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Scarcity mindset - Can it lead to debt? How to overcome it

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By: Good Nelly
on 8th Apr,2020

Get to know how your scarcity mindset can lead you to face debt problems. Also check out 7 tips to change your scarcity mindset to abundance mentality to avoid debt and manage finances well.
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How does a scarcity mindset lead to debt?

Before answering this question, it is better to discuss what is meant by ‘scarcity mentality’ and how it is related to finance, if a relationship can be explained at all.

When a person has a scarcity mindset, he/she believes that he/she doesn’t have enough. These people think that they can’t afford the life they want.

As a result, they believe that they will never be able to achieve their financial goals or won’t be able to pay off debt, because they don’t have and will never have the required money.

So, it can be said that scarcity mindset and debt are related, since such a mentality can stop you from solving your debt problems.

Implications of a scarcity mindset over debt

1 It may cause anxiety

When you are anxious about your money matters, you’re not able to plan anything successfully, right from saving to creating a suitable budget.

It also prevents you from focusing on your long-term financial goals, since your mind is occupied to meet your immediate needs.

It is like a decision fatigue - the more time you spend on making small choices, the less time you have to tackle your big problems, especially about money matters.

For example, if you’re worrying about how you’ll repay your monthly bills on time, how will you spend your time and energy on making strategies to get out of debt or to plan for your retirement?

You may be earning enough but worrying about not having enough dollars can distract you from making more money.

So, if you have too much debt to pay off, it will be difficult to repay it, since you’re not able to make more, and this can lead you to deep into debt.

2 Cannot make good financial decisions

If you are not able to make right financial decisions, which can help you to build wealth, you’re losing money. Usually, this is a result of the fear that you’ll lose what you already have.

3 May end up spending more

A person with scarcity mindset can also end up spending more what in normal circumstances he/she wouldn’t have spent. These people make instant purchases out of fear - the fear of not having enough and the fear of not being successful.

Often people compare themselves with others and allow fear to creep in. Sometimes they even want to meet up with the Joneses and end up spending more.

What happens? There’s a higher chance to fall into debt.

All these fears can add up debt quickly.

One of the reasons might be you stock food due to the fear of not having enough. It might also be that you swipe your credit cards to buy the latest items out of the fear of being unsuccessful.

People also end up buying more to spend money on themselves due to low self-esteem.

On the other hand, the abundance mentality is a sense of mind where people believe that they have enough to spare for everybody. It results in recognition and decision making, which in turn, opens up possibilities, options and creativity.

So, how will you overcome your scarcity mentality?

7 Tips to change your scarcity mindset to avoid debt

So, now that we’ve known the adverse effects of scarcity mindset on our financial lives as well as impacting our lifestyle, let’s see how we can overcome this mindset.

It’s not that tough. Let’s check it out:

1 Avoid comparing yourself to others

Often envy drives your decisions when you have scarcity mindset, thus leading you to swipe your card for huge bills. Just stop once and give it a thought - Are you sure they are not overspending whom you’re envying?

According to Marie Forleo, host of MarieTV and entrepreneur “Be thankful for what you have, you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.

Do you know that about 3 billion people live on less than $2.50 per day, and about 80% of humanity lives on less than $10 per day.
So, appreciate what you have.

You can also try out the minimalist lifestyle. You’ll see how happy you can be in life.

2 Organize your life

This is one of the easiest ways to change to an abundance mindset. Not only is it easy, but it’s fun, too! Organize your life - your possessions, information, time and the things in your home. When you do it, you’ll realize how many things you already have and how much time you have for yourself.

For example, just by reorganizing your closet, you’ll come to know how many things you have. You might not feel the urge to buy new things for the time being. You may also feel like donating some of them which you won’t require.

Spread some of your wealth among others; you’ll feel happy and content.

Abundance mindset not necessarily will lead you to debt problems.

3 Appreciate others’ success

It is not so easy but it’s not impossible, too! Try to appreciate others’ success by feeling happy for them. By doing so, you won’t feel inadequate.

Applaud for other’s achievements, which in turn, will inspire you to achieve your dreams as well.

4 Watch television less

Television, or rather media, entices you to have those things which you don’t have. Yes, you can include social media too. Advertisements, in particular, cultivate desires. You see your friends' lifestyles and crave for achieving it. As a result, you ruin your life, even what you have. So, it’s better you reduce your media consumption.

Instead, use that time in what you like to do, maybe pursuing a hobby. Just think and list the items you’d like to do. Choose one and start doing it. You’ll have a sense of accomplishment, which will improve your life altogether.

It won’t be easy to stop your media time suddenly. Gradually reduce it. Give yourself a target of reducing your media time by 10 minutes everyday. But, don’t stop watching everything. I’m just saying focus on utilizing your time more on what you like to do.

5 Take small steps to grow wealth

Try to build your safety net. Open a savings account and invest a small amount in it. Start investing small amounts in the stock market and you’ll be confident when you get profitable returns.

Plan your retirement early. The financial advisers often say that you should start planning your retirement from the time you earn your first paycheck.

Also, you should build a fat emergency fund. Try to have about 3-6 months of lifestyle expenses into that fund. First, contribute a little towards your emergency fund. Gradually, increase the contribution amount. You’ll feel contended that you’re able to tackle any financial emergencies without falling into debt.

When you build your safety net, you won’t even realize if you miss a few dollars here and there.

6 Try to find out positive in every loss

The successful people, whom you see now, have usually made some sacrifices in the past. They have also suffered losses.

So, when you go through a phase of not so happy moments, try to bring out the positive of every situation - it will bring a positive change in your life.

Almost every situation offers some positives.

So, when dealing with finance, focus on small changes to improve your financial situation.

Another thing is very important...

7 Start a fun fund to enjoy life

Every month, deposit a certain amount ONLY for your FUN ACTIVITIES. Spend the dollars on what you like to do - Going for a movie, shopping, partying, dining out, etc.

When you accomplish a financial goal, use this fund to celebrate.

Believe me - You won’t fall into debt and regret your decisions later; rather, it will help you build a secure financial future and enjoy life.

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