What is a poverty mindset?
Money doesn’t grow on trees, right?
A poverty mindset is a limiting set of beliefs and worldviews that narrows the way you think about money, and it absolutely holds you back.
It’s as simple as saying, “I could never afford that” when looking at your dream house or car, or as complex as the calculations you do when you’re setting your budget and deciding whether or not to put money into savings this month.
A poverty mindset can be insidious, too – after all, you tell yourself you have to be realistic, right? Some people just get lucky, or got a good head start in life, or went for the right career in a booming industry, or maybe it’s just not in the cards for you to live the life you’ve dreamed of….
Except it totally is.
If you’ve ever decided not to apply for a better job because you’re not 100% qualified for it, if you’ve ever accepted less than you know your work is worth because you needed the money, if you’re still making credit card payments on something you splurged on to treat yourself months ago… your poverty mindset is definitely holding you back.
Below are 7 ways to help break the poverty mindset and empower yourself to get back in the driver’s seat of your life.
7 Ways to Break The Poverty Mindset
1. Change Your Language Around Money
“I can’t afford that” is a toxic statement. It gets into your mind and starts creeping around in dark corners, stirring up all kinds of dust, and before you know it, it’s changing the way you see yourself. I’m not saying to go buy things you can’t afford to make yourself feel better (see #6), but saying “That’s not in the budget this month” or, “That’s not my priority right now”, puts you back in charge of how you spend your money and on what, instead of stripping away your agency. “I can’t afford that” is self-victimizing. “Here’s what I’m doing with my money instead” illustrates an independent choice that keeps you in control of your finances.
2. Set a Growth Budget
What if writing our your monthly budget was an empowering activity that made you feel energized and excited about the future, instead of stressed out and worried? Set room for growth in your budget. Add in your savings, your debt repayment, or payments that go towards building equity like your mortgage, and remind yourself, “every month this money grows my wealth a little more”. Track your savings account on paper, and keep it in a place where you can see it when you need to. Even just throwing $5 a month into a savings account consistently has the effect of building and growing your wealth – emphasize those factors that, every month, take you in a direction to a better built future.
Related: How to Budget When You’re Broke
3. Don’t Make It Personal
It is incredibly important that you understand your finances are not reflection of your character or your worth as a person. Whether your income is low or you’re struggling with balancing the budget, or drowning in debt, we have a tendency to think that we “deserve” these struggles or that they’re somehow representative of the person we are. Stop it! Money is neither inherently good or bad, so don’t let it make you feel that having it or not having it has anything to do with your value. Look objectively at your finances – don’t feel about them.
4. Identify Problems; Find Solutions
Messy finances are not a prison sentence, and they don’t need to be a permanent reality. While looking objectively at your situation, identify problem areas; what needs to change? Write out solutions, then formulate an action plan. Smaller debts can haunt you for years while you scrimp to pay minimums, but working a side job for a few months may be all it takes to get that off your back for good. Get creative with solutions, write a plan, and stick to it!
5. Look for Inspirational Examples
I guarantee you that for every excuse you can find about why you can’t change your situation, there’s a story of someone who was in your situation and found a way to change it.
Stephanie of Six Figures Under and her husband paid off almost $150,000 of debt in three years, despite growing to a family of six in that time. The Frugalwoods saved over 70% of their income so they could transfer from an urban professional lifestyle to homesteading in rural Vermont. Personal finance blogs are full of stories of people who transformed their lives. Maybe not every method will work for you, but spending some time reading about people who have gained financial freedom through creative means will spark your imagination and reassure you that no situation is permanent.
6. Are Your Coping Methods Keeping You Broke?
One of the truest quotes I’ve ever read went something like, “Rich people stay rich because they live like they’re broke. Broke people stay broke because they live like they’re rich”. Your apartment is small and cramped, so you constantly go out to eat and socialize (then, looking at your monthly expenditures, bemoan that you can’t afford a larger place?). You spent too much on a designer handbag because it was on sale, and you couldn’t pass up “the chance” . I’m not saying you can’t buy yourself nice things… but are you doing it out of a fear that if you don’t do it now, you might never be able to afford it? Are you doing it because spending money on something frivolous makes you feel better about a stressful financial situation? That’s a poverty mindset, and it will drag you down and keep you there as long as you keep feeding it your mental activity AND your money.
People who are focused on growth don’t worry that they’ll miss their chance if they don’t buy now. They know another chance will come along, and they’ll be able to get what they want when they’re ready for it.
7. Declutter “just in case” items
This one is bound to be controversial – proponents of frugality encourage keeping lots of items that may be useful in the future, to prevent having to buy something down the road. And I’m definitely not against sustainable living. But some things just aren’t worth saving, regardless of how marginally useful they may be. Saving bread bag clips, worn out shoes, or that pair of jeans that’s in excellent condition except for that one rip you’ll get around to sewing someday – just toss them, or find them a new life elsewhere (did you know you can sell your denim scraps to crafters on eBay?). This is another manifestation of fear – you’re worried that you’ll toss something you need and won’t be able to afford to replace it. But 99% of this type of clutter is useless.
Some things are worth keeping, like expensive baby items if you or a family member may be having more children, but how much stuff is taking up space in your home that may never turn out to be actually useful? I promise you, whatever problem that will come up down the road that could have been solved by the contents of your junk drawer, will still be easily solvable with something else. And I say this as someone who used to save old pen caps because I saw a YouTube tutorial once about turning them into screwdrivers. You’ll feel better and more optimistic once that stuff is gone and you’re no longer keeping physical reminders of your fear of not having something you need.
Bonus: Cultivate Gratitude Even in Your Darkest Moments
It can be hard to stay positive when it feels like things are crumbling all around us. If you’ve ever had to work out a plan to feed your family until payday, you know that panic that can set in seems to overwhelm everything else. The secret to staying growth-focused and forward looking, no matter how bleak it seems, is gratitude. Being grateful for the things you do have, the things you can do, helps you to redirect your focus and think with a clear head. While you work on changing your language, try telling yourself, “I’m grateful that I have a roof over my head, and the ability to come up with a plan”. You’ll be amazed at what sticks – and shifts – when you try to change your mindset about money.
Are you working on changing your mindset?