The concept of "abundance" vs "scarcity" mindsets has garnered a lot of discussion in personal development and business circles for a number of years now.
In short, the scarcity mindset represents a "zero sum" sort of view in which there are limited resources available in the world, and we are all in competition for them. We need to be careful not to run out of what we have, because we may never be able to acquire it again. Scarcity is a source of stress, as it represents a thought pattern that there will, ultimately, not be enough.
In contrast, the abundance mindset believes that more can be created. We are free to enjoy resources we have, because there is a reason to believe that more will be created. Winning does not always create losers; it's possible for multiple parties to a relationship or transaction to all get what they want and need. Abundance allows for peace, because we no longer have to believe in conservation at all costs.
Today, I want to explore how these ideas intersect with personal finance and wealth creation in two distinct ways:
- Understanding how money (which might be scarce) and wealth (which is not) differ from one another can help us better focus our efforts on true wealth creation.
- Understanding how the common misplaced goal of "more money" can be better replaced by "more ability to access and enjoy wealth" can completely alter our strategy and allow for abundance, instead of scarcity, throughout our lives.
A Key Distinction: Money vs. Wealth
Before we dive into mindsets, it's probably helpful to clear up a fundamental confusion that plagues many related conversations.
As Paul Graham writes about in his article "How to Make Wealth," (originally published in Hackers & Painters) money is not the same as wealth.
In his words:
"Money is not wealth. It's just something we use to move wealth around...Wealth is stuff we want: food, clothes, houses, cars, gadgets, travel to interesting places, and so on. You can have wealth without having money. If you had a magic machine that could on command make you a car or cook you dinner or do your laundry, or do anything else you wanted, you wouldn't need money. Whereas if you were in the middle of Antarctica, where there is nothing to buy, it wouldn't matter how much money you had."
Money is merely a medium of exchange; it's a placeholder, a method of moving wealth around. Wealth, on the other hand, is what people actually want; in a sense you could think of wealth as (in part) the ability to spend and enjoy money, plus the non-monetary sources of joy in life.
This distinction matters because when we confuse money with wealth, we limit our thinking. And if we allow our money situation to interfere with our access to true wealth, we may find ourselves forced straight into the trap of the scarcity mindset.
Intersection #1: The Scarcity vs. Abundance Mindset in Wealth Creation
The scarcity mindset sees the economic world as zero-sum. It's a fixed pie where one person's gain must come at another's expense. This perspective employs the language of limitation: costs rather than investments, transactions rather than relationships, security rather than opportunity. In order to "make money," you have to find someone else with money and extract it from them.
An abundance mindset recognizes that wealth can be created, not just redistributed. It understands that human ingenuity, cooperation, and innovation can generate new value where none existed before. Graham uses the example of having an old, beat-up car. If you work on the car to fix it up, get it operational, and make it beautiful, then you have created value where none previously existed. The world is now plus one beautiful classic car. You possess something now that is of greater value than it was, and you didn't have to take it from anyone else to make that happen.
Artists, writers, and coders would surely understand this concept easily as well - it's clearly possible (and common!) to create something of value that didn't previously exist, and you can do so without extracting that value from elsewhere in the world.
How Wealth Actually Gets Created
Wealth creation comes from creating things that people want. When you create something people value, you're generating wealth. This process isn't about taking from others; it's about bringing new value into existence.
This aligns perfectly with the abundance mindset's rejection of zero-sum thinking. Wealth creation isn't about scrambling for resources in a closed system. Instead, it's about innovation, problem-solving, and value creation in an open one.
If you are looking to understand how you can do a better job of wealth creation, use these anchors. Graham would say that wealth follows where you can measure results and have leverage. Outside of your work, when you think about how you're deploying your capital, consider whether what you're doing is adding something that people want to the world - that it's meaningfully supporting an endeavor that is creating true wealth and that your terms in that arrangement make sense to compensate you over the long-term.
Excellent thinker Shane Parrish (The Math of Generosity) adds that compensation tends to follow autonomy. You may be putting a cap on your wealth creation if you need to be told what to do. When you are capable of (and in position to) decide what needs to be done to create value and do so without needing to be asked, you're likely in a better position to create wealth for others and yourself.
Intersection #2: Scarcity vs. Abundance in Wealth Usage and Enjoyment
The Two Financial Realities We Navigate
Here's where our financial journey takes an interesting turn. While wealth creation operates on abundance principles, there's a practical reality we must confront: the financial lifecycle.
The Wealth Creation Phase:
During our primary working years, we have a clearer path to relative abundance.
We have:
- Human capital (our ability to earn)
- Time (for investments to compound)
- Recovery runway (ability to bounce back from setbacks)
- Growth opportunities (new skills, ventures, investments)
In this phase, an abundance mindset isn't just psychologically helpful, it's economically accurate. The possibilities for wealth creation are vast and workable.
The Wealth Preservation Phase:
As we age, however, the financial reality has a tendency to shift for most people.
In retirement or later life:
- Our earning capacity (often) diminishes
- Our time horizon for potential asset usage shortens
- Recovery from financial setbacks becomes harder if our wealth creation derived from work we no longer do
- Income becomes dependent on accumulated assets - income and assets need to be managed very thoughtfully if we're to avoid scarcity at this point.
This phase introduces genuine constraints that can't simply be wished away with positive thinking. While the "wealth pie" can be grown, your individual "money pie" in some real sense, becomes more fixed. We face actual limits on our ability to replace or expand our resources.
The Self-Fulfilling Prophecy
Here's the fascinating paradox: how thoroughly you embrace abundance thinking during your wealth-building years largely determines whether you face genuine scarcity in your later years.
Those who operate from scarcity, perhaps by hoarding dollars whenever possible but avoiding risk and innovation, might find themselves with limited resources later in life, forcing continued scarcity-driven approaches. Their earlier mindset creates the very constraints they feared. Those who are afraid to make long-term financial commitments out of scarcity and fear, may find that they must contend with scarcity once it's too late to make those commitments for their own benefit.
Conversely, those who embrace abundance, which might mean not only taking calculated risks and investing aggressively, but also creating value and setting up infrastructure that will benefit them later in life, can build the resources that help maintain an abundance mindset throughout life and retirement (financial independence). They've altered their position such that, even with naturally declining earning potential, they remain unconstrained, or at least less constrained, by scarcity thinking or scarce reality.
Importantly, there's much more strategy involved in attaining success in this space than "hoarding and growing as much money as possible."
The possibilities are almost endless, but here are a few examples where more "money" can still equal less "wealth":
- Saving money in the short-term by making time commitments to do things yourself that are not in line with what you want (or how you create value) in life.
- Avoiding an investment that reduces your balance sheet (less cash/monetary asset value now) but enhances your ability to create or enjoy wealth (either now or later).
- Steering only toward forms of investment that give you the opportunity to generate the largest hypothetical future value, without regard for when and how you would be able to access and enjoy potential future gains.
- Taking risk in a way that prevents you, either mechanically (disinvesting problems or reducing spending in case of ongoing risk and uncertainty) or emotionally (not sleeping at night), from enjoying the potential benefits of that risk-taking.
Building Financial Abundance That Lasts
To attempt to create and enjoy a financial abundance mindset:
Recognize the distinction between money and wealth
Money is the medium; wealth is what you actually want. Focus on creating genuine value, not just accumulating dollars. Don't overemphasize decisions that put larger dollar figures on paper, but rather decisions that provide freedom, enjoyment, access, and the ability to create even more value.Embrace abundance thinking during wealth-building years
- Seek opportunities to create new value rather than just capturing existing value
- Invest (in yourself, in infrastructure, and in value creation) rather than merely "save"
- Take calculated risks when sources of recovery or replacement are known
- Focus on growth and possibilities rather than limitations
Build resources that support continued abundance thinking
- Create diverse income streams that don't deplete principal
- Develop margins of safety that allow reasonable risk-taking
- Favor asset choices that allow you to optimize for how you can access and spend your wealth rather than just grow it and avoid touching it
- Build non-financial assets (health, relationships, skills) that maintain value
- Structure finances to preserve flexibility and choice
Maintain abundance perspective even when resources become more fixed
Even with finite financial resources, abundance thinking can extend to how we share our time, wisdom, relationships, and joy. These are all resources that often grow rather than diminish when shared.
The Ultimate Financial Freedom
The real victory isn't just having "enough money". In my opinion, winning is creating a position in life where scarcity thinking no longer constrains your choices, your generosity, or your willingness to embrace life's continuing opportunities.
By understanding that wealth is what people want, not just money itself, and by embracing the abundance principle that new wealth can be a matter of our own creation rather than just redistribution or hoarding, we set ourselves on a path toward a bigger and more enjoyable life.
None of this is to deny the real constraints we face, particularly later in life. Rather, it's best to acknowledge them while ensuring they don't become self-imposed limitations that unnecessarily restrict the truly scarce resource, the time available to spend in our one life. The abundance mindset allows us to see possibilities where others see only problems, to create value where others see only costs, and to build a financial future characterized by opportunity rather than scarcity.
2025-8203367.1 Exp 07/2027