How to break free of a scarcity mentality and build financial confidence

Emotional, fear-based reactions and a financial scarcity mindset tend to trap people into overthinking, instilling the belief that they will never have enough money to live comfortably and that they will always be in some form of financial turmoil. Experts say this mentality can harm a person’s long-term financial well-being and quality of life.

Why your money mindset might be holding you back

“That mindset plays a really big role in keeping people stuck,” says Jeri Bittorf, financial wellness coordinator at Resolve Counseling Services in Canada. Bittorf said she often encounters clients in her work who have a scarcity mindset. Sometimes people worry that they will never be able to increase their income or reduce their expenses, and that their situation will never get better.

Kalee Boisvert, a financial advisor at Raymond James Ltd., said this emotional reaction often comes from some kind of money-related trauma. This emotional reaction can stem from childhood experiences, such as growing up poor, but it can also arise later in life from an awareness of a lack of resources or from hearing stories about people around you who can’t pay rent or buy groceries, Boisvert said.

“Sometimes this lack of funding comes from stories that people have heard and almost made it their own, or out of fear of it,” she said.

Boisvert’s clients spot red flags of a scarcity mindset when she hears comments like: “I’m terrible with money; I’m worried I’ll never retire; I should be doing better, or should be doing more.” It’s a “scarcity mentality operating behind the scenes,” she says.

Boisvert says this mindset can lead to issues with confidence and self-worth, ultimately affecting everyday decisions about a job, the partner you choose, or where you choose to live.

Understanding your money past is the key to changing your financial future

Bittorf says it’s important to get to the root cause of this mindset, and journaling plays an important role in uncovering patterns and beliefs surrounding money. “I start them at the earliest age they can remember, which is about five years old,” she said.

Bittorf used prompt questions about financial security growing up, such as whether their parents talked about money, whether they experienced financial arguments at home and whether they were financially comfortable in school. “I want them to think about all of these things because these are the things that impact the decisions you make now, even if you don’t realize it,” she said.

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Sometimes Bittorf encourages her clients to create vision boards to understand their passions and what their future selves with an abundance mindset would look like. This gets people excited about pursuing these plans. “If they were to get out of this life situation, what would be their goals?” she would ask her clients.

Build wealth through careful money habits

While analyzing financial models is the foundation, Bittorf says it comes down to practical steps like creating a budget, tracking money and breaking down broader financial goals into smaller, actionable steps. It also means making some tough decisions, like cutting back on expenses or changing jobs if needed. “You know you’re good enough to do it. And there’s a lot of support,” Bittoff said.

For Boisvert, breaking the scarcity mindset is a conscious effort on her personal journey. If she hadn’t grown out of this mindset, she thought her response to money would be to save and put everything away instead of aligning her spending with what she truly cared about.

“Knowing that I grew up with a scarcity mentality and I had to work really hard to overcome that, when I talk to (my daughter) about money, I just say money is a tool and it’s a tool to help us achieve our goals,” Boisvert said.

For those stuck in this cycle, she recommends separating fact from fiction and practicing gratitude. “If you’re feeling this fear and fear and you’re looking at these numbers and you have money to pay your bills and your rent, it’s just a reminder to yourself, ‘Okay, now I’m safe. Is this an old story to me?'” Boisvert said.

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