When you see that your checking account balance is getting low, your first instinct is probably not to go out shopping for fun, unnecessary stuff. That’s a good thing—it shows that you have a normal, reasonable reaction to a lack of funds, a situation that can also be referred to as scarcity.
Scarcity is a tactic that many sales professionals use in order to encourage you to make a decision to buy quickly. When they tell you that something is only on sale for a short amount of time or that it comes in a limited quantity, that’s scarcity. Scarcity works in these situations because you’re wired to want to take advantage of deals. By being forced to act quickly, you don’t give yourself the chance to apply critical thought to the situation.
While scarcity often works against you, forcing you into purchases that you otherwise might not have made, artificial scarcity—a kind of scarcity that’s not real—can also work for you.
Using Artificial Scarcity in Your Bank Account
At the beginning of this post, I brought up the fact that you likely don’t think about going shopping when you have a very low checking account balance. So what if you had a savings account at a separate bank, with a balance you can’t see when you log in to your checking account, and you put money in that bank account first thing every payday? Then you’d create a false sense of scarcity that could encourage you to stay on budget and stop useless spending.
This concept is partially based on a strategy I discuss in Financing Your Life, called paying yourself first. It further helps to strengthen this concept by keeping your hands out of the money you’re setting aside.
In order for this to work, you may need to ensure you have no written notes of your savings account balance anywhere. While some people need just a thin veneer of artificial scarcity to get on track, others need to completely hide from themselves any evidence of a growing savings account balance or they will tap into it and use it to fund their overspending.