The way I describe the scarcity mindset is with the word, “lack”.
Last night, I went for a walk through my neighborhood. I couldn’t help but notice that each house emitted the soft glow of a plasma television. As I walked further, I began to wonder why everyone had one of these TV’s and I didn’t. When I finally got to the end of the street, I couldn’t help myself anymore. Driven by envy, I walked up to a living room window and pressed my face up against the glass. There it was, in all it’s 1080p glory. 60 inches of awesomeness, only a credit card swipe away. The missing ingredient for the life I’d always wanted. I had to have one.
So today, I went to Best Buy. I browsed the televisions, paying particular attention to price (the only measure of value, IMO). At first, I settled on a $1500 model, but as a savvy consumer, I quickly realized that this model would only be current for a couple of years. In order to keep up with technology, I would have to go with the $2500 model.
Along with my $2500 plasma screen, I was offered a $300 warranty, just in case. I graciously accepted because, after all, losing my $2500 investment would be an absolute disaster.
Although I’d beaten poverty years ago, I still had to finance the unit. It wasn’t really a big deal... Four years to pay off $2800? Lots of time!
That particular story is fiction, but it’s not far removed from real life. It started with perceived lack (“Everyone has one but me!”) and ended in real lack (I spent more money than I had).
Here are the biggest differences between the two:
- there’s a missing ingredient, and you know what it is
- you couldn’t stand to not having something anymore
- there’s only one way to do things
- you become adept at fooling yourself (which is the greater lack: having a negative net worth or not having the TV?)
- as of right now, you have everything you need
- you’re happy with or without “it”
- there are many ways to do things (buy a latte everyday for $4 or buy a machine and make them for $0.30?)
- you scrutinize your purchases because you realize that less is more. Excess has an opportunity cost.
It really comes down to beliefs and habits. Change the belief and the habits will follow. They’ll balance out in a way that’s right for you. Don't allow your happiness to become attached to what you have (or your bank account).
Both small wins and big wins have merit.
Small wins tend to be consistent (The Latte Factor, subscriptions).
Big wins are inconsistent (haggling down a car deal, not buying that damn TV).
PS. Remember this: sales people and advertising operate on the scarcity mindset. Avoid those two things as much as possible and you’ll be on your way.