Avoid The Scarcity Mindset

A lot of the suggestions and tools that I and others provide is geared towards understanding your finances. It suggests measuring, monitoring, tracking, predicting and budgeting your money in various degrees of detail.

That’s a super-useful toolset for diagnosing a problem and designing a solution.

I would argue, however, that too much focus on budgeting, tracking and spend control can lead to a scarcity mindset. This will hold you back if you let it govern your goal-setting or decision-making.

I’ve fallen into this trap in the past, and I think it’s important that you be aware of it.

Measuring Isn’t Action

Too much focus on budgeting can lead to a scarcity mindset. This will hold you back if you let it govern your goal-setting or decision-making.

When you spend time preparing your financial plan, monitoring your spending, setting up your savings and checking their progress, that’s all constructive.

It provides the foundational understanding that lets you take control of your finances.

But measuring isn’t acting. Counting your money isn’t saving, or earning. Filling out spreadsheets isn’t “taking control”, it’s a tool that lets you see if you’ve successfully taken control or not.

Your financial success isn’t made by measuring, analysing or predicting your earnings and your spending. It’s made in the hundreds of spending decisions you make every week. It’s made in the quality of your work that allows you to go ask for a raise. It’s made in the work you invest in a venture that can actually earn some cash.

So think about where you put your effort. If you work an hour each morning updating a spreadsheet and then reward yourself with a snack from a vending machine or a sandwich shop, you’ve got it backwards.

Target Fixation: “The Secret” Was Onto Something

There’s a book called [amazon text=The Secret&template=text link&asin=B002RI9UKE] which suggested that the universe would give you what you wanted if you asked for it the right way.

No offense to the true believers out there, but that’s rubbish.

There is, however, an underlying truth. A better term for it might be Target Fixation. When you focus on a problem, an obstacle or a constraint, you inadvertently make it more likely that you will collide, or be limited by it. Alternatively, aim for the moon and you’ll find yourself among the stars.

Similarly, when you keep thinking about how much you can afford to spend, you are unlikely to earn more than that amount because all your energy is consumed living within it, rather than on the goal of getting beyond it.

That’s not to say you should stop controlling your spending, but that you should beware of becoming so obsessed with the act of budgeting that the numbers as they are today become your limiting reality.

Avoiding Scarcity: An Abundance Mindset

There are infinite ways of making money, and an infinite amount of value to be created in the world today. You have more opportunities for wealth creation in the next 18 months than the total sum of achievements in your life so far. (Ok, unless your name is Bill Gates or something…)

Achieving any of this is not just a question of intelligence, courage and knowledge. Putting those things into practice requires that you believe it’s possible in the first place. It requires an open and curious mind, a desire to achieve things that you have not yet achieved and the kind of self-reinforcing energy that comes from a positive attitude.

To reach goals beyond your current limits requires an abundance mindset, something you cultivate with a positive attitude and self-belief.

Focusing on your budget and how to live within a constraining cash limit can be helpful as a detox, as a test of your discipline, as a reset of your spending habits. You don’t want to be spending more than you have and you definitely want to be savings as much as you can.

That said, taking a $60 monthly budget down to $50 using 20% of your available effort is not a good use of your energy or your time.

Focus on what makes a difference, don’t get dragged into the detail of your budget to the exclusion of all else, and remember that the goal is not just to live within your means. The goal is to expand your enjoyment of life by removing the financial constraints that might be holding that back. We’re about living more, and your bank balance only matters insofar as it holds you back.

Too much focus on budgeting can lead to a scarcity mindset. This will hold you back if you let it govern your goal-setting or decision-making.