Are our mindsets predetermined, or can we grow, adapt, and change?
Your mindset matters greatly. You have the power to develop an abundance mindset and reach your potential and be happy.
How We Think Can Impact Us
How we think influences how we see the world around us and can significantly impact our happiness, success, and prosperity. A scarcity mindset has a more limited and pessimistic view of the world, while an abundance mindset can better enable you to reach your potential. We dive into these opposing mentalities and discuss how you can shift your predominant paradigm for the better.
Carol Dweck, a Stanford psychologist, has done significant research on motivation and mindsets over the past forty years, particularly fixed and growth mindsets. In Mindset, Dweck writes, “Mindsets are just beliefs. They’re powerful beliefs, but they’re something in your mind, and you can change your mind.”
Our mindsets or attitudes stem from our experience and upbringing, influencing our behavior. These mentalities may be enduring, but I believe we can change if we have the motivation and persistence to work hard.
A Scarcity Mindset
Stephen Covey, author of “7 Habits of Highly Effective People,” coined the terms scarcity and abundance mindsets. He wrote, “The key to valuing differences is to realize that all people see the world, not as it is, but as they are.”
On Scarcity Mindset, Covey said, “Most people are deeply scripted in what I call the scarcity mentality. They see life as having only so much, as though there is only pie out there. And if someone were to get a big piece of the pie, it would be less for everybody else. “
In this glass-half-empty prism, we see a world competing for limited resources to fulfill our basic needs. The scarcity mentality defines much of our society. When those who are struggling for food and shelter, unfulfilled needs can center their thoughts toward negative feelings of low self-esteem.
For many, scarcity is a harsh reality and difficult to change. Juggling your household’s ability to pay rent, late bills, and loans can deplete your energy and willpower. When you have less money or are poverty-stricken, it impacts your cognitive resources more.
On A Societal Level
I have written about Universal Basic Income as a possible way to reduce economic inequality. It is far more challenging to institute societal change when scarcity for many is about physical needs such as food, shelter, and clothing for those impoverished.
It would be unreasonable to say that a whole community can shift over to an abundance mindset and solve their problems. The government must resolve these needs, and people can pledge their votes to make those changes.
An Individual Level
A scarcity mindset is not limited to those who do not have enough but refers to individuals who do not need government intervention. Individuals may require thinking about trade-offs when making decisions. You may need to consider spending time or money to take your car for an essential repair to get to work now rather than going away for the weekend. If your household has several cars, your trade-off is less urgent.
Growing up in a modest home may perpetuate those feelings of making choices throughout your life, even if you have the resources. It is hard to discard deep-rooted beliefs. Seeing the world as a zero-sum game is commonly felt by those with scarcity mentalities where one person’s gain is another person’s loss.
A Story To Share
I worked with someone who grew up in a “well-to-do” home and was very successful in his career, earning seven figures annually. This individual didn’t have money worries, that I could tell. He had a frugal mantra about time and money. He actively saved and was savvy about investing despite stressing about money.
Without a doubt, he likely had a net worth well into the seven figures. Yet, he always felt he was about to lose his job, lived in a studio apartment, and feared that he would eventually be homeless. His scarcity mentality dominated his life, preventing him from potential happiness and feeling financially secure. This person is not as unique as you may think.
The Grass Is Always Greener Somewhere Else
Those who have a scarcity mentality may feel the grass is always greener somewhere and may rob us of our ability to succeed. Individuals who tend toward scarcity are more often fearful, anxious, and stressed. It is difficult for them to see the good in the world, and they may suffer from tunnel vision, focusing on what is wrong rather than right.
Many worry about competition for a promotion in their workplace, and they lack self-esteem. People believe they will never have what they deserve and often portray themselves as victims.
A mindset is an attitude that can help or hinder your ability to make financial decisions, manage stress and social situations, and reach your goals. No one is exempt from challenges, but you can accept and deal with them. If you put up barriers, you will fixate on your losses rather than correct your mistakes. That is a recipe for sabotaging your finances. There is no shortage of people who are worse off than you are.
Adopting An Abundance Mindset
In his book, Stephen Covey gave us a description of this mindset:
“The Abundant Mentality, on the hand [from Scarcity Mentality], flows out from a deeper inner sense of personal worth and security. It is the paradigm that there is plenty out there and enough to spare for everyone. It results in sharing of prestige, of recognition, of profits, of decision-making. It opens the possibilities, options, alternatives, and creativity.”
In contrast to having a scarcity mentality, the abundance mindset envisions the world as having enough resources to go around. This mentality is the antithesis of the scarcity mindset in virtually every regard. Simultaneously, the scarcity mindset views the world as a glass-half-empty prism. Positivity reigns for those with a predominant abundance mindset. Win-win situations for the abundance mindset replace the zero-sum game, which has someone as a loser.
Their perspective sees limitless opportunities, whether in business or life. Such a mindset is desirable for making progress toward prosperity. A recent study found that natural-born optimistic participants lived 5.4% longer than non-optimistic participants, equating to four more years of life.
1. Accentuate The Positives
You can recognize people bursting with a positive nature by how they go about their lives at home and work. Reflecting on what they have provides them with the feeling their life is abundant. They have confidence in their skills but will learn what they need to complete the task. They have a “can-do” mentality and won’t forget responsibilities.
You want this person to be on your team because they will take action and meet challenges.
2. How To Handle Defeat
When someone makes mistakes, it is not an ultimatum in life. For one with an abundance mentality, it is a way to learn how to do better. Losing a job may become an opportunity in the future. Few successful people have not lost a job. How you handle such a loss defines you as a person.
I have never forgotten a comment the head of HR told a group of us just out of college starting a job at an elite cut-throat investment banking firm. After saying that we would have many challenges, she said, “Keep in mind that the average person will lose their job at least three times in this industry, meaning you and the company took some risks.”
How you react to that event will make you a winner or a loser. Many became fearful. Others were motivated by the challenge.
3. Embrace Change
Change is inevitable and can be exhilarating. Sometimes it can be hard to make a significant life change, leave a job, or recognize a bad habit. It is always easier to accept the difference when instigating this for the better. When you can’t control the change, uncertainties can arise.
As a result of the pandemic, we had little choice but to undertake massive actions–quarantining, social distancing– for health and safety. No one likes changes out of your control, but adapting to these measures was unquestionably the way to go.
Determining what is in your control makes it easier to embrace any change. As the serenity prayer encourages you to accept the things you cannot change, the courage to change the things you can, and the wisdom to know the difference.
4. Plenty of Opportunities
The half-full glass that gears the abundance mindset readily sees opportunities worth exploring to develop ideas and growth. On the other hand, the scarcity mentality envisions limitations or roadblocks. They won’t want to spend the energy on something that won’t be feasible. They hang on to their misery but see others who succeed with resentment.
Challenges and failures for the abundance mentality are merely an integral part of the learning process, and will use the feedback as a stepping stone.
5. Don’t Compare Yourself To Others
Marketers urge us to compare ourselves to others when they show us the comforts we should be buying: cars, homes, appliances, and clothes. Merchants prosper when those with scarcity mindsets feel they don’t have enough. If we cannot afford it, we may borrow more heavily, putting us in a negative financial situation. Social media beckons us to look at others at their best and measure up.
It is natural to gauge your performance by comparing yourself to others. However, there is a downside to doing that to ourselves. It leads to overspending to keep up with your friends and neighbors.
Resist the temptation to compete with what your peers, friends, family, or others have. It wastes your time, money, and energy as you won’t know all the facts. Fulfill what you want out of your life. We are on different paths to our own goals.
6. Achieving Goals With Confidence
When setting your goals, it is more likely that you can envision what your success will look like in the future.
In his research on Olympic athletes, Dr. Srini Pillay found mental training as essential as physical training. He found that “visualization” and the ability to picture yourself crossing the finish line can help you achieve your goals. We stimulate the same brain regions when we visualize an action as when we perform it.
7. Achieving Financial Security
Having confidence can propel you to take steps to create a reasonable plan to achieve financial security. When you are in your 20s or 30s, you are likely quite a distance from financial security.
However, organize your finances to spend less than you earn so you can allocate savings through automating deposits to various accounts from your paycheck. Specific amounts can go into your emergency fund, retirement, and investment accounts so you can visualize your money working for you.
8. Be Open To Varying Viewpoints
Be open and respectful in your conversations with others. Learn from others and share what you know. Visit your friends and make new acquaintances, and have positive experiences. During the pandemic, we have been cooped up, isolated from people, and have not socialized. At the same time, divisive opinions may have inhibited us from being more open. We don’t all have to agree with each other, but we can learn and appreciate one another.
9. Expressing Gratitude
When you appreciate what you have, it usually comes with recognizing that others played a role in your success. Expressing your gratitude to them makes you feel as good as the recipient. Feeling grateful has many benefits without any cost factors. It can reduce negative emotions, increase motivation, promotes generosity, and be linked to good health and happiness.
Oprah says this best, “Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never have enough.”
10. Giving To Others
“No one has ever become poor by giving.”
People with an abundance mindset are predisposed to engagement and strong relationships. They see life as a win-win situation, where both sides gain, rather than a zero-sum game which is more reflective of the scarcity mindset. Giving produces positive feelings when we enhance the lives of others. By providing for others, you are giving back for having abundance in your lives.
It doesn’t have to mean giving money. You can give away material things, invest your time through volunteering, and offer a free service or talent, which can be very rewarding.
Adopting An Abundance Mindset Is Advantageous
There are significant differences between having a scarcity or abundance mindset. Having an abundance mindset allows you greater satisfaction without the barriers that will slow your growth. You will better leverage opportunities that can reward you and move you toward success.
Comparing the two mindsets, you can see the abundance mindset is a reshaping of your mentality that can help you choose to have more win-win situations. When you feel better about yourself, making financial decisions may be easier, and your road toward wealth is more certain.
This article first appeared and syndicated by The Cents of Money.
With a passion for investing and personal finance, I began The Cents of Money to help and teach others. My experience as an equity analyst, professor, and mom provide me with unique insights about money and wealth creation and a desire to share with you.