Scarcity is not having enough of something – food, money, time, water, social interactions – anything that humans need. It has a profound impact on behavior, thinking and decision making. Scarcity captures the mind involuntarily. It has a positive “focus dividend” – if you’re running short of something, your mind fixates on that one thing. But the big negative is that if the mind is preoccupied with what’s insufficient, there’s much less attention available for everything else.
A behavioral economist and cognitive psychologist wrote an interesting book on the topic. Mullainathan and Shafir, Scarcity – Why Having Too Little Means So Much (2013). Their thesis is that scarcity is a mindset and that scarcity creates more scarcity. The authors explain scarcity’s impact on the mind with metaphors. For example, compare two people packing a suitcase for a long trip. One suitcase is suitably large, the other insufficiently small. The guy packing the small suitcase has to be extremely careful about what and how he packs because he’s short on space. The guy with the big suitcase has plenty of room, so he doesn’t need to be as careful. He has lots of “slack”; not deliberately unused space but rather the by-product of packing under abundance.
During good economic times, people don’t meticulously account for every dollar of their spending. But people living paycheck to paycheck have to carefully budget every cent. Poor people have much less slack than rich people. My clients tend to have plenty of slack because they recognize the importance of financial and estate planning; they work hard, save their money and are smart about having their act together.
Do what it takes to generate plenty of slack in your life. Little things can add up to strong psychological security, which gives you plenty of cognitive and physical time and energy to pursue your interests and passions beyond making a living (for me, that’s playing music, exercising and reading books about the economics of scarcity). Mental slack allows you to vigorously pursue endeavors beyond survival.
Save for retirement, stuff some more cash in that coffee jar, buy some silver or gold, be sure you have plenty of insurance and by all means, execute your estate planning documents. The peace of mind living without scarcity brings is vital. Having an Estate Planning War Chest is the mental luxury of living with a feeling of abundance. As Henry David Thoreau observed “A man is rich in proportion to the number of things he can afford to let alone”.