How to Balance 2 Common (and Competing) Money Mindsets

Are you a glass-half-full or half-empty kind of person? When it comes to your money, the answer matters.

Your mindset toward your personal finances can shape the decisions you make in how you spend, save and budget. Understanding whether you are more inclined to an outlook framed by abundance or scarcity - and how to strike a balance between the two - is instrumental in creating the financial life you most desire.

"A healthy relationship with money means you feel great attracting it, you feel great having it and you enjoy spending it," says psychoanalyst Claudia Luiz. "But you don't waste it, flaunt it or destroy it."

In other words, a good money relationship is one in which you aren't sabotaging your financial goals, either consciously or subconsciously. You're comfortable with the money you have, which extends to how you spend it, save it or share it with others.

Abundance vs. scarcity: What's the difference?

Imagine you're having dinner with a group of 10 people. The host brings out a pie for dessert. On seeing the pie, you could have one of two thoughts: Great, I love pie! Let's dig in. Or, One pie for all these people? There won't be enough for me.

That's a simple way to compare an abundance versus scarcity mindset, but this same attitude can prevail when it comes to your finances. "A scarcity mindset can happen when you think that there's a set amount of money to be made," says Ashley, a financial coach. With a scarcity mindset, you may think, "If someone else has more, then you have less," she explains. Here's a closer look at what distinguishes the two.

Someone with a scarcity mindset:

  • Believes that there's never enough money. Or that there is, but they're not deserving of it.
  • Desires having more money, but feels frustrated because they don't know how to attract or create it.
  • May lack confidence in making decisions about saving or spending.

Someone with an abundance mindset:

  • Believes they have the exact amount of money they need.
  • Feels they have the ability to create the money they need.
  • Is confident in the decisions and choices they make with their money.

You don't need to consciously identify with an abundance or scarcity mindset to live it. In fact, you may not even realize how your thinking affects the way you approach money. However, understanding your money mindset is important since your thoughts can influence your actions with money, which in turn shapes your bigger financial picture.

You can become more aware of your financial mindset by paying attention to the patterns that happen with saving and spending. From there, you can begin working toward a balance between abundance and scarcity.


Where your money mindset comes from

How you think about money is formed early, taking root in childhood, Ashley says. "It comes from what our parents taught us, either by telling or by seeing how they lived," she says.

Those childhood experiences and the money story they create, leave a positive or negative impression. That can influence your financial mindset and shape your spending profile as an adult.

Growing up in a household where money was always tight, for example, could instill the belief that you have to hold on to any money that comes your way. You might be reluctant to spend, to the point that you're not enjoying the kind of lifestyle you truly want.

Someone who develops an abundance mindset early on sees the possibilities of money, rather than its limitations. They may be comfortable spending without monitoring every dime that moves in or out of their bank accounts.

As adults, the kind of people you surround yourself with can further influence your mindset also. "We're most like the five people we're around the most," Ashley posits. So whether your core relationships are primarily with people who think abundantly or those who tend to lean toward scarcity has an impact.

The goal should be to nurture relationships that have positive impacts on many aspects of your life, including your money mindset. That doesn't mean cutting out people who practice different money habits, however. But if you have a shopaholic friend who always asks you to tag along, you might suggest another activity that doesn't require spending money.

Finding a balance between abundance and scarcity

If you're at either end of the abundance vs. scarcity spectrum, you might be wondering whether it's possible to change your habits entirely or find a happy medium. Noah Riggs, a marketing coordinator, is an example of how you can adjust your money mindset.

"Growing up in a poor family, my initial money mindset for most of my life was very scarce," Riggs says. "I believed your financial wellness was almost completely determined by the background you come from."

However, his mindset began to change when he launched his own career. He'd always believed that you should spend whatever money you had, since he believed that changing your financial circumstances was beyond your control. Then he began working alongside people who were building businesses and taking control of their finances. That led to him to rethink his ability to save money as well.

Riggs says it's crucial to find the sweet spot between scarcity and abundance to become financially healthy.

"If your mindset becomes too abundant, you may eventually start overspending as you believe there's always more money to be made," he says. He learned this firsthand after his spending climbed temporarily when he began earning his first real paychecks.

Alternately, he says, if a scarcity attitude motivates you, you might be reluctant to try new things or invest in yourself to open up new opportunities to earn or save more. In between the two lies the middle ground, where you're saving money and investing it while also spending it in moderation.

For example, you might be an adherent of the 50-30-20 budgeting method, where you spend 50% of your income on necessary expenses, save 20% and spend the remaining 30% on "fun." Essentially, you have multiple buckets to put money into and you're making sure each of them is filled.

Making a lasting shift in mindset

Luiz says adopting a healthy financial mindset begins with addressing your feelings about money and understanding why you have them. "It's always scary to get out of a scarcity mindset, which may feel familiar and therefore comfortable," she says.

From there, you can begin implementing actionable steps to make the shift, such as:

  • Commit to making a regular budget.
  • Keep track of your expenses each month.
  • Save money from your paycheck automatically.
  • Create meaningful financial goals that are realistic and achievable.

Riggs says you can reinforce balance between the two mindsets by spending money on things that are important to your happiness or personal and professional growth - of course, in moderation with your budget.

Conversely, avoid spending on things that don't support personal and professional growth and happiness. "This allows you to keep a grateful, abundant mindset, while also not getting carried away on things that don't matter," Riggs says.

The content reflects the view of the author of the article and does not necessarily reflect the views of Citi or its employees, and we do not guarantee the accuracy or completeness of the information presented in the article.

It's always scary to get out of a scarcity mindset, which may feel familiar and therefore comfortable.

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