Maslow’s Hierarchy of Needs is a well known Psychological framework. It also has serious implications for how we earn, save, and spend our money.
I first learned about Maslow’s Hierarchy of needs in a college level psychology course I took. Abraham Maslow created this theory from his study of the healthiest 1% of a pool of college students (see wikipedia). He believed that to find out what matters to humans, we should look at the people worthy of being emulated. The hierarchy prioritizes the things that people want. It is usually presented as a pyramid where the bottom comes first,thenthe top.
According to the hierarchy, food, shelter, etc are the most basic needs (physiological). People that don’t spend money to have these covered, will not achieve the rest. If they are lucky enough to achieve them, they will not appreciate them. The interesting thing about the items on the bottom is that they are finite. You can only eat so much food in a day. You can only sleep in so much space at night. As you move further to the top to safety and love/belonging, the items continue to be finite – but become less so. It only takes one job to make a person financially secure (in most cases)…but how much safety is enough? That’s a tougher question. Even less finite is esteem but the highest level is self-actualization which is infinite.
It appears that the hierarchy has to be complete for a person to be happy. At the same time, there is very limited time, money, and effort available to complete all of it. Over the past few years, I had come up with the following as ways to complete it with the least amount of money.
I started small with shelter. I have only lived in two places as a working adult, and both have been “beneath” me. I go for the bare minimum – amenities, location, etc – and this allows me to get the cheapest price. I earn enough to “pay for” a nicer place, but I will let time tell me if I should actually get one.
I chose a diet, and maintain it. I have spent quite some time developing a diet that represents the minimum amount of food that I believe my body needs. At this point, this diet costs me $50 a week and maybe a lot or a little depending on where you stand. The important thing for me is to maintain it where it is.
I aggressively pursue love, and preserve my self esteem. I only keep close people who care about me enough to accept me and my life choices. This matters, because I refuse to suffer from keeping up with the Joneses. Aggressively pursuing these things conditionally means that I don’t wait for them to fall in my lap; I consciously look for the right people to enrich my life. The right people appreciate me for who I am, including whatever limitations I have financially – in fact, with them my finances are never a problem.
As my income increases, I increase spending on self-actualization. This blog is part of my self actualization. I buy lots of books from Amazon, Barnes & Noble, and other places – and I read them. Increasing my knowledge moves my life forward on many levels, including my professional profile. In my article about the Carnegie Dictum, I pointed out the importance of learning in the first third of my life.
The last section above is key: When I earn more money, I put it towards the highest levels. They are the ones that are infinite, so they provide me the most satisfaction also. Most of the higher levels are experiential, so they enrich my life more than any “thing”. I still want a nicer place, and a better car, but I will never acquire those things in a way that limits my ability to continue to spend money on the items at the top.
Do you think that Maslow’s Hierarchy of Needs can inform your financial decisions? Why or why not?