There is a lot of talk about mindset these days.
That’s because it is SO important. Most limitations we believe we have are simply in our minds.
We are all capable of so much. If we just let ourselves imagine the most absurdly positive outcome, many times the outcome will come to life.
Abundance Versus Scarcity Mentality
The concept of abundance versus scarcity mentality was made famous in the book “7 Habits of Highly Effective People” by Stephen Covey.
Abundance mentality refers to the mindset that focuses on the fact that there is plenty to go around and everything is achievable. People with abundance mindsets dream big and see their dreams realized. They support others because they know growth is unlimited and resources can be shared.
“Abundance Mentality… flows out of a deep inner sense of personal worth and security.” – Stephen Covey
Scarcity mindset is based in fear- fear that there is not enough, that resources are limited and time is limited. People with scarcity mindset try to hold others down and limit their own growth as a result. They are afraid to take risks. Scarcity mindset leads people to make poor spending decisions. Because time is limited, they must have everything today. They often get caught up in competing with others or trying to keep up with the “Joneses.”
“People with Scarcity Mentality have a very difficult time sharing recognition and credit, power or profit… they are always comparing, always competing. They give their energies to possessing things or other people in order to increase their sense of worth. “ – Stephen Covey
Frugality as the Ultimate Abundance Mindset
On the surface, the term frugality may look like a scarcity mindset. People in the FIRE movement (Financial Independence, Retire Early) believe in being frugal and saving a significant percent of their income, so some may akin that to fear based living. But, in fact, frugal living is the essence of the abundance mentality as described by Stephen Covey. Let me explain.
The FIRE community is a group of people focused on the ultimate abundance- the concept that we CAN have a happy life, wealth, and early financial independence. All we need to do is get out of debt, save 25 times our annual spending and invest it in reasonably diversified low cost index funds. Then, we can live off the interest from our nest egg alone for the rest of our lives, without touching the principal.
When I accepted the goal of early financial independence, I found it easier to live a little for today and save a little for tomorrow. All I had to do was open my mind to the concept that I can have it all. The way to do it was by focusing on the most important thing in my life- my family. Then, it was easy to see how much we DIDN’T need to spend on more things.
Another essential part of the development of my frugality/abundance mindset was the process of planning for the future and realizing that more likely than not, there was plenty of time to get everything I want out of life. I didn’t need to have everything today. By making a few wise decisions about our spending today, we could have little to no money stress for many years to come.
Once I adopted the FIRE and frugality mindset, I began being more grateful for all the blessings we had. Comparison with others didn’t matter so much anymore.
FIRE Is Not A Competition
FIRE is not a competition. Everyone has their own path to it. Just because one person reaches it earlier than another, that doesn’t prohibit the other from reaching FIRE as well. All we have to do is save and invest a significant chunk of our income and we can all get there. Perhaps this is why the FIRE community is one of the most generous, grounded, and gracious group of people I have encountered.
FIRE is also not a destination. It’s not just about having a chunk of change. FIRE is simply a means to get us closer to what we want out of life. What good is a stash of cash if you’re not happy? For me, FIRE is a way to design my life so I can enjoy time with my family.
Being frugal, to me, is appreciating the many things that I already have, instead of constantly thinking about MORE, MORE, MORE.
Through this mindset, we we were able to annihilate the mountain of student loan debt that I thought would never vanish ($208k in a year and a half!). We took our net worth from negative $200k to positive $400k in a little more than 2 years. This allowed me to cut back to 0.8 FTE (Full Time Equivalent) so I could have some time to watch my babies grow up, while also indulging my passion for medicine and helping others.
There is plenty of time and there is enough to go around.
That is the essence of abundance mentality.
Last week, I introduced No Spend February. A no-spend month is an exercise in appreciating the ABUNDANCE we already have. We can simplify and have more happiness.
For me, my No-spend month involves organizing and simplifying my family’s closets, and not buying any clothes in February. You can chose which category you want to focus on.
I can’t wait to dive in!
If you want to join us, sign up here.
Stay frugal, ya’ll!
Disha
Standard Disclaimer: Not meant as individualized financial or medical advice.