dr. Zepeda recommends a middle ground or an ambivalent mindset. This integrates the benefits of a scarcity mindset with the benefits of an abundance mindset: Prepare for the worst but trust things will work out. 

Doing both sets you up to have realistic expectations and feel secure in your ability to handle whatever happens, chipping away at the anxiety of it all. 

6. Ask for help.

So what if you’re affirming away and running the numbers over and over again, but still can’t find your chill about money? It’s time to look for a sounding board. “If you notice you’re going through the same patterns over and over again and getting stuck, it may be time to work with a financial therapist to help you move through some of those emotional or behavioral barriers you have,” Evans says. 

A financial therapist or coach can add some context to your assumptions about money, like how much should be in your checking account, how much you really need to put away to feel secure, and what a realistic budget looks like, says Dr. Zepeda. The more financially literate you become, the easier it will be to overcome those irrational fears when they creep up. 

Talking about your struggles with friends who get it or seem to have their financial shit together can help too, adds Evans. Sharing your insecurities can lessen lingering shame and might invite people to share their money issues too. “Everybody has made a money mistake, I don't care who you are,” says Evans. “Talking about it will help you realize you’re certainly not alone.” They might even have some advice on how to tackle your biggest fears.