My Dad had a huge impact on my life. So much of what I learned from him was caught more than taught. Like all kids, I watched my parents and picked up on things, what they valued, what made them happy and what they worried about. Money was always on his mind. I imagine growing up during the depression had a huge affect on him. He never bought things he didn’t need. A family joke is we never had umbrellas! Who needs a luxury like an umbrella?!
One saying I heard time and again from my Dad was, “the only way to save money is to not spend it!”
There certainly are positives to this mindset. You tend not to waste money. You tend to control impulse buys and you tend to be a good saver. That said, this focus on scarcity can impact you in other ways too.
According to Dr. Shahram Heshmat, in his article “Scarcity Mindset” in the online version of Psychology Today, “scarcity makes you myopic . The mind is focused on the present scarcity.” Thus the focus is toward the here and now, causing us to “overvalue immediate benefits at the expense of future ones. We attend to urgent things and fail to make small investments even when the future benefits can be substantial.”
Dr. Heshmat continues by saying that a scarcity mindset depletes the energy it takes to focus on the future. All we see is the now.
So during a stock market decline, a scarcity mindset wires us to think, “Oh, no! We will never have enough to retire on, this is scary, so I will move all of my money to cash.”
A corresponding belief is to believe that the way things are today, are the way things always will be. If the market is down this week or this month, then the belief goes, it will always go down. Again, the myopic “here and now focus” causes us to make counterproductive investment conclusions and choices, and the scarcity mindset becomes a self fulling prophesy.
It is in the balancing of a scarcity mindset with reality that it becomes clear that there will be days that you will need an umbrella and there will be sunny days when you can leave the umbrella in the closet. Wisdom comes from having gratitude for the umbrella, the sun and, yes, even the rain.