Scarcity mindset

What It Means

A scarcity mindset is the narrowed focus that comes with having too little of something you need, most often money or time. (1) In research by Sendhil Mullainathan and Eldar Shafir, scarcity takes up mental bandwidth, leaving less attention and self-control for other decisions, and the effect comes from the situation a person is in. (2) In everyday talk, people also use the phrase for a habit of feeling there's never enough, even when money isn't short, which is a looser use than the research measured.

How It Sounds at Home

• "I can't think about anything except rent right now."
• "When money's this tight, everything else slips."
• "I grew up with nothing, so I still panic over every purchase."

The Breakdown

A short example. Tasha works two part-time jobs and is $200 short on rent this month. For two weeks the gap is all she can think about. She forgets a dentist appointment, misses the deadline on a school form for her son, and takes a costly short-term loan to close the gap without reading all the terms. In a normal month, she handles all of it.

Where it goes wrong. Tasha decides she's just bad with money and stops looking at her accounts at all. Mullainathan and Shafir's research points to the shortage itself: in their study, the same farmers did worse on tests before harvest, when money was short, than after it. By that account, the load comes with Tasha's situation.

What to watch for

• Routine things, like appointments and forms, slipping when money is tight.
• Quick fixes that cost a lot later, taken because the shortage is all you can see.
• Decisions made on the worst day of the month that could wait for a better one.

What can help. Take routine dates off your memory before a tight month starts: reminders for rent, bills, school forms and appointments, so the shortage has less to crowd out.

Good to Know

Mullainathan and Shafir's work, summarized by Harvard and in the APA's Monitor on Psychology, describes scarcity in several forms, including poverty, lonelinessLonelinessThe painful feeling that you lack close, meaningful relationships or a sense of belonging, whether or not other people are around you. See more and a packed schedule, and its cost in attention, decision-making and self-control. Before signing up for any loan in a tight month, read the full cost and the repayment terms, or ask a nonprofit credit counselorCredit counselingAdvice from a trained counselor, usually at a nonprofit agency, on your budget and debts, which can lead to a debt management plan or other next steps. See more to look at it with you. If money stressFinancial anxietyOngoing worry or unease about money, your bills or how you handle your finances, sometimes with physical signs such as lost sleep. See more is affecting your sleep or health, talk with a doctor.

Related Terms and Categories

• Money mindset

  The beliefs and attitudes about money you carry, many of them learned in childhood, that shape how you spend, save and talk about it.

• Financial anxiety

  Ongoing worry or unease about money, your bills or how you handle your finances, sometimes with physical signs such as lost sleep.

• Paycheck to paycheck

  Spending all of one paycheck before the next arrives, so there's little or nothing left over in between.

• Decision fatigue

  The idea that making many decisions in a row wears down the quality of later choices, a popular claim whose research evidence is disputed.

Household money and budgeting