3 Ways a Poverty Mindset Is Keeping You from Financial Freedom
Written by
Cara Danielle Brown
Edited by
Zuri Anderson
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English philosopher James Allen once wrote: “As a man thinks, so he is; as he continues to think, so he remains.”
In other words, you are your thoughts. So could a poverty mindset be affecting your finances?
A poverty mindset refers to a scarcity mindset and focuses on what one doesn’t have, as well as the underlying belief that they’re never going to get it. This stands in contrast to an abundance mindset which focuses on not feeling limited by what one doesn’t have, and, instead, seeking opportunities to acquire it.
While it’s imperative to note that external circumstances outside one’s control can contribute to poverty (and it would be patronizing to say otherwise), it would also be negligent to not acknowledge the role mindset can play.
Without further ado, here are three ways a poverty mindset could be keeping you from financial freedom, according to experts:
Aversion to Financial Risk
With risk comes potential for loss. And this is terrifying to those with limited assets because one wrong move may mean losing it all.
“I frequently see this with new prospects in their mid-30’s and early 40’s who, despite having decades left until retirement, stick solely to ‘safe’ investments,” stated Said Isralilov financial planner and wealth manager at Israilov Financial. “This isn’t just a conservative investing approach — it’s a deeper psychological barrier.”
Jaime Wall, personal finance strategist at Gamblizard, supported that notion that a poverty mindset comes from a deeply ingrained focus on limitations that keeps one in protection mode, “where the fear of losing overshadows the drive to build wealth.”
Self-Fulfilling Prophecy
Whether born into a less privileged lot in life and/or having been knocked down a number of times in an effort to obtain financial security, it can become easy to feel like there is no point in trying anymore.
Individuals then internalize the belief that poverty is just part of one’s identity.
Chelsea Williams, founder and fractional CFO at Money Mastery, explained that a poverty mindset can cause people to stay in poverty due to self-limiting and self-sabotaging behaviors stemming from the eventual “belief that one is poor because they deserve it, which prevents them from trying to improve their lot in life.”
This mindset makes change difficult.
“A scarcity mindset based in unworthiness or helplessness can prevent people from spending money on themselves, applying for a promotion, or contributing to savings or retirement,” said Kate Dorman, financial therapist at Sound Financial Therapy LLC.
Missing Out on Long-term Growth
A poverty mindset keeps one in survival mode, meaning it can be hard to see five steps ahead of you when immediate, basic needs like food and housing are front of mind.
But, as any finance guru can attest, foresight and long-term investments are key to building wealth. The absence of this foresight “can make reaching financial goals far more difficult compared to those who pursue a balanced, growth-oriented investment strategy,” stated Israilov.
“Someone with the poverty mindset sees a [sudden] surplus in resources as an opportunity for increased consumption,” said Williams.
Having grown accustomed to deprivation, a large bonus or stimulus check may encourage one to go out and buy everything as opposed to, for example, investing that money in the stock market and letting it grow.
Also complicating matters is imposter syndrome.
“You get a lot of money, you spend a lot of money […] subconsciously they’re operating under ‘Oh my gosh, I gotta get rid of this. Like this is not mine.'”
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