Scarcity
I have written previously about the importance of mindset in investing, sports, and life in general. I firmly believe that it is the single most important factor that determines a person's successes or failures. The right mindset in a tough situation can completely change the outcome, just as the wrong mindset in an ideal situation can ruin it. I've been thinking a lot lately about the question, "what is the ideal mindset for success?"
While thinking about ways to answer that question, one thing I kept coming back to was a mindset that I knew was definitely NOT the answer. Maybe one day my thoughts on a more affirmative answer will come to me, but for now I want to focus on something that we all have hardwired into our brains that takes some time to overcome: scarcity mindset.
This is essentially a mindset that tells us that something is scarce, so sometimes despite all logic and reason, we feel the need to save, hoard, or load up on it because we're not confident in our ability to obtain it again. This is an instinct that is meant to keep us safe and alive, but in modern society tends to be misguided and does more harm than good. If you've ever watched the TV show Hoarders, this is a common storyline. The subject of the show may have grown up poor and without much more than having their basic needs fulfilled, so later in life, they overcompensate and feel the need to save everything they possibly can. Unfortunately, they fail to see later in life how their insatiable habit of buying things just to save them is contributing to the cycle of poverty that they just can't seem to escape. Oftentimes blame is assigned to some exterior circumstance out of their control because they're not willing to accept responsibility and examine the true cause that lies within.
Scarcity mindset is a defensive and fearful way to approach anything, and causes us to be cautious and to always take the safe route. This results in a focus on preservation of what we already have instead of looking towards growth. Of course, preservation does have its place in anything, however I believe we put way too much focus on it over growth.
This often manifests with money as well. Think about it, why do we feel the urge to save money? They're printing it (digitally creating it actually) faster than it has ever been printed before in history. Why on Earth would you want to save something that is created on such a massive scale? Would you stockpile toilet paper (don't get me started), toothpicks, or bottlecaps? No one in their right mind would obsess over acquiring these things at scale. Yet we do it with money - why? There are two reasons why: 1)They immediately equate the amount of money they have sitting there to the amount of time and effort it took them to acquire it, and the thought of it being put at risk is too much to bear, and 2) they believe they lack either the willpower, desire, or ability to acquire it again. So those with scarcity mindset only focus on ways to increase their salary so that they can add to their stockpile and one day they'll have "enough."
What most people fail to see is that they are continually trading time (a finite, irreplaceable, invaluable resource mind you) for money, which there is more of floating around out there than there ever has been before. Anybody that has ever run a business knows that a salaried employee is salaried because it's a bargain at best to the bottom line. At worst, the employee is getting completely ripped off and isn't compensated in line with the value they provide. To top it off, actively earned income receives the worst tax treatment possible.
While trading time for money is pretty much unavoidable in the beginning, those who become wealthy don't play that game for long. They use the active income as a capital generating machine that allows them to buy assets that appreciate in value and provide them with passive income. Eventually the game becomes moving money in and out of assets in order to generate a return. Eventually, the active income is no longer necessary because the passive income now supports the lifestyle.
Scarcity mindset tells us that we need to get the higher paying job because it's the safe, guaranteed route. The retirement plan and benefits package is too tantalizing to turn down. Unfortunately it's often required to take out large loans in order to one day get that job. Without a disciplined approach to how that debt will eventually be repaid, life starts to happen and we lose sight of what the whole point of the high paying job was in the first place. Paying off that debt takes a back seat to everything else, and despite making more money than ever before, no money is being invested in cash-flowing or appreciating assets. Next thing you know, 15 years have gone by and you're no closer to the goal than you were before.
Scarcity mindset told you to save money for the sake of saving it because it made you feel good knowing it was there. What it didn't tell you was how much of our most precious resource - time - it would eat up. Doesn't seem very safe now does it?
Get out of your comfort zone and find a way to grow and fill your life with abundance.
“When you stop growing you start dying.”
