Mindsets are often what differentiates people, especially when it comes to a scarcity mindset. So many people do not obtain financial freedom because they do not have the right mindset, and that includes their money mindset. Everything starts with how you think about money, wealth, and success. It all comes down to mindset, outlook, and behavior, especially in times of financial crisis and you’re living paycheck to paycheck.
Are you stuck in a scarcity mindset? Here’s how to break free
Most personal finance advice has been centered around shame and scarcity, and while it has worked for some people, it can also do a lot of damage and discourage others. A scarcity mindset is related to our negativity bias because it is the belief that there aren’t enough resources to go around, money is a struggle to come by, paycheck to paycheck is all there is, and we have to scrimp to conserve and hoard what is ours.
5 Money mindsets that are holding you back from financial freedom
1. Leading with guilt and shame during a financial challenge.
Feeling and focusing on guilt and shame during a financial crisis will never serve you. We need to learn to embrace the suck. Life is cyclical; it has its ups and downs. And the “failure” or old version you’re hung up on is merely a correction. Whenever you have a financial challenge, maybe you’re living paycheck to paycheck and over drafting your account, ask for help – and ask for help from your financial institution.
2. Stop being price driven, be coverage driven.
When it comes to insurance, we tend to cut different types of coverage because we don’t understand it and would rather save a few extra dollars. But risk management is about your life. We never think that we need it until something bad happens, and by then, it’s too late. You need to understand what the coverage means and what happens if you don’t have it. Cutting out coverage in order to save money is only feeding into your scarcity mindset.
3. Loyalty can be a great thing, but in risk management, it can provide a disservice to you.
For instance, having two different institutions for your first and second mortgages. For your first mortgage, you pay the first institution. If you experience financial hardship and can’t pay the second, they can’t close on your home unless they convince your first institution to do so. And if you’ve been paying your first one, they won’t have any reason to agree to it.
4. Remove the money mindset that you want a tax refund.
When you’re begging for a tax refund, what you’re really doing is begging for a lower income tax bracket. The lower the taxes you pay, the lower income you make, facing the possibility of living paycheck to paycheck.
5. Remove the scarcity mindset of “there is only one tax season.”
The standard annual deadline for tax season is April 15. But there are actually 2 tax seasons: There is tax planning season and tax-paying season. Tax planning starts on January 1 and ends on December 31. You should already know the estimate of your taxes by the time the year ends. You need to plan. Being reactive instead of proactive does not serve you or your family.
Takeaway: Stop letting a scarcity mindset sabotage your financial freedom
Here’s the good news: you can switch up your money mindset! There are many ways to shift your mindset and feel more empowered in your financial planning and decision-making, breaking free from the stress of financial crisis and living paycheck to paycheck