It’s Not Scarcity Mindset, it’s Money Trauma: Why Abundance Mentality isn’t enough

Money trauma covers many elements

Have you ever wondered if you have a scarcity mindset?

Here are some money behaviours you might recognize that people claim have to do with a scarcity mindset:

  • Paying bills at the last minute (or late) even though you have the cash available
  • Afraid of spending any money
  • Spending your money as soon as it comes in (because you’re afraid it will disappear)
  • Avoiding looking at your bank accounts
  • Taking money out of investments because the markets are going down
  • Taking risks in an attempt to achieve a big payoff (e.g., lottery or get-rich-quick opportunities)
  • Impulse spending
  • Constantly worried or ashamed about your debt
  • Scared of actually using your emergency fund
  • Having no financial goals or plans

These are all listed on the internet as signs you have a scarcity mindset.

But do you really have a scarcity mindset?

What Is a Scarcity Mindset?

The term scarcity mentality was apparently coined by Stephen Covey.

It is described as a belief there is not enough to go around, or a focus on lack, or living from a limited source.

“People with a scarcity mentality tend to see everything in terms of win-lose. There is only so much; and if someone else has it, that means there will be less for me.” is a quote attributed to Covey.

Scarcity mindset and money

A scarcity mindset is characterized by hypervigilance. With money, you can feel frequently or constantly afraid something bad is going to happen.

You can experience anxiety, an all-consuming focus on money, and/or fears about your financial future, so you might be constantly checking your bank account.

You can feel overwhelmed and exhausted so you might avoid dealing with your finances entirely, until there are serious consequences you have to address.

But this idea doesn’t come out of the blue. Scarcity mentality isn’t a personality trait.

Conditions of scarcity (in money, time, etc.) produce their own psychology and affect your behaviour.

Experiencing lack of any kind (food, housing, income, time, love) in childhood or as an adult can be traumatizing.

Large-scale economic events, such as the Great Depression, the 2007-2008 financial crisis, or the impact of the 2020 COVID pandemic, can also be traumatic.

Any conditions of scarcity (in money, time, etc.) whether “real” or “perceived” can result in a scarcity mindset.

The fact is that these are significant life events. They are whole-person experiences that impact the whole of you, not just your mind.

Also, living under capitalism leads to money trauma, even if you haven’t experienced a specific, traumatizing event around money. Capitalism is shaming and blaming about money. Ongoing shaming and blaming is abuse and can lead to C-PTSD.

All of this is related to stress physiology and our reactions to fear and threat.

Scarcity elicits survival fears.

When the related stress physiology dominates, you can’t focus or think clearly. It’s possible to shift your attention for short periods of time, but the worry and fear are inescapable, because the survival impulse will override the distraction.

The body, as well as the mind, remembers the scarcity. This is why working with the mind, with thoughts and insight, isn’t enough.

Positive thinking or abundance mantras, etc. on their own will not do the trick.

People don’t often think of it this way, but trauma can occur in relation to anything–school, hospitals, work, driving, as well as money.

I often hear people–colleagues, friends and clients–criticizing themselves for their so-called scarcity mindset. 

Scarcity is a real thing and a so-called scarcity mindset has its roots in the valid human impulse to survive.

Often, with money we may not even be aware that our survival impulse is at play. We may think we’re bad with money, irresponsible, wasteful, or call ourselves cheap, a miser or a tightwad.

This is usually the internalized critic that has absorbed external judgments and moralizing.

Budget culture is one culprit. Budget culture is “a damaging set of beliefs around money that rewards restriction and deprivation, and promotes an unhealthy and fantastical ideal of financial wellness,” writes Dana Miranda, a Certified Educator in Personal Finance®.

In the same way that North American culture idealizes a certain image of health and beauty that is based in privilege, so also we internalize ideals of financial health that are harmful.

I have consulted with financial professionals on and off since my 20s. They were always great at calculating how much money I would need in retirement and how much I should to put away each month in order to reach that goal. Every time I’d crumble under a shame attack, because I wasn’t earning anywhere near enough to save or invest money.

I never saved or invested anything until my 50s… and while it’s not the end of the world, it’s a bit late in the day. I now know it’s better to contribute even a dollar on a regular basis than to contribute nothing. But the judgments I had internalized and the shame I felt as a result prevented me from seeing that.

The internalized critic

The internalized critic can also echo the voice of our parents or other authority figures.

I always believed I was bad with money until I looked at my money history. 

I was given a small allowance, as were my brothers. But I was expected to pay for my own tampons and deodorant, and they didn’t have equivalent expenses, so my money didn’t go as far as theirs. I was frequently criticized for not managing my money well in comparison to them. In my lifetime, the kind of work I was able to get and was interested in paid far less than theirs, so I had less money. My limited earnings and greater expenses across my life meant my money didn’t appear to go as far as theirs did, and again I came up short by comparison.

When I later looked at the facts of my adult life, I saw that my belief that I was bad with money was simply not true. I was actually very good with the limited money to which I had access. I was astonished!

But I first had to see where the idea came from, and then orient the parts of me that remembered those times to the new reality.

People cry doing their math W??? Some of you never had to spend hours at the kitchen table crying as your dad shouts, "WHATSIS 3 TIMES 7?"


I believed I was bad with money, too.

It was only in my early 50s that I became aware I had learning disabilities: dyscalculia for one, as well as problems with working memory and some other traits that are consistent with ADD. 

Like many kids of my age, I remember screaming sessions with a parent over math homework.

I was shamed by teachers in math classes for being too slow and not getting it. I never got past Grade 10 math, which I barely passed. I still don’t know my times tables.

doing math homework in the dining room growing up: lined notebook paper showing tear drops on itIt was only when I connected all that with the anxiety I experienced when I tried to balance my books that I understood I wasn’t bad with money, my struggles to understand money and finances were a function of my neurodivergent brain and not my fault.

It wasn’t possible to change my belief about being bad with money until I addressed all that as part of my money trauma recovery journey.

Simply having an abundance mentality isn’t enough. 

It’s money trauma 

Financial trauma, poverty, financial abuse in an intimate relationship: all of these can lead to a so-called scarcity mindset but in fact this mindset is real and was put in place for a good reason: to help you survive.

These are actually money traumas.

Also, as I mentioned, living under capitalism leads to money trauma, even if you haven’t experienced a specific, traumatizing event around money. Capitalism is shaming and blaming about money. Ongoing shaming and blaming is abuse and can lead to C-PTSD.

The dilemma arises when the strategies you adopted (usually outside of your awareness) no longer serve you.

For example, you can find yourself making financial decisions that don’t serve the current you.

You might engage in hoarding behaviours.

You might be reluctant to take a risk.

You may attempt to soothe your distress by consuming alcohol, drugs or food.

You might find your anxiety or depression rise to the point you are diagnosed with a mental health condition.

(By the way, these are all legitimate responses to distress and your organism’s best attempt to survive in conditions of ongoing adversity.)

But it doesn’t have to be this way.

Mindset work is part of the journey, but it’s not the first step.

You can offer yourself care for the negative experiences you had.

You can learn tools to support your nervous system and care for yourself as you begin to re-write your money story and develop a positive relationship with money.

As a result, you can find yourself with a sense of abundance in your relationship with money that arises from within you.

If this kind of support resonates with you, I invite you to learn more about working with me here.

About the author 

Shulamit Berlevtov  -  Shulamit (she/her) is the Entrepreneurs' Therapist. She is working passionately to mitigate the entrepreneurial mental health crisis through keynote speaking and educational workshops and by supporting women entrepreneurs 1:1 to prevent burnout and preserve their peace of mind as they ride the emotional rollercoaster of running a business.

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