Creating the Illusion of Scarcity
One of the reasons so many people are up to their eyeballs in debt is that they’ve had access to gobs of credit. Whether lenders threw a dozen credit cards at us, offered us big, fat lines of credit, or let us buy now and pay later, we’ve been living a life where we could have whatever we want whenever we want. It’s been a life of abundance.
Then came the economic change. Creditors stopped throwing credit at every Tom, Dick and Mary regardless of their ability to actually pay back that credit. The government got into the swim creating legislation that said lenders couldn’t just raise a person’ credit limit without telling them – further exposing them to credit risk. And people started losing their jobs.
The abundance of the previous years has turned to forced scarcity. Some people took steps to prepare for the worst and are holding on through the tough times. Others have found their debt loads too high and are headed to bankruptcy trustees to see what they can off-load. Still others are just drowning with no idea what to do next.
I’m sad for all the people who can’t keep it together – people who are missing their rent or mortgage payments, falling behind on their car payments, pulling their kids out of their sports or other extra-curricular activities. While things were good and they were constantly being offered more and more credit, they never imagined there would ever be an end to their ability to have what they wanted. I’ve worked with more than a few people who are totally astounded at the place they are currently in. How could this happen? Y’all probably know a body or two who are scratching their heads.
I’m hoping the forced scarcity teaches an extremely important lesson about money: there may not be more money, and you better have some set aside just in case. It doesn’t take a world economic crisis to throw a body’s budget into a tailspin if you have no money saved. It only takes a few weeks off work with a sick child, a call to jury duty, or a cut-back in your hours at work to make a house of cards fall down.
I wonder how many people will actually learn the lesson. I wonder how many people will go back to spending every cent they make as soon as the economy gets back on its feet. And I wonder if anyone has figured out that you can create your own sense of scarcity to keep you constantly on your toes when it comes to managing your money.
Abundance has a way of permeating our very being and making us feel invulnerable. But we are all vulnerable, whether we want to accept that fact or not. And creating the illusion of scarcity may be what it takes to stay true to a sound financial plan.
I’m not talking about creating such a sense of scarcity that you’re always whining about what you can’t do or can’t have. And I’m not suggesting you use the illusion of scarcity to cheap out on life. But if you’re the kind of creature who routinely spends every penny she makes, maybe you need to implement the illusion of scarcity to keep yourself in check. And maybe if you move your money where you can’t touch it, leaving yourself with less to “blow” on stuff, you’ll actually end up achieving some of those goals that have always been so elusive.
How do you create the illusion of scarcity. Well…
First, you make a budget that balances. You transfer all the money that must be used to pay your fixed and variable expenses to a “house” account, so you know those bills are covered and you can’t spend that money on stuff.
Second, you set some goals you want to achieve. It may be paying down your mortgage annually, taking a fabulous family vacation, or going back to school.
Third, you set up savings accounts for each of the goals you want to achieve, and have the money you want to saved moved automatically to those accounts so that money is out of sight.
Now you only have money left in your first account that you can actually spend on all that crap you so love to buy: coffee, lunches out, another tool, magazines, DVDs, more clothes… name your weakness here. For me it’s houseplants and books. When I look at the money in my account, because I’ve made most of it disappear to places I don’t look regularly, I’m more cautious about just how I blow what’s left. I prioritize. I consciously decide to spend (or not to spend) the money. I don’t feel like I have so much money I’ll never run out so I can just have this one little thing.
And that’s the point of creating the illusion of scarcity: to recognize that money is an exhaustible resource so you better be sure your spending isn’t just a knee-jerk reaction to your sense of abundance.