There’s an ocean to explore and learn about in finance. Even as a veteran with decades of experience, it’s interesting to consider new investments and trends while discerning the “truths” that remain the same. You can navigate finance like you’re on a life raft, taking what the ocean and weather deliver to you that day. Alternatively, you can start with your needs, objectives, and resources and gather relevant information for your journey. By crafting your lens, you can save time and money and enjoy a higher quality of life. Maslow’s Hierarchy of Needs offers one such lens.
This conversation may feel rudimentary for those with volumes of social science studies under your belt. Suppose you already have a good handle on Maslow’s Hierarchy of Needs. You may be ready to translate his teachings into financial strategies. If that’s the case, let’s get to work.
This blog is for the rest of us.
You can Google Maslow’s Hierarchy of Needs and see a wide variety of illustrations. We show one example on our website. Reviewing this together is an excellent exercise for new clients and clients we’ve worked with for a while because it defines where we need to focus at this moment. The pyramid shows how our needs and fulfillment rely on solving and settling various segments. Maslow also outlines how needs relate to each other and, like tiers, build on one another, starting with physiological needs and moving through to safety, love/belonging, esteem needs, and self-actualization needs.
Physiological needs can be as simple as securing clean air and water, safe shelter, clothing, rest, and sleep. These aren’t just considerations for your children who are beginning to leave the nest and learning to live independently. Sometimes, securing physiological needs is a priority for someone leaving a difficult marriage or partnership. Anyone who’s survived a natural disaster knows gratitude and relief when physiological needs are secured. If these needs aren’t solved, addressing them pre-empts any other consideration.
The next tier of the pyramid comprises safety needs, including personal security, stable employment, safe transportation, access to health services, and feeling secure with your property. If you spend a few minutes in any media, you’ll know that safety needs aren’t always easily secured.
When basic physiological and safety needs are solved, we can turn toward relationship/belonging needs and solve for friendship, love, family, and connections. This might be our community through birth, and it might be a community of choice. Ideally, these relationships serve our well-being and help us grow to become our best selves.
When relationship needs are on solid ground, we can think about esteem needs, which focus on respect, status, recognition, accomplishment, and some path of mastery. These needs are met through our education, our promotions, our public relations and awards, and the things we begin to accumulate in our lives – ex., our travel, our houses, cars, boats, planes, art, and other collections.
The challenge is that getting trapped in the esteem need tier is easy. The world will never chastise you for one more accomplishment! It can become your gilded hamster wheel. I’ve witnessed exceptionally accomplished wealth-builders prioritize their esteem needs and the accoutrements that come with success to such an extent that it can jeopardize relationships and community. You can see the vulnerability and risks for anyone who is so adept at “winning” that decisions morph into “win at all costs.” A great question to ask at this stage of life: Is the life I’ve constructed owning me and, by default, limiting me?
The top of the pyramid is the tier where we explore self-actualization needs. This stage can come later in life, but for anyone who’s successfully scaled a company that has been acquired, this stage can come early. For most of us, self-actualization is something to contemplate after our children are educated and independent. As they ‘come off your payroll,’ you begin to enjoy the discretionary resources to craft your perfect life.
However, an inheritance or a windfall can propel you into dealing with self-actualization questions at a younger-than-usual age.
The fun part of a self-actualization conversation can mean exploring a wide variety of options, ex., working into your 70s at something you’re good at and enjoy. It could mean leaving a stressful job and consulting. It could mean selling your business and volunteering for your favorite non-profit. It could mean turning that favorite hobby into a viable business.
Sometimes, your needs will change, and the tier in the pyramid in which you find yourself will shift. It shifts as you progress through your career, and it can change with other transitions, such as a divorce, job loss, sale of a business, or death in your family. Your financial strategy must align with the right priority area at the right time.
No matter which tier of Maslow’s Hierarchy of Needs is relevant to you at this moment, some fundamentals stay the same. These fundamentals include constructing and/or updating your personal financial statement – knowing your assets and your liabilities. Have a handle on your cash flows, your income, and expenses. Negative cash flows require different strategies. Be intentional about how you deploy your positive cash flows; you’re investing time and money every day, so be sure these are working for you. Successful wealth-builders make incremental improvements that compound over years and decades and may leave a legacy to benefit the people and causes that matter most.
In the end, wealth-building is not about the money. It’s about you. You are complex, and life is dynamic. Using Maslow’s Hierarchy of Needs is one paradigm that can enhance your financial advisory experience, orient you toward achieving your goals, and optimize your version of a life well-lived.
Investment Advisory services offered through Equita Financial Network, Inc., an Investment Adviser with the U.S. Securities and Exchange Commission. Equita Financial Network also markets investment advisory services under the name AegleWealth. The foregoing content reflects our opinions and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.