If there’s an optimal morning routine for starting your day on a tranquil note, I’m guessing it doesn’t involve immediately opening your phone to peer blearily at ominous headlines about a looming recession. Yet this is how I start my days recently.
When I attempt to forget about the state of the world while grocery shopping for a friend’s dinner party, the reality of inflation stares back at me in the form of a $10 price tag for a tiny package of brie. (Unrelatedly—or maybe, very relatedly—the friend I’ve picked it up for has a lot more money than me).
Then, at the dinner party, someone mentions buying a house and my thoughts take on an increasingly panicked tone:
What if I can never afford a house?
Is everyone here more successful than me?
Should I sell everything I own and leave the country?
(Jk. But like…actually…should I??)
What brings me back to earth is recognizing that I’m falling into a common mental trap, fueled by ambient anxiety about the economy.
There’s a term for this type of fear-based thinking: “Scarcity mindset”
Originally introduced by Stephen Covey in his 1989 book The 7 Habits of Highly Effective People, the idea of a scarcity mindset refers to the tendency to think of resources as limited and to worry that there will never be enough. It could apply to money, time, jobs, or anything that might be considered finite.
The risk in fixating on what you lack–or could lack–is that it can drive you to make decisions that benefit you in the short-term but that limit your potential.
You might panic about rising grocery prices and max out a credit card to stockpile, rather than keeping that money in savings. Or you might pull money out of investment accounts when you see the market dropping, rather than waiting until the market recovers.
Research has shown that the stress of living in scarcity, and thus having a scarcity mindset, is so impactful that it worsens cognitive performance.
A 2017 study found that when lower-income people merely thought about an expensive car repair bill, they performed more poorly on unrelated tasks. The fact that struggling to get by makes it harder to think is a cruel and unfair reality for those on the less-moneyed end of our deeply unequal economy. When many people’s wages are not keeping pace with inflation, and the cost of housing in many places is (if you’ll pardon the bad pun) through the roof, concerns about resources are valid. Add to that the ongoing burden of student debt, especially with the pause on federal student loan payments set to expire at the end of August, and it’s not hard to see why many of us feel a little (or very) freaked out.
However, a scarcity of resources is not the same as a scarcity mindset.
The former is a practical problem requiring tactical solutions (on an individual level, acquiring more money, and on a societal level, creating stronger safety nets). The latter is a matter of emotions, and one that can also affect people like myself, who have relative financial security but still feel haunted by the possibility of falling behind.
So the next time I see foreboding headlines, feel the pinch of inflation, or find myself comparing myself to other people, I’ll try to keep in mind that the perception that there’s not enough to go around might be just that – a perception. And one that might not actually be helpful in practically addressing challenging realities.
*For more on avoiding scarcity mindset and managing the practical realities of market volatility and economic insecurity, tune into the latest episode of the “Money Confidential” podcast, featuring Money with Katie’s, Katie Gatti Tassin.