This article is by staff writer Kristin Wong.
(This is a two-part series. Part I is “Our brains on scarcity: The trap of not having enough.”)
For my last post, I wrote about the book “Scarcity: Why Having Too Little Means So Much.” To recap, researchers Sendhil Mullainathan and Eldar Shafir conducted a series of experiments and found that scarcity — whether it’s a lack of time, money or food — drastically changes our behavior. Here’s how:
It lowers our cognitive capacity. (We perform worse on intelligence tests.)
It makes us less polite.
It makes us more impulsive.
It prevents us from considering the big picture, including consequences.
Of course, the book goes into much more detail about how scarcity affects our brains. As I mentioned in that post, the authors also talk about scarcity in relation to the larger issue of poverty. It’s pretty ambitious to suggest a solution for such a massive issue in a single chapter. But they do offer some relief.
If you’re struggling with a major lack of resources, you can probably relate to the trap of the scarcity mindset. Living paycheck to paycheck is an example of this trap.
When I was struggling to pay off student loan debt without an emergency fund, I was stuck in a scarcity trap. I thought it was silly to save $1,000 for an emergency when I felt buried in debt. To me, I was struggling to financially survive, and saving for an emergency seemed like a luxury. But an emergency would always pop up, as they inevitably do. I’d end up taking one step forward and two hugely frustrating steps back. So in a moment of clarity, I vowed to start an emergency fund. Once I created that safety net, I was able to reach my goal more easily. I broke out of the trap.
In the book, the authors refer to tunneling. When you’re overwhelmed with scarcity, you get tunnel vision. Your only focus becomes the quick fix to the various emergencies that arise.
In a chapter titled “Scarcity in Everyday Life,” the authors share some research-based insight on how people cope with the effects of scarcity.
The following is a very general rundown of each of their points. I should mention that, in the book, some of these seem to be less meant as solutions and more as objective observations on, well, scarcity in everyday life. Still, I think these observations are helpful.
The authors point out just how effective simple reminders can be. In one of their studies, they sent subjects a simple reminder at the end of the month, via text or letter, to save money.
“This benign reminder alone increased savings by 6 percent,” the authors reported. “We were able to increase savings not through education or by steeling people’s willpower but merely by reminding them of something important that they tend to overlook when they tunnel.”
A quick, simple reminder can distract you from your scarcity problem and redirect your focus to the big picture.
Reminders, in all of their simplicity, are seriously underestimated. Here’s a personal example. I’ve talked about how I sometimes overwork myself. I feel stressed, and I worry about not having enough time to finish a project. The result? I get burnt out, the quality of my work decreases, and this stresses me out. I feel like my only option, as I’m stressing, is to push myself. I don’t have time to think about the big picture; I get stuck in a trap.
For me, it helps to set a reminder on my computer to shut down at a certain time. Yes, some days I don’t finish as much as I want to, but after heeding these reminders for a while, I have more time, I’m less stressed, and the quality of my work improves.
How can you use reminders to break a financial scarcity trap? If you read this blog regularly, that’s a reminder in and of itself. A reminder is anything that makes you remember your financial goals. This could mean:
Scheduling an alert on your calendar to do some financial spring cleaning.
Taking the time to celebrate your financial milestones.
Using an accountability partner to remind you of your financial goals.
Taping your financial goals to your desk — or credit cards!
Automate your vigilance
When you automate your finances, there’s less risk of making financial mistakes when you’re tunneling.
“Automatic bill pay is a prime example. A busy person who enrolls in automatic bill pay no longer runs the risk — in the tunnel of work — of forgetting to pay her bills. Or, rather, she is free to ignore her bills, but when she does, those bills still get paid.”
When you tunnel, you neglect certain areas of your life. Lots of tasks take vigilance — paying your bills, ensuring you save, etc. When you’re caught in a scarcity trap, you have less bandwidth to worry about being vigilant.
By automating your tasks, you can combat this. The book offers a few examples:
“Paying your bills every month requires vigilance. Setting up automatic bill payment only needs to be done once.”
“Remembering to have sufficient cash for tolls while you drive requires vigilance; signing up for E-ZPassâ€¦is done once.”
With dieting: “Rather than having to be vigilant every time you grab a snack from the pantry, just be vigilant at the grocery store.”
Automating your savings is a great example of this. You pay yourself first, so your “vigilance” is automatic.
Take action when you’re focused
“Our needs for today are pressing; those a month away are abstract and unrealized. This, as we have seen, is how we end up overcommitted. It’s how those strapped for cash end up buying items they eventually cannot afford.”
We get stuck thinking in the present without giving much thought to the future. Our future selves seem completely unfamiliar. This seems true even for people who are doing well financially. But those struggling with scarcity have an even more difficult time finding an “appreciation of scarcity in the future.”
Back to my debt example — this is why I neglected to save for an emergency even though an emergency seemed to arise every month or so. This is why some people neglect to save for retirement. The future seems completely disconnected from the present.
To combat this mindset, the authors suggest taking action during a moment of focus. It’s pretty simple: next time you think, “Ugh, I really need to get around to doing this,” actually do it.
“Otherwise, you’ll plan to do it sometime soon, but you’ll be in another tunnel then.”
Change your decision-making time
In the book, the authors use the word “bandwidth,” meaning our mental capacity to deal with certain situations. When our resources are scarce, our bandwidth is taxed, and we don’t make the best decisions. One simple way to combat this? Change when you make decisions. In an interview with Marketplace, Mullainathan said:
“One powerful tool is to just change when you make very big decisions. We call this bandwidth. We often neglect the importance of bandwidth in our decision-making.”
He refers to a study that featured farmers as subjects. They studied the psychology of these farmers pre- and post-harvest:
“In some sense, that farmer could say, ‘you know what? I’m a better decision maker post harvest. So if there are important decisions to be made, I’m going to make them then. At least recognize that I have these â€¦ waves of capacity.”
Whether the resource is time or money, all of us have probably been caught in a scarcity trap at some point. Many of these answers are simple, but they’re certainly not easy. I think most people who have escaped the trap will likely point to one or more of these solutions, though. It can be daunting, and sometimes it can seem pointless and counterintuitive, but it’s also worth the effort.
How did you break out of your own scarcity trap? Did any of the above help you stop tunneling? What advice would you give to those who feel stuck?