If you’re like most people, you’ve never really learned how money works. The only thing you ever knew about money was that it’s used to put a roof over your head and food on the table.
You save as much money as you can and live paycheck to paycheck. You don’t turn any profit and every month you break even. You talk yourself out of replacing outdated products no matter how slow or inefficient they get. As bad as you want to go to that concert for your favorite artist, you talk yourself out of it because you need to save every penny you make. You skip meals when money is tight because you can’t afford to eat. You grew up with parents who had a scarcity mindset and it has rubbed off on you. Financial anxiety is a common thing for you.
Any of this sound familiar? If any of this resonates with you, it’s because you’ve developed a scarcity mindset. You’re scared to get out of your financial comfort zone because you fear losing money.
What is a scarcity mindset? It’s the thought that you will never have enough. There’s never enough money, food, or time. No one was born with a scarcity mindset. It was taught to us by relatives and society.
At the end of the day, it’s just that — a mindset. Just like you change your mind on simple things, you can change your mindset from moving in fear to moving in confidence.
Financial Insecurity Has Caused You To Settle
Most of us were taught that you should save your money for a rainy day — but that’s it. Rainy days will come, but what if the rain gets so bad that you don’t have enough to cover the expenses.
It happens to many people every day. Most people are one incident away from having their entire savings being wiped out. Because of this uncertainty, it causes people to feel like they have to save every penny and can’t afford to take any chances.
The paycheck to paycheck lifestyle is something that causes the most stress in people’s lives. The constant burden of living costs with inadequate income causes people to feel overwhelmed and defeated. Eventually, you give up hope of getting ahead and start to focus on getting by.
A scarcity mindset also causes you to shrink yourself down and talk yourself into settling for less than what you really want. The vacation of your dreams stays a dream. The only time you’ll experience the house of your dreams is during an open house. You start using self-deprecating speech more commonly. In short, life has beaten you down.
You know that you’re not comfortable “just getting by” or “making just enough” to cover the bills. You want more and you deserve more. There comes a point in life where life starts to beat you down and you decide you’re not going to take it anymore. Being broke gets old and you become frustrated.
So what do you do? You fight back. Life is a bully. You can either let it push you around or show it you’re not the one to be messed with.
Analyze your life and ask yourself, “Am I living or just existing?” If you’re settling, you’re existing and you’re not living as you should. Just because you’re failing now doesn’t mean you can’t change the script. I can’t give you the battery in your back to change your mentality — it starts from within. You have to want to change your life and your financial outlook.
Throughout my life, I’ve heard money doesn’t grow on trees. Even back then I knew that money came from plants so if I wanted to make money I had to start sowing seeds. Growing up I would watch MSNBC and look at stocks scroll across the screen. I didn’t know what any of it meant, but I was hooked. In my teens, I never considered myself broke. Instead, I would say that I am “pre-wealthy.” My confidence and belief helps me on my path to financial independence.
You don’t need to be wealthy to start thinking like a wealthy person. Every great invention or achievement started with someone who believed in change. Life is a challenge that tests our character and resiliency. Do you believe you have the power to change the direction of your life? If so, then you’re halfway there. When you develop the right mindset, you can begin taking action.
You’ve Never Learned How Money Works
The main excuse I hear when it comes to learning about money is “Well no one taught me that.”
Guess what? Nobody taught me either.
Money isn’t taught in schools and some of our parents didn’t talk about it. That may be because you can’t teach what you don’t know. Some even see discussing money as taboo. The only time we hear about it is when people mention the lack of it or how much we wish we had.
It’s not just financial insecurity. Most people live paycheck to paycheck because they’re financially illiterate. They don’t know how to budget and before their income gets a chance to settle in the bank, it’s spent on things that don’t provide any returns. Being financially illiterate opens the door for bad money management — which leads to an increase in personal debt.
The good news is it’s not the end of the world. You can reverse the damage and start a healthy relationship with money. How does one begin to reverse the damage?
There are many ways to learn how to become better at finances. We have the internet, books, magazines, courses, and classes that can help you turn a new leaf.
While it’s not your fault for not being taught, it becomes your fault once you know better and don’t take the initiative to do better. You have the ability to learn anything you want to learn. If you can take the time to learn lyrics to your favorite song or see what a celebrity is up to, you can take some time to learn how to improve your finances. You don’t have to cram your brain with hours of information at once — don’t wreck yourself. The best approach is starting small. Work on an immediate need and branch out from there.
Are you in debt? Learn strategic ways to pay it off without draining your bank account. Are you bad at budgeting? Learn ways to limit expenses and cut out things that put you in the red month after month. Bad credit? Learn how to pay your balance in full and build a healthy history.
Don’t be afraid to ask questions. There are plenty of people who are glad to help you get on a path to being financially healthy. Once you improve your finances, you’ll start to feel better and do better in other areas of life.
You’re Financially Defensive, But Never Financially Offensive.
Is this a learned habit from your parents? Is this from life’s circumstances? Are you too scared to invest? Do you find it hard to spend money because you’re afraid you won’t make more? All of these are reasons why people are financially defensive and lack a financial offense.
Financial defense is finding ways to spend less money and the financial offense is finding ways to make more money. When you’re always on the defense, you have more going out than coming in and that triggers a scarcity mindset. You start to believe you can’t afford to take risks or treat yourself to things because money is tight. While it may be true, money can’t come to you if you always keep the door closed.
Let’s face it; the bills won’t stop coming no matter how much you hate seeing them. Instead of running from the issues, accept them as a part of life and learn how to not see them as something to dread. It’s good to save money, but it’s better to save with a plan.
Saving isn’t enough — we need to do more. We need to go on the offense with our money.
The first step in the offense is learning how to let go. Stop hoarding your money and get comfortable with spending. An example of hoarding would be making money and not spending out of it for fear of losing it. You don’t want to be the person who made millions over their lifetime and die before you get a chance to enjoy it.
Let’s say you made $60,000 in a calendar year, but during the year you lost $2,000 or had buyers regret. Since then you’ve made the money back, but you can’t take your mind off of what you could’ve done with that $2,000. The scarcity mindset made you think money isn’t supposed to leave your pocket when in reality, it’s supposed to circulate. This is why learning to let go is important.
There’s a saying that goes, “It takes money to make money.” Well, here’s another one, “You can’t receive unless you’re ready to give.” You’ll have to break free from the poverty mindset if you want more out of life. In time, you’ll realize money comes and goes and it’s not meant to collect dust in a bank account. The banks shouldn’t be the only one putting your money to use. You should be in on the action, also.
Going on the offense means you’re accepting you’re going to take losses — it comes with the territory. You have to get used to taking losses to be able to learn from them. You can’t grow without experience. It may be scary, but the scariest loss of all is not trying in the first place.
If you are living on one source of income, unless you are making great money it’s not going to be enough. To get on the offense financially, you’ll need to think of more ways to generate income. Side hustles are pretty popular in the gig economy. You can also learn to invest passively or actively to add more streams of income. Everyone is different and there are many ways to make money that suit your situation. The bottom line is there is money to be made out here and it’s available for anyone who is willing to go after it.
Planning is the most important step because it involves taking your current situation into perspective. If you have a family to care for, you won’t have the same liberties as a college student. There are people from all walks of life that have overcome financial burdens and changed their financial outlook. This is great because you can find someone you can relate to and gain the confidence to take the leap.
Above All, Start Learning To Live
The way you think about life is how it will come to you. Even though this applies to finances, you can apply the abundance mindset to other areas of your life. The goal is to be better than you were the previous day — every day.
It’s going to take some work to adjust to a new mindset. Being broke has a lasting impact on people and it’s often hard to shake. I remember reading a story about Eminem asking his manager if he was rich enough to buy a Rolex. At this point in his career, he could have bought himself a Rolex many times over. When you aren’t used to making money it can take a while before you realize it’s okay to breathe and start living how you want.
When you think differently, you do differently. If you have kids, do it for them. If you don’t, do it for yourself or whomever. Whatever motivates you, use it to make a change for the better.
Most of all, start as soon as possible. Your future self will thank you.