Sep 4, 2009

Creating the Illusion of Scarcity to Accelerate Financial Goals

Writing about how we haven't had any financial stress stemming from our current health crisis reminded me of how sound our finances really are. Generally, I usually feel like money is tight because I create the illusion of scarcity and limit the amount of money we have easy access to. I transfer money to savings and pay extra on the mortgage each month, and once those things are done, there isn't much leftover for what's usually called discretionary purchases.

Thus, I constantly create a sense that we have less money than we actually do. This illusion helps us accomplish our financial goals a lot faster than they would otherwise be reached. Instead of spending money on dining out, I'm paying off the mortgage. And instead of buying another pair of shoes, I'm saving to pay cash on our next new car.

I feel like we have a lot less money than we really do, which helps me to be mindful with the money than I do allow myself discretion over. If I only give myself $100 to spend on "fun" for the month, I'll be a lot more thoughtful about how I spend it than if I had $500.

And the big effect of the illusion of scarcity is that I have money when I really do need it. Like for hospital bills. And that's no illusion.


Mr Credit Card said...

The US Federal Government could sure learn something from you. Instead the US is in debt, have no money and yet assume we can spend spend spend!

SimplyForties said...

Great tip!