How to get out of a deep financial hole

Scarcity can give us tunnel vision, forcing us to resolve that scarcity at the expense of everything else that matters. This means that decisions designed to get us out of the red can dig us into a deeper hole. Consider all your financial needs, not just the ones that aren't being met.

Many of us aren’t where we want to be financially. Some of us feel downright deprived of the financial security we need to live the life we want. If that deprivation gets intense, we can react in ways that, though intended to make things better, can actually make things worse.

This is because of the scarcity trap: when something we really need is scarce, our brains hyper-focus on that one thing at the expense of other equally important things. This happens when we have no money, no food, no time, no friendship, no love. Whatever is sorely needed but deeply lacking will become the focus of our fixation. Everything else begins to matter less than it should. And we end up making choices that lead to self-sabotage.

Let’s say you’re a handyman. Keeping your truck well-maintained is important to getting to your clients and making a living. But lately, your truck has been breaking down, leaving you without reliable transportation. You have to turn down jobs because you can’t carry all the tools you need on public transit or in a rideshare. Suddenly, what’s “scarce” is a means of transportation to work.

So, you redirect your funds to maintaining your truck. You pour whatever money you have into not just fixing but also upgrading it, to make sure you never end up stranded again. You think you’re being rational because without a running truck, you can’t get to work, and without work, you can’t survive. Your truck has to be the center of your attention, right?

But as you siphon all your money into your truck, you lose sight of other expenses that are also important. Suddenly, you don’t have enough for rent, so your rent payments end up being late – which means you lose money on late fees, leaving you in a worse position to maintain your truck. You also lose the trust of your landlord, who doesn’t want to renew your lease. Your tunnel vision has made your truck better but your life worse.

Or imagine that you’re so worried about saving enough for retirement that you put every dollar you have into savings. Your fear is anticipatory, but it’s no less real. You fear that whatever you save won’t ever be enough. Your tunnel vision causes you to over-compensate, to focus so much on your retirement savings that you may ignore other things, treating them as less important than they actually are.

You may, for example, neglect to make sorely needed repairs on your home for many years, thinking they’re much less important than the size of your investments or savings account. And it makes sense to you: your roof might be old, but it works, so why spend the money when you can invest it? But once you’ve retired, the wear and tear on your home that needed attention years ago causes bigger problems than expected. Now you now have to replace your roof and pay for damage caused by a roof leak, leaving you less money in your retirement than you had hoped for.

The scarcity trap can be a serious problem for those struggling to make ends meet or for those anxious about financial security. If being broke is top of mind for you, consider that your solutions may cause more problems, and it may not be your fault. It may just be because you’ve been bit by tunnel vision.

Take control by paying attention. Set aside time and energy to slow down and make a list of all your financial expenses, and not just the ones you’re struggling with. Consider all the things you need money for, from food to rent or mortgage, the upkeep of your home, debt payments, gas, essentials, entertainment, and so on. Then, ask yourself, “What conditions need to be in place for me to address all these expenses?” Then, list out what has to happen for those conditions to be met, and set out to make those conditions real.

This exercise can take you out of your worry and put you in your head, where decision-making is more rational and better able to put you in a good place. Second, it forces you to look at all your financial needs, and not just the ones that scarcity has you worrying about. That way, tunnel vision won’t set in and you won’t miss anything.

Revisit this list regularly, monthly even. The more you rationally think about the big picture, rather than impulsively reacting to scarcity, the better your chances at reaching financial stability.

Read about how the scarcity trap can impact your ability to make friends.