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We’ve all seen it in grocery stores in 2020. The shelves, which were stocked with toilet paper and hand soap, were empty. We hid in our homes, deep cleaning all surfaces, and sometimes we challenged COVID-19 threat Catch Last remaining bottle of hand sanitizer in a 50-mile radius. We felt out of control, so we controlled what we could: the contents of our kitchens and bathroom cabinets.
Today, this fear of scarcity plays out differently, because Rising prices, a volatile stock market and whispers of a looming recession. We simply rotated one set of fears into another, continuing to assume that all our resources are scarce, whether that is true of us or not.
If the current situation makes you avoid any long-term planning or are afraid to spend any money, even on things you need, then you have a scarcity mentality. This means that you see your resources – such as money, food, and job opportunities – as limited. And when you’re interested in getting into these things, it’s only natural that you’ll want to stick with whatever you can.
Sometimes, that motivation comes in handy. “It helped humans survive back in the day when we faced existential threats from nature,” says Courtney Cardin, co-founder of Aura Finance, a private beta financial and investment platform. “Everyone here had an ancestor who benefited from a scarcity mentality.”
But when a scarcity mentality isn’t rooted in a genuine need to avoid hungry lions or keep enough food for a season without refrigeration, it may work against you, persuading you to make financial choices that are not actually in your best interests.
We see: Homebuyers, who are panicked by rising prices and prices, are making huge mistakes when buying a home
The emotional and financial implications of the scarcity mentality
Factors beyond your control, such as inflation or a supply chain shortage, can limit your access to the things you need and make it difficult to achieve your financial goals.
“You can imagine it’s not a very fun place, being kind of wary, thinking that you have to keep everything you have, and that you’re going to lose it somehow,” says Susan Greenhalgh, a certified financial advisor and founder of Mind Your Money LLC in Providence, Rhode Island. “That’s kind of a waking point of view, and that’s a very difficult point of view to enjoy life from.”
Constant stress can cause you to keep cash in a savings account because you are afraid to invest, which can limit your ability to grow your net worth over time. Or you can take the opposite approach, which is to spend money like there is no tomorrow because you worry that the items you need will disappear from stores. When you’re worried about the short term, it’s hard to plan for a few years – or even months – ahead.
You can even take ineffective or risky steps to try to make some gains. “Every product you see has a potential solution for you,” says George Blount, founder of nBalance Financial, a financial therapy and health practice in Boston. “The lottery will look a lot better. Cryptocurrency will look a lot better.” But cryptocurrency may or may not be a good fit for your overall financial picture, and just One lucky person won a billion dollars. Unless you’re reading this from the lounge chair on your new luxury yacht, you probably aren’t.
See also: “It’s the first step to evacuation.” Why 20 million homes in the US are struggling to pay their utility bills.
How do you put your fear into action?
Although anxiety sounds daunting, it can be a productive emotion that pushes you into action. Reading through some modern banks and credit card informationFor example, it can give you a better idea of where your money is going each month and where you can cut back on spending.
Set up automatic money transfers in a file Emergency Savings Account It can help you feel more confident in your ability to take on unexpected expenses. Or maybe you’re updating your resume because you’re worried about layoffs at your company. Whether that happens or not, you’ll be ready to look for work at any moment.
read the following: You are working hard to pay off the debt. Here’s the surprising secret to keeping you from backtracking as the economy slows
What is unproductive is obsessively tracking stock prices, falling into get-rich-quick schemes or constantly watching the news. There is a lot of yelling, often by people who don’t fully understand what’s going on but have opinions about it anyway. Give yourself time and space to determine what you really need and its value, so you can set appropriate financial goals and make a plan if things don’t go the way you hoped.
“We have to stop and calm down and figure out these things,” Greenhalgh says. “Once we do that, when we have something on our mind about our relationship with money, we can dampen the noise that’s in there a little bit.”
Sarah Ratner writes for NerdWallet. Email: email@example.com. Twitter: @sarakrathner.
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