How to retrain your brain to be less anxious about money (2024)

Growing up, money felt like a scarce resource. Once, in primary school, I remember being wowed after finding a gold coin on the playground. I couldn’t believe someone had lost a whole dollar. Poor kid must have been looking for it, so I picked it up and hurried to give it to the closest teacher.

One dollar felt like a lot of money back then. See, as a child of immigrants, I grew up watching my parents scrimp and sacrifice to scrape together financial security.

Unsurprisingly, I developed what I now know to be a “scarcity mindset” around money. And I’m certainly not alone.

In Stephen Covey’s bestselling book The 7 Habits of Highly Effective People, he suggests that most people have a scarcity mindset. He describes it as a mindset where people “see life as having only so much, as though there were only one pie out there.”

At its core, a scarcity mindset is a perceived lack or shortage of resources. The key here is the word: perceived. You can elicit a scarcity mindset simply by thinking and feeling that you don’t have enough – irrespective of the actual circ*mstances.

Here are some clues you might have a scarcity mindset:

• Do you frequently experience anxiety or dread when unexpected expenses come up, even though you have more than enough in the bank to cover them?
• Have the phrases “that’s too expensive” or “I can’t afford that” become a knee-jerk response, without actually assessing your financial capacity to afford it?
• Do you find yourself feeling like you’re on a never-ending chase for more money? You have more than you did five years ago, but it still feels like it’s not enough?

Operating from a scarcity mindset has been found to drive people to make decisions that worsen their financial problems, keeping them stuck in the circ*mstances of scarcity.

This sounds contradictory. If you are in scarcity, wouldn’t you make decisions to get out of it? Why would you make decisions that keep you stuck in scarcity?

This is because a scarcity mindset impacts your decision-making. A recent research paper published in the Social Cognitive and Affective Neuroscience journal notes a scarcity mindset has been found to increase the experience of negative emotions like stress and lack of confidence, and negatively impact decision-making, cognitive functions (like attention, executive control and memory) and even empathy.

Shifting to an “abundant” mindset starts with intentionally changing the thoughts and beliefs that shape your world view.

Here are some examples of how a scarcity mindset can drive poor financial decisions:

• You may have a strong aversion to the idea of losing or risking money, making it harder for you to put money in investments even though you know you should
• You may lack confidence in your ability to save money and therefore prefer to hold on to your savings instead of paying down your high-interest credit card debt
• You may lack confidence in your ability to get a better paying job or overestimate how hard it is to get another job, so you stay for too long in a job that is underpaying you

In these examples, the psychological and emotional grip of scarcity doesn’t allow you to make the more financially optimal decision. It feels too scary and dangerous.

So how do you break the cycle?

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Most people think that when they have more, then they won’t have a scarcity mindset. This presumes that the mindset comes from the circ*mstances.

This can be the case. Living in poverty for example, can create a scarcity mindset. But our brains can continue to live in scarcity long after the external environment has changed.

In his book Scarcity Brain, Michael Easter points out that for much of human history, important resources were scarce. So, the drive to find and accumulate more is what kept us alive.

But he points out that this has changed since the industrial revolution. Now, we’re surrounded by abundance. Yet, the programming of our brains hasn’t changed.

So, it’s not enough to hope that if you keep accumulating more, one day your brain will finally feel like it’s enough. In fact, this is unlikely to happen if you’ve spent decades training your brain to feel you don’t have enough and to chase more.

Shifting to an “abundant” mindset starts with intentionally changing the thoughts and beliefs that shape your world view. It starts with questioning and unlearning the thoughts of scarcity.

As you do this, you’ll start to notice subtle changes in your reactions and decisions.

Maybe you feel less scared to invest. Maybe you are less stressed about unexpected expenses. Maybe you make decisions faster, less consumed by analysis-paralysis.

These small changes slowly snowball over time leading to better financial decisions, which ultimately make it easier for you to create the financial abundance you wanted in the first place.

Paridhi Jain is the founder of SkilledSmart, which helps adults learn to manage, save and invest their money through financial education courses and classes.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circ*mstances before making any financial decisions.

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