As dusk was approaching on the North Shore, a friend was driving around in circles trying to find the best spot to watch the sunset. Being so focused on finding the perfect vantage point made her miss the sunset. Why do so many of us seem go around in circles at the expense of seeing what's right in front of us? Believe it or not, this has to do with scarcity.

In their book "Scarcity, Why Having Too Little Means So Much,'' authors Sendhil Mullainathan and Eldar Shafir describe juggling. "When you juggle, you tunnel on the balls that are about to drop, and you neglect those high in the air."

Tunneling can happen in a variety of ways. One of our clients feels the need to replace his car, even though he loves it. He feels he has too many miles on the car. So he has gone shopping several times and hasn't been able to find something he likes as much as what he owns. His tunneling is getting a new car rather than loving what he drives. By simply investing some money in his existing car, he could redo the seats, get the nicks and dents fixed, and do a complete detailing. He won't end up with something new, but he will have something that he really wants.

Almost every client we meet with these days is struggling with a lack of time. Not only does this time scarcity bleed out in impatience, but things get missed. They simply don't have the bandwidth to handle all their responsibilities. One way to manage this is by bunching necessary tasks together. For example, since property taxes are paid twice a year, we encourage them to trigger house things that need to be done around that time but may get forgotten — changing furnace filters, turning on and off hoses, spring and fall cleanup.

If you are feeling this time crunch, use the April income tax season as a time to rebalance your 401(k), check on your property insurance rates or see what bills you can move to online banking. Bunching makes you more efficient and thereby creates time.

Scarcity rears its head in other ways. One of our clients hides money in her home. We're not talking cookie jar money; we're talking new car money stashed in sleeves, under rugs, in books and in a variety of other places potentially never to be found again. Her behavior is extreme, but not misbegotten. The best way to deal with scarcity is to build in some slack. Having a budget where every dollar is accounted for doesn't leave room for the unexpected.

"To be free from a scarcity trap, it is not enough to have more resources than desires on average. It is as important to have enough slack for handling the big shocks that may come one's way," write Mullainathan and Shafir. An emergency fund is a form of slack. So is a home equity line of credit. But there are other things that could help you create slack. Funding a Roth IRA or a Roth 401(k) forces you to pay a tax today, creating a tax-free fund for slack tomorrow.

Most interestingly, scarcity is often borne out of periods of abundance. We procrastinate when we have time, then we cram at the end. Creating progress deadlines can help. One of our clients is in a business where he gets large checks every couple of years but may earn little in between. If we don't create a mechanism to save for the lean times, he will spend when he feels flush and then need to borrow when he runs out of money. We manage this by creating an account where the large checks get deposited and he receives a monthly paycheck based on expected three-year earnings.

All of us experience forms of scarcity, but managing it may help keep us from going around in circles.

Spend your life wisely.

---------

Ross Levin is the founding principal of Accredited Investors Inc. in Edina. His Gains & Losses column appears on the last Sunday of the month. His e-mail is ross@accredited.com.