I think a lot of people have trouble reconciling an abundance mindset with the omnipresent, "live below your means," advice.

To achieve great success, we're told that we must take risks, act as if, and spend money to make money. The other side of the personal finance tells us to skip the daily coffee, never eat out, and live a life a step or two below our current status.

This is something I struggled with and still do.

Are these two sides of the same coin or different coins?

They're two sides of the same coin in my opinion. The abundance mindset, in my opinion, doesn't mean go hog wild and go deeply in debt just for consumption purposes. It's more to offset the "save every penny and never use a credit card." I think there is a healthy balance between the two, in that living below your means to save and invest can lead you to a life of abundance down the road.

@John Wijtenburg   To me, "live below your means" means not spending money on stuff you don't need.  Also when buying, think about what you truly need-do you need a giant SUV with all the bells and whistles or does a basic car meet all of your needs.  Investing is similar in many ways, don't over extend yourself, buy based on numbers not because the house has granite counters and hardwood floors.

There is nothing wrong with treating yourself once and a while.  I.e. buy a cup of coffee if you've had a tough day, but don't spend $8 everyday on a fancy cup of coffee.

Originally posted by @John Wijtenburg :

To achieve great success, we're told that we must take risks, act as if, and spend money to make money. 

Drinking a $5 cup of Starbucks doesn't fall into the category of spending money to make money, instead it simply falls into the 'spending money' category.  Having the newest iPhone, or paying for 500 channels worth of cable tv + the NFL package isn't spending money to make money.

Investing funds back into your business so that it can grow, or buying your first rental property are examples of spending money to make money, consumerist centric spending on the other hand is just spending.

@John Wijtenburg

John, could I ask you to define what you believe to be an "abundance mindset" and a "scarcity mindset"?

One is a personal finance concept. One is a business concept.

Gotta have a balance of both. You don't get rich pinching pennies and worrying about having that $5 cup of coffee. If that $5 cup of coffee gives you an edge makes you focus or gives you what you need that day to perform then do it. 

I think living below your means to me is not upgrading my housing, my car, my lifestyle on things I don't need at the moment when the money can be better suited for things like my real estate business, rentals etc. It's really the big ticket items. I have to ask myself am I buying these things for me or am I doing this to show off?  The intent and want has to be self serving and you need to truly look in the mirror and be honest with yourself.

Having the abundance mentality is the right mindset.  The money will come back 10x if you are applying it to the right things and putting in the work to back it up.  It never pays to be cheap and it will always cost you more money and time.  Being cheap and being smart with your money are 2 different things.

If coffee makes you sharp,  great.  But coffee is $2 at McDonalds and $0.50 at home...

I grew up poor and have been watching expenses my whole life.  Sure we have lifestyle creep,  most people do,  but we THINK about where the money goes.  And have no debt other than mortgages.  I think a lot of spending is mindless,  and marketing is working to get us to spend even more mindlessly..  Just being mindful of where the money goes, and if things are really worth it...goes a really long way.  New clothes and gourmet foods don't make me happy,  but travel does. Realizing and cutting down the spending on the one frees up money for the other.

While I wait on John to clear up his thoughts on mindsets...

BP moderators, the following pie chart was released by the Bureau of Transportation Statistics in 2009. It is in the public record.

US household expenditures today are roughly the same. The main points to take away are that the three biggest categories are Housing (your house), Transportation (your car(s)), and Food.

There is a rather clear connection between people who live in too much house, drive too much car, stand in line to buy overpriced coffee, and complain about not having enough money.

If you plan on cutting out the coffee without doing anything about the house and the car, you're very likely not going to get anywhere in living below your means. Nobody who's shelling out a $2000/month in mortgage/rental costs and $650/month for their car payment/gas/insurance is going to get rich cutting out their occasional pumpkin-spice lattes.

Thanks to everyone for your input. Great stuff here.

@Jim K. I think of abundance mindset as taking the actions necessary to create more in your life regardless of the cost. I think of a scarcity mindset as holding back on those things because, even though you know there's a potential ROI, you can't move to spend the money.

I grew up in a very frugal home. It took me years to break from a scarcity mindset, and now, I'm living a very comfortable life. Still, every so often, I fall back to my old training.

For example, I had to consciously convince myself that the $750 I paid for melanoma surgery was a good thing... that I was happy to pay for it. My initial reaction was disappointment and fear for my finances, even though I can more than afford it.

I know I'm not alone in this. And I'm so grateful for the responses because as much as it helps me, I know it will help others, too.

Originally posted by @Jim K. :

There is a rather clear connection between people who live in too much house, drive too much car, stand in line to buy overpriced coffee, and complain about not having enough money.

If you plan on cutting out the coffee without doing anything about the house and the car, you're very likely not going to get anywhere in living below your means. Nobody who's shelling out a $2000/month in mortgage/rental costs and $650/month for their car payment/gas/insurance is going to get rich cutting out their occasional pumpkin-spice lattes.

This. Just because you could theoretically afford a fancy primary, car and outings, you choose to reserve some or most for a future and higher ROI or something more important.

Live below your 'means' so you can prioritize spending elsewhere later  On something that actually matters to you. For us it's not always a new investment but often experiences like vacations. 

People that cash their paychecks Friday (yuck) and blow it all by Sunday night obviously have no plan or priorities.  Living below your means in order to build for something  more important than a bathroom visit later or vehicle depreciation  just makes sense. 

@John Wijtenburg

You're not defining these two concepts. You're talking about them, yes, producing ideas about them, but those ideas are not defining the concepts. You're talking about the actions that come out of the mindsets, not the mindsets.

abundance mindset - taking the actions necessary to create more in your life regardless of the cost.

scarcity mindset - holding back because you can't move to spend the money.

Is that a fair characterization?

Well, if it is, I'd ask you to define the two ideas like this: an abundance mindset is a belief that there's enough for everyone to prosper. Others can succeed along with you. Someone else's success is not automatically your loss. An abundance mindset is always defined in opposition to a scarcity mindset, which sees success as a zero-sum game. If you win, others lose. If others succeed, you lose.

I really doubt you have a scarcity mindset. Your profile mentions more than $200M in investments! So what's up with the $750 for melanoma surgery?

So tell me, John, did you start this thread as a possible way of convincing people that instead of taking stock of and taking control of their less-than-frugal lifestyles, they should increase their income to keep pace with it? Spend themselves into the big bucks? That's an argument that's made frequently on this site. Is that the discussion we're really having?

@Jim K. I really love your perspective and explanation. Well said.

It's difficult to reconcile the two when you see so much extravagance in this business. I think of Grant Cardone and *************. I think of people that I work with daily that set material goals before service goals.

To be clear, I don't advocate spending beyond your means. However, as Jeff Bezos says, revenue solves all problems. If you can't solve your lifestyle problem, a lot may be revenue related.

My philosophy, for lack of a better term, is spend less than I bring in, save at least 10%, shop local, shop mom and pop, stay away, as much as possible, from the huge corporations. Keep money in my community, treat people fairly, be positive, and weigh consequences carefully. And maybe the biggest of all : dream big and work on those dreams every day. 

Originally posted by @John Wijtenburg :

as Jeff Bezos says, revenue solves all problems. If you can't solve your lifestyle problem, a lot may be revenue related.

This is interesting perspective !

It's definitely a tricky idea to reconcile. Most everyone I know - because I grew up really poor - has a scarcity mindset, yet also lack any kind of meaningful income vehicles outside of their jobs despite the scarcity mindset. What gives?

Well, the scarcity mindset tells them things like "hoard every penny" "buy the cheapest meat possible" and similar things, and then they can accumulate enough money that they can put a down payment on a depreciating 'asset' like a car or spend everything on a fancy vacation because they "deserve" it. It's not like these people hoard their cash and use it to buy rental property or index funds. 

To me, there is no point in living below your means unless you have some plan for the excess means, since everyone has to spend their money on something or die with a pot of it in the garage. Personally, I prefer to live reasonably decent - buy good quality food, for example - and own my cars outright or spend a small amount of money on a vacation, not "shopping" because I have nothing else to do, etc. and use the excess funds to make more money.

The difference between those who become wealthy and those who stay poor is this: the poor get a dollar and think "How can I spend this on myself?"; the wealthy get a dollar and think "How can I make this dollar make another dollar?" Don't kid yourself that the scarcity mindset doesn't think the first way - just because they're hoarding dollars by clipping coupons and cutting their own lawns doesn't mean they're going to make that money make money - it's still going to be blown on consumer goods or experiences. 

@Jim K.   I think i have a pretty good picture on this question since i work or have worked in half the states in the US.. from the most expensive  Hawaii  CA  etc to the lowest priced Mississippi Alabama and rural PA and Rural Ohio and Indianapolis..

this is just a HIGHLY regional situation..  when you say 2k house payment  that would be opulent in the lower priced states but the ghetto or simply not possible in the higher priced areas.

and car payments of 6oo bucks are mid level car payments or lease payments of high end cars is far above 1000k  a month and 2 to 3k is common. 

To me if you can stroke a check for it then hey thats what money is for.. short of your home you live in and investments you leverage.. everything else should be paid for in cash..  Well except the airplane of course. 

I live below my means and use my savings to invest. I use both these concepts for the same reason; financial independence and build wealth.

Originally posted by @Jay Hinrichs :

@Jim K.  I think i have a pretty good picture on this question since i work or have worked in half the states in the US.. from the most expensive  Hawaii  CA  etc to the lowest priced Mississippi Alabama and rural PA and Rural Ohio and Indianapolis..

this is just a HIGHLY regional situation..  when you say 2k house payment  that would be opulent in the lower priced states but the ghetto or simply not possible in the higher priced areas.

and car payments of 6oo bucks are mid level car payments or lease payments of high end cars is far above 1000k  a month and 2 to 3k is common. 

To me if you can stroke a check for it then hey thats what money is for.. short of your home you live in and investments you leverage.. everything else should be paid for in cash..  Well except the airplane of course. 

Sure, there's plenty of variation in this country but I'm positive I can safely stand by my statement that anyone who's broke and bleeding upwards of $30K a year on their home and transportation costs is just never going to be honestly able to attribute significant wealth creation to the elimination of their cup of tony coffee in the morning.

Originally posted by @JD Martin :

It's definitely a tricky idea to reconcile. Most everyone I know - because I grew up really poor - has a scarcity mindset, yet also lack any kind of meaningful income vehicles outside of their jobs despite the scarcity mindset. What gives?

Well, the scarcity mindset tells them things like "hoard every penny" "buy the cheapest meat possible" and similar things, and then they can accumulate enough money that they can put a down payment on a depreciating 'asset' like a car or spend everything on a fancy vacation because they "deserve" it. It's not like these people hoard their cash and use it to buy rental property or index funds. 

To me, there is no point in living below your means unless you have some plan for the excess means, since everyone has to spend their money on something or die with a pot of it in the garage. Personally, I prefer to live reasonably decent - buy good quality food, for example - and own my cars outright or spend a small amount of money on a vacation, not "shopping" because I have nothing else to do, etc. and use the excess funds to make more money.

The difference between those who become wealthy and those who stay poor is this: the poor get a dollar and think "How can I spend this on myself?"; the wealthy get a dollar and think "How can I make this dollar make another dollar?" Don't kid yourself that the scarcity mindset doesn't think the first way - just because they're hoarding dollars by clipping coupons and cutting their own lawns doesn't mean they're going to make that money make money - it's still going to be blown on consumer goods or experiences. 

 I don't think the people in the financial independence community really think or talk enough about this.

@John Wijtenburg @Jim K.

What many people don't understand is the person who is buying coffee regularly is the same person who regularly shops at high priced convenience stores, orders uber eats instead of picking up their food, purchases useless high end items ($200 shoes, etc.) on a regular basis even if their card gets declined once a week.

So no a coffee won't make you go broke or become rich, but pay attention to the person who buys it regularly, if that person isn't well off/able to keep a high income, they will be poor for life regardless of how much they make because they will always spend more than they can afford.

The most successful savers/spenders are those who focus on being intentional with their spending. They know their goals and values and make daily spending decisions in alignment with them. Their goal is not to "live below their means"...it's to "live in alignment with their values".

The abundance mindset is when you believe their is plenty for everyone...one does not have to lose for someone else to win. The scarcity mindset is a limiting belief that holds us back from acquiring the skills needed to get what we want in life.

@John Wijtenburg I think Alan Watts has the best perspective on both sides. He says "the menu is not the meal" and "people confuse money with wealth".

It's all the same coin. It seems important to me to remember money is only a symbol and tool. And the stacking of tools in a shed doesn't change anything. The employment of the tools is their purpose. How a person employs the tools tells you how their brain views it's possibilities.

If I gave you a paint brush could you give me Starry Night?

Scarcity and abundance are both an illusion, their only useful concepts by which to compare ourselves to someone else. Like night and day.

But, if your aim is to make money, and that's the game you want to play and become good at, then a little scarcity and below your means living can help in the abundance of the future.

When you take on learning new skill, you always start with a scarcity. But with practice ability will become abundant.

I second @Mike Dymski 's comments.  I think the abundance mindset is really about living intentionally whereas the scarcity mindset comes from deep seeded limiting beliefs.

To answer the original question, I absolutely agree that one should live within their means and I absolutely think one should expand those means. In other words, like what Robert Kiyosaki states, "don't say to yourself you can't afford it, ask yourself, how can I afford it." That is abundance mindset thinking.  And then, don't buy it until you create a way to afford it.  In other words, go and acquire an asset to pay for it.

People with a scarcity mindset may look like they have a lazy mindset because they just tell themselves that they can't afford it or that it really is not that important and then they put it out of their mind and go about business as usual.  Rather than saying, I really do want it, and I am going to figure out a way to get it; and then exercising their mind, and increasing their creativity, create a way to make it happen.  

As a therapist, I can tell you that a scarcity mindset doesn't really stem from laziness but it often stems from fear that is supported by negative beliefs about money and people who have money.  So it becomes easy for someone to just dismiss the need to put forth effort to expand one's means because deep down they have a belief that it is probably bad anyway.  

The scarcity mindset of saving may help keep you from being poor, but it won't help you become wealthy.  The scarcity mindset may help you keep a roof over your head and food on your table, but it likely won't help you get to a level where you can keep a roof over the heads of lots of people or feed the hungry throughout the world or build wells in areas where they don't have clean water.  Wealth can do that.  That is an abundance mindset.  And as I become more blessed with abundance, it becomes my responsibility to use that abundance to bless the lives of others.

i believe in....Expanding Your Means