Applying Maslow?s Hierarchy of Needs to Financial Planning

Admittedly, when people mention Maslow’s Hierarchy of Needs, the first thing they think about is a pyramid segregated with lines with each division carrying corresponding labels. This is actually one of the most famous theories in regards to human psychology. Although this theory has often been criticized as not being entirely true or universal, it retains its popularity over the years. 

In a nutshell, this theory states that the human needs consist of five levels of tapering importance. Unless the lowermost levels are met, there can be no progressing up the pyramid. 

The topmost level is dedicated to self-actualization: the state where one individual finally achieves everything that can be expected of him or her. The four lowermost levels (starting from the base of the pyramid) consist of:

1. Physiological needs (biological needs dictated by the human body)
2. The need for safety and well being
3. The need for belongingness
4. the realization or promotion of self-esteem

In theory, man can achieve his full potential if all the other four levels are satisfied first. If we apply Maslow’s theory in financial planning, we can actually see how our basic human needs dictate how we set our short term goals and why we choose the long term goals that we have. Naturally, as human beings, we dedicate a lot of our money to acquiring food and drink. We are therefore satisfying our most primitive biological needs.

However, for many of us, we have this unerring need to find safety, either physically or psychologically.

• Physically, some of us set aside money (as part of our financial planning for the future) in order for us to acquire our own house or at least a domicile where we can feel at ease when we are not facing the public.
• Psychologically, some of us take refuge in simply saving large volumes of money as a safeguard to possible unfavorable events. In this case, we find refuge and complacency by knowing we have something to rely on should we face leaner times ahead. Having a pension plan is a good example of satisfying our psychological need for safety and well-being.

The need to belong can be satisfied when we begin to save up for our family’s future. We belong to a family unit, and therefore we take great pains in keeping it safe. In financial planning, we usually do this by making sure that when we pass on, our loved ones will have legacies to tide them over. In other cases, our financial planning revolves around a person we feel belongs to us or that we belong to. A good example of this is acquiring an educational policy for a child who may or may not be related to us. 

There is also this need to promote one’s self esteem. And this is quite prevalent in modern society. Although we might stress that for some people, promoting self esteem comes way before satisfying the need to belong and the need for safety. Saving up for a car is one way of promoting one’s self esteem because it serves as a visible status symbol in society.

Whatever needs we might be satisfying, financial planning is a critical element in paving the way for a secure future.