Embracing Scarcity

Estimated reading time: 6 minutes

One of the most fundamental truths of any finite resource is that it is, well, finite.

Money is one of those finite resources. Whether you live under the poverty line, or have billions of dollars at your disposal, you still have a finite amount of money to go around.

In a world where we can gain access to significant amounts of credit, it’s easy to forget the finite nature of money.

But the danger is that we get caught up in spender consciousness, neglecting to keep our spending in check and so risking our financial wellbeing.

Who Wants to Think About Scarcity?

As someone who constantly talks about abundance, it might surprise you that I’m asking you to consider the scarcity of your money.

Your financial potential is limitless, but in any given moment, you only have what you have. Keeping these seemingly opposing ideas in balance will help you to make better decisions about how to use your money while still being optimistic about your financial future.

By all means, envision the future you desire and open to the inspiration to make that vision a reality.

But in this moment, be honest with yourself about how much you actually have in real assets. That might be uncomfortable, especially if you’re used to living beyond your means, but the more uncomfortable it is, the more important it is that you face the reality of your financial situation now. Just rip off the bandaid and see what is actually there.

The absolute last thing you want to do is to pretend your situation is better than it is, or to attempt to live a lifestyle that is beyond your ability to maintain. It might feel good in the moment, but it can only lead to disappointment in the end. It might take months, it might take years, but the house of cards will come falling down and then you’ll be forced to see reality for what it is.

I think that’s the predominant reason people dislike budgets so much — it forces them to face the uncomfortable truth in all its stark reality.

No one comes to me for help because things are great and they just happen to want to start a budget. They ask for help because things aren’t working and they know they need to do something different.

It’s better to face the truth now than to wait until things are falling apart.

The Power of Zero

The best way to confront the scarcity of your own money is to implement what is called a zero-based budget.

A zero-based budget is a budget where you assign every dollar you have to a specific purpose.

You have dollars assigned to short-term expenses like rent, utilities, groceries, subscriptions, entertainment, eating out — and long-term goals like saving for vacation, buying a house, retirement, etc. No dollar is left without some purpose, whether short-term or long-term.

This means you are deliberate with your money. You know exactly what your money needs to accomplish, and budget it appropriately to achieve those goals.

But you also become very clear on how far your money can go. You might want to go on vacation and have enough to go out to eat regularly, but the moment that last dollar is assigned to a job, you know what will actually be possible or not. Maybe you’ll have to cut back on how much you spend on that vacation, or you have to make the choice to not eat out as much — or make some other decision to cut back somewhere else.

Embracing the scarcity of your money forces you to face these decisions. You can’t go out to eat, for example, while pretending that you’ll magically have enough for vacation. You have to confront your actual, present-moment resources, and do the best you can with what you have.

Debt Is Not an Option

Of course, some people might just spend what they want, then put the vacation on a credit card.

And why not? The credit is available, why not use it?

But then they have to pay interest on that new debt, which means they have even less money available.

Whereas they could cut back voluntarily before, now they are forced to cut back in order to pay down that debt — even if only by making the minimum payments.

And not to mention, with the extra interest they have to pay, they’re left with less money overall. A $3,000 vacation could end up costing hundreds of dollars more just because of the interest.

With a 20% APR on their credit card, taking a year to pay off a $3,000 balance would cost an additional $277.36 (source). Taking two years would cost $597.50.

Meanwhile, if they had instead saved for that vacation over a year by setting aside $250 per month, with a 3.75% APY (the interest rate I get at soFi where my savings account is), they would actually end up with an extra $51.22 (source).

Debt allows for instant gratification now, but a higher cost later on. Whereas, embracing the scarcity of your financial resources makes for some difficult decisions in the short-run, but puts you in a far better position in the long-run.

don’t get me wrong, I’m not demonizing all debt. I 100% believe that if you can handle it, you should have a credit card, and use it responsibly (meaning never pay interest on it).

I have a credit card that offers 1.5% cash back, and I probably make $30–$50 from that every month. It can certainly be profitable when done correctly.

Also, certain forms of debt are acceptable to take on, such as a mortgage, or possibly even low-interest student loans in the right circumstances.

I’m just saying that you should not frivolously take on debt because you don’t want to confront your true financial situation.

Let Your Scarcity Shape Your Decisions

Your priorities are thrown into stark relief when you have to give every dollar a job. You can no longer pretend that everything is possible right now, and you must confront the reality of your situation and the tradeoffs you must make in order to reach your goals.

But rather than being depressing or discouraging, this should be freeing. It’ll make you get clear on what your true priorities are. When anything is possible, nothing is truly of value. Realizing the limitations of your current situation forces you to choose what is actually important to you, rather than just a “nice to have”.

Let your scarcity shape your decisions. Force yourself to make those tough choices, and you’ll be more intentional about where and how you spend your money. Once you have homed in on what truly matters to you, you can make sure that every dollar goes where it will be used most efficiently to achieve your vision.

Does that mean you’re stuck here forever? Of course not! You have the freedom and potential to achieve whatever you desire.

But, you are where you are. Admit that, be honest with yourself, and embrace the scarcity of the present moment. Making the most of your current situation is the best way to move closer to living your ideal life.

If you’d like help with gaining control over your financial situation and creating a budget that works for you, just reach out and let’s discuss how I can help.

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