How to Break Free from the Scarcity Mentality and Build Financial Confidence – MoneySense

An emotional, fear-based response, a financial scarcity mindset, often sends people down a rabbit hole of overthinking, leaving them with the belief that they will never have enough money to live comfortably and that they will always be stuck in some form of financial turmoil. This mentality can harm a person’s financial well-being and quality of life in the long term, experts say.

Why your money mindset might be holding you back

“Mindset plays a very big role in people sticking to the financial situation they are in,” says Jeri Bittorf, financial wellness coordinator at Resolve Counseling Services Canada. Bittorf said that in her work she regularly encounters clients who have a scarcity mentality. Sometimes people remain afraid that they will never be able to earn more or reduce their expenses, and that their situation will never get better.

That emotional response usually stems from some kind of trauma around money, says Kalee Boisvert, a financial advisor at Raymond James Ltd. It can stem from childhood experiences, such as growing up in poverty, but it can also arise later in life from a perceived lack of resources, or from hearing stories of people around you being unable to pay their rent or buy groceries, Boisvert said.

“Sometimes this shortage of money comes from stories that people have heard and almost adopted as their own, or from the fear of it,” she said.

Boisvert spots red flags of a scarcity mentality among her clients when she hears comments like, “I’m terrible with money; I’m afraid I’ll never be able to retire; I should do a better job or do more.” That’s “the money scarcity mentality working in the background,” she said.

Boisvert said this mindset can lead to issues with self-confidence and self-esteem, which can ultimately lead to real-life decisions about jobs, partners you choose or the home you choose to live in.

Understanding your money history is the key to changing your financial future

Bittorf said it’s important to get to the root of this mentality, and that journaling plays an important role in unraveling patterns and beliefs around money. “I start them at the earliest ages of our memory, about five years old,” she said.

Bittorf uses direct questions about financial security growing up, such as whether their parents talked about money, whether they had financial fights at home, and whether they fit in financially at school. “I want them to think about all these things because they will influence the decisions you make now, even if you don’t realize it,” she said.

Sometimes Bittorf encourages her clients to create vision boards about what they are passionate about and what their future self looks like with an abundance mindset. That creates excitement to continue those plans. “If they were to get out of this life situation, what are the goals?” she asked customers.

Building abundance through conscious money habits

While unraveling financial patterns is fundamental, Bittorf says it comes down to real steps, like setting up a budget, tracking money, and breaking down broader financial goals into smaller, actionable steps. This also means that you have to make some difficult decisions, such as cutting back where necessary or changing jobs. “You know you’re strong enough to do that. And there’s a lot of support,” Bittorf said.

For Boisvert, breaking the scarcity mentality has been a conscious effort on her own personal journey. If she hadn’t broken away from this mentality growing up, she thinks her response to money would have been to save and put everything away instead of tailoring her spending to what she really cares about.

“Knowing that I grew up with a scarcity mentality that I had to work very hard to overcome, when I talk to (my daughter) about money, I just say that money is a tool and it helps us achieve things,” Boisvert said.

For those stuck in the cycle, she suggested separating fact from fiction and practicing gratitude. “When you feel this fear and anxiety, and you look at the numbers and you have the money to pay the bills and the rent, you have to remind yourself, ‘Well, right now I’m safe. Is this resurfacing an old story for me?'” Boisvert said.

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