For most of us, cash flow is where money work becomes real. We can talk about money all day long, but what you do with it day in and day out is what really makes the difference.
When working with clients on cash flow, scarcity comes up pretty quickly. Scarcity is either not having as much as you need or as much as you want.
What can surprise you is that scarcity happens at ALL income levels, just like having enough happens across the board. People can live paycheck to paycheck whether they make $3,000 a month or $30,000 a month.
It’s also true that people can put 1% of their income aside for the future at both of those income levels.
Scarcity is both a mindset and a reflection of our society’s focus on what Brené Brown calls “never enough culture”.
To understand scarcity, we need to understand bandwidth. Authors Eldar Shafir and Sendhil Mullainathan wrote the book on these topics: Scarcity: Why Having Too Little Means So Much. They define bandwidth as how much any one of us is able to manage at one time.
Stress, trauma, illness, and too many competing priorities limit our available bandwidth. And financial worry definitely reduces our bandwidth.
Image by Isabella C. Aslarus from The Harvard Crimson
How Bandwidth Gets Squeezed
For example, a working parent has many balls in the air. Say they want to save money for a vacation and decide to cook at home to cut costs. But when push comes to shove they end up ordering food because they’re exhausted and want to prioritize rest, or time with their children. What is the right answer?
Here’s another common example, imagine you’re doing well in your career and because of it you get invited to join more and more new projects? At what point do you say no? How many projects can you work on simultaneously and produce quality work?
When we’re overcommitted, be it through responsibilities or simply too many hobbies, at some point we start to tunnel. Tunneling is when you focus on today at the expense of tomorrow. It’s when you say yes to short term solutions without acknowledging potential long term problems.
Coming back to money, Shafir and Mullainathan explain that people get trapped in payday loans with high interest rates not because they don’t understand that borrowing will be more expensive, but because they have no or very limited options. They tunnel to solve today’s problem in any way possible.
Payday loans charge incredibly high interest rates to give someone access to money from their next paycheck. This can become a vicious cycle where they continue to borrow from the next paycheck to cover today’s expenses. For a deeper look at debt check out Debt – A Labyrinth.
Beyond “Never Enough”
What can we do to escape tunneling, lack of bandwidth, and the nagging feeling of scarcity – or never having enough?
First take a deep breath. Notice the gap between the inhale and the exhale.
That gap is where you can trust the flow of life, that what comes will go, and what goes will come. Remember times before when you thought you wouldn’t make it, and remember that by hook or crook you made it through.
- What made getting through hard times possible?
- What inner resources did you tap into?
- Who helped you through it?
Those very inner resources you’ve used before will help you transform your money and cash flow today.
Now that you’re back in your body, let’s talk about strategies to create this pause in between the comings and goings of your money.
Regular money check-ins to understand where your money is, where it’s going, and how to get to where you actually want to be. These can be fun! Check out Bari Tessler’s podcast on Money Dates for ideas.
Support like a money coach, a partner, or a friend that you can talk money with. Shameless plug – come join Bosque Money to cultivate owning your power with money.
An emergency fund or just in case money can increase your bandwidth by creating a cushion for life’s unexpected expenses.
You might think abundance is the opposite of scarcity, but in fact the true opposite of scarcity is ENOUGH.
Both scarcity and abundance are striving for more, whereas having enough is settled, grounded, satisfied, satiated, relaxed. And satisfied people are more creative, easier to be with, and have better breath (this last one is my own impression, but you get what I mean).
Setting Yourself Up for Success
It’s difficult to get ahead when you’re fighting fires all the time and tunneling has you just focused on today at the expense of tomorrow. To create bandwidth Eldar Shafir and Sendhil Mullainathan state you need to automate good behavior and set up systems.
One of the foundational systems is to pay yourself first.
- Make sure you are getting an employer retirement plan match if you’re eligible.
- Automate the payments that go to debt.
- Set up a separate savings account to start building an emergency fund.
- Have regular money check-ins to see what’s happened, where you’re at with money, and what expenses are coming up.
It’s also helpful to break goals down into smaller milestones. How do you eat an elephant? One bite at a time…
In our earlier example of a family putting money aside for a vacation, rather than saying NEVER eat out, they can see what’s reasonable.
- Can they go from eating out three times a week to just one?
- What do they need to do to replace the other two nights?
- How long will it take them to save the money they need by cutting out those two meals?
As Stephen Covey says, begin with the end in mind. There’s plenty of ways to get started, the most important thing is that you start.
We always have options, especially for those of us lucky enough to be born in first world countries. Although the US’ social safety net is not as robust as it is in other first world countries, we do have assistance available.
Understanding Scarcity Wounds
When it comes to scarcity, simply getting a bunch of what you think you’re missing is not necessarily the answer.
For example, if you get unexpected cash like a tax refund, does that solve all your problems? For some it may, but for many of us it’s a temporary solution. The true solution is having enough to cover today’s expenses, pay for what you owe, and save for the future. This is extremely difficult on less than a living wage.
In addition to a living wage there needs to be a mindset shift. Growing up in scarcity leaves a mark: a scarcity wound. If one day you have enough food, but the next day you don’t, whenever you do see food, you eat as much of it as you can, because there’s no certainty there will be any tomorrow. You can see how this extends to money. Growing up with uncertainty be it around food, money, or loving attention leaves a mark.
A mindset shift and repeated practice can heal a scarcity wound. This is not a “pull yourself up by your bootstraps” kind of thing.
We are not responsible for where we started or the circumstances we were born into. Yet, we have agency to change our current life and those of the society we live in.
Please remember support makes this possible! Surround yourself with others who are healing their own scarcity wound.
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