I've written about the importance of having a strong money mindset to get richer. But what I've also realized is having a scarcity mindset can also make you richer as well!
Could both mindsets lead to good fortune? Let's explore.
The Fire Alarm Goes Off
Our home's fire alarm started going off one morning, so I immediately started searching thru every room upstairs for the source. You see, once one alarm goes off, all of our other fire alarms start to go off too because they are all hard-wired into a system, like The Borg in Star Trek.
The fire alarms kept beeping and pausing at 15-second intervals. Given my wife was two floors down, I texted her to see if the source came from down there. I didn't get a response.
Given there could be a fire, I rushed downstairs in frustration to see what was going on. My wife had just come out of the shower and deduced the alarm right outside the bathroom was the culprit. She had left the bathroom door open to help release the steam in addition to leaving the exhaust fan on.
It seems the water vapor from her shower likely triggered the alarm. She believed this to be so because the fire alarm was also triggered a couple of months ago when she took a long shower with the bathroom door open.
I was pleased she had identified the cause for the fire alarm going off but also annoyed that she hadn't responded to my message. If there is ever a chance of a fire, I want an immediate response.
Then I realized something else. My scarcity mentality had caused me to be unpleasant with my wife.
Three Minute Showers: Scarcity Mindset
Both my grandfather and father served in the U.S. Army. Both told me about how they only had three minutes to shower or else they'd be reprimanded. As a result, I adopted their rule and seldom shower for longer than three minutes.
My wife doesn't follow the three-minute shower rule. Instead, she enjoys taking 15-20 minute showers. As a result, I blamed her lengthy shower time for the accumulation of water vapor that caused the fire alarm to go off.
If she had just taken a three-minute-or-less shower like I do, then the alarm would never have gone off! After calming down, I had a moment of clarity where I realized I was being a neurotic jerk.
First of all, I can easily take quick showers because I'm a guy with short hair. Second, I like to save money on our water bill, even if it's an insignificant amount. Finally, I have this irrational fear that showering too long will cause excessive wear and tear on the plumbing. I've had to deal with stressful plumbing problems in the past.
Hence, in my mind, the less water we use, the fewer plumbing problems, the fewer moldy walls, and the lower our bills. But the cost of thinking in this way hurts our relationship, which is way more important than money.
Extending Scarcity With Electricity, Food, And Time
Having a scarcity mindset creates unnecessary anxiety and stress. If you suffer from any type of chronic pain, like chronic back pain, one reason could be due to having a scarcity mindset.
Here are more examples of scarcity mentality that are probably unhealthy. If you grew up in a frugal household like I did, you might better empathize.
Electricity Scarcity
I find myself constantly turning off the lights in rooms, sometimes even if other people are in them! How presumptuous of me.
I do so because I want to save on electricity. But I also do so because I know each one of our recessed lights has a shelf life. Once those 10,000 hours are up, I'll have to buy a new custom bulb, get on a step ladder, and install it. What a pain.
But the incremental cost of electricity is low and the bulbs are also inexpensive. Therefore, I shouldn't worry about turning off unused lights. But my scarcity mentality prevents me from letting go.
Letting go of the little things reduces our anxiety and improves our agreeableness.
Related: Stop Frugality From Leading To Lifestyle Deflation
Food Scarcity
Having a food scarcity mindset may result in eating more than we should because we are uncertain whether we'll have enough food to eat in the future. As a result, we may gain more weight than is healthy.
I either always finish everything on my plate or take leftovers to go. I don't waste food because I grew up in countries in the 70s and 80s where food was not abundant for everyone, e.g. Zambia, Malaysia.
When I wasted food I felt like I was insulting the very people I had observed who seldom had enough to eat. Besides, my mom would scold me for not eating every out of my bowl.
Growing up in poor countries and subsequently visiting poor countries for business created my fear of ending up poor and hungry. Fear is my main motivator for achieving financial independence. If I didn't get good grades, stay late at work, or build a network of friends, I feared ending up broke, hungry, and alone.
But maybe wasting food on occasion is OK for safety and freshness now that we have kids? If I changed my mindset, I would be more OK with eating less at social events because I feel embarrassed to take food home in front of others.
Time Scarcity
In terms of time, my scarcity mindset goes into overdrive. Because one of my friends died at age 15, I have this concern about whether my life will also be prematurely truncated. As a result, I have a problem when it comes to squandering time.
For example, I got sick and tired of attending meetings about meeting while I worked in finance. The lack of efficiency drove me nuts because it wasted so much time. As a result, I decided to retire early in order to work at my own pace.
Feeling time scarcity made me lose a lot of potential career earnings for more freedom. In addition, feeling time scarcity doesn't let me relax for a long period of time, which is healthy to enable the mind to heal and recharge.
I envy the people who can go for a long walk and sit on a park bench and do nothing for hours. This inability to chill for a while leads to a more frenetic life. In turn, this puts more pressure on my wife to do more. If she doesn't match my pace, she feels guilty, which is no good.
But Scarcity Mentality Can Also Make You Rich
Although having a scarcity mentality can be debilitating, it can also make you richer than the average person. The first reason is that a scarcity mentality will force you to save more money.
I don't treat water, electricity, food, and time as infinite resources. As a result, I use less of them and save more money than the average person who doesn't have as great of a scarcity mentality.
With more savings, I can invest more money into risk assets that have the potential to increase in value over time. And that's exactly what I've done since 1995.
Appreciate Time More
Another way scarcity mentality can make you richer is by encouraging you to pack as much as possible into a certain amount of time. By thinking you don't have as much time as others, you tend to save more and work harder so that you can gain more freedom before you die.
This phenomenon is called Parkinson's Law. It is the idea that work expands to fill the time allotted for its completion. If you artificially limit time, you will get more done.
Think about a school project that counts for 80% of your grade. If you have nine months to complete the project, you won't appreciate the sense of urgency. You may waste a lot of time doing irrelevant things and not start on the project until the eighth month.
Now imagine if you only had one week to complete the project instead. You would go into overdrive immediately to get the project done on time. A scarcity mentality helps you do more things now to reduce feelings of regret in the future.
The Less You Have Of Something, The More You Appreciate It
Growing up with everything isn't a good idea. You would naturally take things for granted because you'd already have everything. I'd much rather have my first car be a beater than a Ferrari! This way, if I ever were to buy a Ferrari, I'd appreciate it so much more.
My wife and I constantly struggle with how much to give our children and how much to help our children complete difficult tasks.
I'm more on the tough love side where I want my kids to suffer enough in order to better appreciate their future successes. For example, I want them to do a lot of manual labor until they leave for college.
My wife, on the other hand, is kinder and more nurturing than me. As a result, our children go to her first whenever they hurt themselves. She also has less of a scarcity mentality than me despite growing up in a poorer household.
The Cost Of Having A Scarcity Mindset
The world is a cruel place. One day, we will no longer be around to protect our children from bullies, accidents, betrayals, and disappointments. Therefore, I think going the tough love route sets our children up for greater resiliency and success in the future.
There will come a time in everyone's life when they can only take three-minute showers. Sometimes, during those three minutes, there won't even be any hot water. When that time comes, having a scarcity mindset will help because you might not even notice the difference.
Just don't forget the cost of having a scarcity mindset.
If your scarcity mindset is making you miserable or unpleasant to be around, it may be best to make adjustments. You could save all the money in the world, but if you don't have healthy relationships, then what's the point?
Finding a balance is the key!
Related post: It's Hard To Frugal Your Way To Early Retirement
Reader Questions And Suggestions
Do you have a scarcity mindset? If so, why do you think you do? How has having a scarcity mindset or welfare mentality helped you grow as a person and get richer?
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I always get upset because my wife would leave 3 rooms and leave all the lights on. Then I’m following her around to turn them off. I think for my own sanity I should just ignore it as others have mentioned at the end of the day its minimal savings, but big savings in my stress levels. I also got the need to do this from my parents. Also grew up with a one income household and had to pay for everything I wanted myself. Even my own braces at 16 and college. I guess it gave me the indenpece to be on my own, but also a scarity mindset. So its hard for me to get out of it sometimes.
Funny how our upbringing shapes us no? Did your wife grow up poor, middle class or well off?
She grew up middle class… maybe it matters who pays the bills regarding on who is complaining about the lights. I pay the bills so I know how much things cost where she has no idea. Same with my Dad. So I think it could also be out of sight out of mind on the costs and using the utilties.
Every year I front load all my retirement accounts, I set contributions to 100% and live with no paycheck for the first 4 months of the year. I become much more aware of spending, I stop going out to eat, sell junk online for extra cash, forgo pointless purchases, and clean house financially. Then by the end of April everything is funded and I start getting 100% of my paycheck with no deductions. The rest of the year I ease up, still investing in things, but appreciating long showers, air conditioning set a little cooler than it should be, and cleaning services.
A good plan! I front load all my tax-advantegous accounts as well. But I don’t end up changing my spending habits after they are maxed out. The extra cash flow 90% – 100% goes to investing. So I’m trying to break that cycle now that I’m middle aged.
I grew up in a scarcity-minded family as a result of my parents who grew up in third-world, low income conditions. Everything they do is scarcity-based, however they immigrated here to the U.S., built two very successful businesses and amassed over $50M worth of wealth since coming here.
I’ve seen my dad eat rotten food, I’ve seen him spend an extra 15 minutes looking for the cheapest gas station, I’ve seen my mom fill buckets of water while waiting for the water heater to kick in, and I’ve seen her wear clothing full of patches because she doesn’t want to buy new clothes.
All this scarcity made it’s way to their kids and it honestly is miserable. I can’t buy anything for myself without feeling guilty and I’m constantly worrying that I’m not making enough money.
Abundance and scarcity are on opposite sides of a spectrum. They’re useful to have in different areas in life but like most things, balance is key and usually the healthiest place to be is somewhere in the middle.
Great article as always.
I grew up in a “poor country” as well and when I moved to the US my family had to go from being professionals back home to working fast food jobs for many years. We grew up being cautious of our spending for many years.
Some of my family members still take short showers and turn off all the lights if the room is not in use, even make sure the AC is on only when it’s needed to save on electricity.
After growing up in this lifestyle, I am very grateful I did. I don’t think it’s a bad mentality to have as long as you have that balance like you mentioned.
I will take hot showers as long as I need to but also be aware of not taking too long.
I don’t leave lights on because I have just think it is wasteful to leave the lights on if it’s not in use or needed.
I rather cook at home than eat out because it’s expensive, but I also would spend the money if it’s needed, for social reasons or trying out food that I wouldn’t make at home.
I also spend my money on things that allow me to grow my money and not just buy things for the fun of it.
I learned the hard way on how to balance yourself with being in scarcity and having the chance to say yes to yourself from time to time.
Because of this I just turned 34 and I own 3 properties. I don’t make millions but I am the only one in my circle of friends that owns real estate. I also do not have a lucrative job like most of your readers, I just spend where I think it’s needed and cut where it make sense.
No doubt scarcity of an item decreases waste. This is just human nature and I think you can see it in about anything.. if there is only a small bowl of popcorn to share people will end up eating the half popped kernels, but if there is tons of popcorn, half will go uneaten and a bunch will be on the floor…
However, I think when irrational fear overtakes things then the scarcity mentality is not good. For example stressing out about something which will end up saving only pennies.. the stress alone could cause a heart attack which could cost hundreds of thousands of dollars or end one’s life! I think it is about being rational and efficient.
I like the turning off lights example: A lot of us remember our dads walking around the house yelling at us to turn the lights off! I remember thinking to myself then that I hope I never turn into a dad who does that. Now that I am a dad I do think about it and turn off lights, but I never yell at the kids about it, after they leave I just walk around and flip off a few lights. Mostly because due to technology what used to be a 60Watt bulb is now only a 6Watt LED bulb, and we also have solar power which really reduces our bills. So to me the stress of yelling and worrying about lights is not worth the few dollars saved. In most things it ends up being technology which solves problems and increases efficiency. Using resources EFFICIENTLY whether they are scarce or abundant is the ultimate goal for me..
Maybe your dad’s yelling made a bigger impact than you think though! Because now, you probably always turn off the lights, and think about conservation across more things.
I won’t be yelling at my kids about turning off the lights. But I will be explaining to them that wasting unnecessary energy also wastes time bc making money often takes time.
I like how you finished – BALANCE IS KEY.
My father definitely has scarcity mindset.. even though he is now 80, he doesn’t spend a penny on entertainment for him or my mom, which makes their 40 year marriage really hard. He lives in a very good house, but drives a 1998 car. He doesn’t spend eating out and actually hates whenever someone important. invites him for a fancy restaurant.
I went to therapy a few years ago not to be like him, now that I’m 36 I can see how his mindset shaped mine. I agree with you that scarcity mindset can be helpful, and coming from a third world country I definitely had to save every penny on gas, electricity, water, etc. Now that I’m in a much better financial situation, I can let go of the small things and enjoy moments of happiness that I wouldn’t a few years ago, just because of the cost it.
We have to be aware that some situations will trigger specific feelings/emotions, like the shower situation you described with your wife. I recently had my own, when our recently adopted puppy had diarrhea and I ended up spending 400 bucks in the vet for xrays and whatnot – it drove me completely nuts, but in the end I realized I was being a jerk and got the puppy a pet insurance to avoid this from happening again.
Like my cousin once shared – he used to save every penny, like going out for lunch at work and not order anything to drink, drinking free (awful) coffee from the office instead of going to Starbucks with his peers, driving an old car and refueling at the cheapest station in town, etc. One time he was on vacation and on the last day of his trip someone stole his backpack when he was going to the airport. They stole some pretty valuable stuff, like a good camera, laptop, passport, etc. The money he had to spend because he got distracted for a minute drove him crazy – but he realized it – shit happens and it’s better to live and enjoy the small moments, save what you can without making it a burden, and be prepared because you’re gonna have to deal with some unforeseen events that will make you spend a large amount of money.
Again, balance is key.. trying to enjoy life and letting go of the small things.
Letting go of the small stuff. So important. Telling ourselves whether these things really matter much in the end. Usually they do not.
Thanks for sharing your stories. A journey of self discovery we all have based on so much childhood upbringing. It’s good for parents, to be aware of how we raise our own children as a result.
I prefer the abundance mindset rather than the scarcity one. To be clear, abundance does not mean waste or abuse of resources.
I also feel that people who have a scarcity mindset are harder to be around.
Do you think scarcity can be construed as being cheap?
Yes, people with the scarcity mindset can definitely be construed as cheap. However, I spend freely on my friends and always trying to get the bill and never let anybody else pay for me. Maybe that’s more cultural.
Consistency is important in anything, including saving. I find it weird that many people worry about only specific costs. For example, they care deeply about gasoline or electricity prices, but think nothing of buying a new car, big house or giant television. When I grew up in the Northeast, the heat was off during much of the winter and we had kerosene heaters (which was a bad thing, it turns out) around the house. When I was an adult, my mom stopped caring and started using the air conditioner in summer and had the heat high in the winter.
Yes, consistency in how we approach saving or anything is key. But it also changes with how we value different things.
I had more of this mindset growing up — because I had to. Mom and Dad had a small farm, which produced food for us — but never huge profits in cattle or crops. How little, I never realized until after Mom’s death, when I saw multiple loan papers…they had to borrow $70-100 every year, just to get through until harvest. And that was with Dad working full-time at the local tractor dealership, as well. (He earned his way to part-owner, but the dealership went bust…and he never recovered a cent of his investment.)
This meant that Mom sewed my clothes until I was a junior in high school, and I could pay for them myself. (Or I wore hand-me-downs.) It meant that our vacations were usually camping. And it meant that we all worked together during haying, selling at a roadside stand, etc. I never remember my parents saying I couldn’t have something — I just knew not to ask. And I worked all four years of high school — because that was the only way I could afford to attend college. (My dad, an 8th-grade dropout from South Dakota, valued education and wanted me to go on. My uncles and aunts weren’t so sure. After all, I was a GIRL. If I really wanted to, I could go for a year, and find a good husband. This attitude meant that very, very few of my female cousins have a college degree — and only one or two a M.A.)
But we ate GREAT fresh food on the farm. I read a lot. And my brother and I both grew up relishing our independence. If we needed something, we worked for it. Husband grew up a military brat, pretty much the same way. We’ve tried hard to teach our daughters a similar mindset.
The one problem: because I had so little $$, I tended to buy whatever was cheapest. Husband has gradually shown me that quality is just as important as price — I’m far better off buying boots that I can wear 20 years later (and I have a few pairs) than ones I have to discard after a season or two. Cars, appliances, camping gear — it applies to an incredible range of stuff. The key: wait until that quality item is on sale — or offered at the thrift shop. Good cashmere sweaters are still just as useful, even if someone else broke them in for a year or so.
So yes, I still believe in a frugality mindset. But there are things I’ll pay a little more for, based on experience. It also means that I’m willing to wait and research, especially for things like vacations.
Sounds like an idyllic upbringing I would enjoy!
Yes, as I’ve gotten older, I spend more on quality and want less stuff.
“My wife and I constantly struggle with how much to give our children and how much to help our children complete difficult tasks.
I’m more on the tough love side where I want my kids to suffer enough in order to better appreciate their future successes. For example, I want them to do a lot of manual labor until they leave for college.
My wife, on the other hand, is kinder and more nurturing than me. As a result, our children go to her first whenever they hurt themselves. She also has less of a scarcity mentality than me despite growing up in a poorer household.”
It’s the same thing in my household. My upbringing didn’t quite emphasize an appreciation for tough love, yet I err on that side because I’m always trying to prevent any sense of entitlement in my children. I don’t want them to grow up with an entitled attitude. I’m aware though that my perspective could be very myopic, so I’m glad that my wife balances it out by being more nurturing.
Tough times create easy times. Easy times create tough times.
I’d rather be used to tough times so that most times will feel easier.
And tough times isn’t really tough in comparison to the really tough times we see in war zones, poverty zones, and more.
So I’m not sure how difficult we can really make things for our kids.
I grew up poor right here in the USA. My parents only had a $200 SEARS credit card. They saved, bought used, use layaway, repaired or did without items. They worked low pay jobs. This was many years ago. Because of this history, I definitely have a scarcity mindset. Now, when I buy anything I consider the cost, how badly I need it and the likelihood it will last. This mindset has made me grateful for what I have accumulated. I have learned there are only two currencies in life 1) time and 2) money. We use our time working which can’t be replaced to earn money to buy things. Because I don’t know how much time I have, I value my time over buying things. You can have healthy relationships if you value the irreplaceable time you spend with the people you care about.
With respect to children and mindset, I believe Robbie William’s song Love My Life sums it up perfectly. It was never a hit in the US but was quite popular in Europe. Search for it and listen to the lyrics – you will understand why I recommend it
I’m pretty good at saving electricity by doing simple things like always turning lights off when I leave a room, keeping lights off during daylight, and using appliances during off peak hours. Water is a bit harder because I also like a good relaxing shower. I do a lot of meditating and brainstorming in the shower. It’s very peaceful. But I hear you on feeling anxious about overusing plumbing. Water issues are so stressful as a homeowner.
Sometimes I also have trouble getting rid of things around the house b/c of the scarcity mindset of “what if I need this in the future” and I don’t want to have to spend money to buy it again. I remember reading an article about how some people who went super minimalist had this problem. They got rid off too much stuff and ended up having to spend more money repurchasing things they gave away.
Ultimately, I agree that balance is key to a lot of things – happiness, wealth, lower stress