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06 – How to use self actualisation to improve your wealth

What can Maslow’s hierarchy of needs teach women about wealth and financial well-being?

Abraham Maslow was a famous psychologist who came up with the idea that people are motivated to satisfy certain needs in a hierarchical order. They can only move up the hierarchy to the next need once they have the prior need fulfilled.

If we want to know how this can teach us about how to improve your wealth, we need to look at the word wealth and its origin.. The word wealth comes from mid 13th century “happiness” and “prosperity in abundance of possessions or riches,” from Middle English “well-being”.

So really wealth is about creating well-being in our lives. It is about starting in a place of stability. If we think about finances in terms of Maslow’s hierarchy of needs, the basic needs are:

1. Physiological Needs: food, water, sleep, etc.

We need money to survive. For some of us, we may be able to easily meet our basic financial needs. When we look at debt, people  ‘spend beyond their means’. This is great when you want to make investments in yourself, for example for education, buying a home, or starting your own business. Certain investments can provide security at the bottom of the pyramid.

A mortgage gives you access to a more predictable living situation, and can also be a savvy investment for your future or the future of your family and children. Taking out a student loan gives you access to higher education and skill building, which in turn can improve your long term earning potential.

However it is when debts are used on ‘basic needs’ that this type of spending can become a problem. People often live beyond their means because they are looking to satisfy one of their higher needs. Their ability to earn hasn’t increased but they’ve already borrowed against their future self.

Debt is dangerous when you use it to satisfy a higher need because debt is very expensive. If your earning ability doesn’t also increase, introducing debt means you end up in the cycle of spend;

  • You overspend
  • You borrow to fill the gap
  • You need more income to repay the debts
  • You keep borrowing to maintain the lifestyle
  • All your income goes towards repaying the debt.

More often than not, we underestimate what is required to satisfy our basic needs. We don’t account for unexpected costs and instead focus on monthly expenses. In order to fulfil our basic needs we need to plan ahead; what do you spend in a typical calendar year? Planning ahead in this way allows you to avoid becoming unexpectedly trapped in a cycle of debt and spending.

2. Safety: Security and Health

Our health can threaten our safety and how secure we feel. As women we typically underestimate our own security for the sake of our children. We forsake saving into a pension, for example, and then fall short in later life when we find that we have a pensions gap.

Another major security sacrifice we often make as women is with health insurance. You will want to make sure that your basic needs (and the needs of your family) are not threatened by poor health.

Abraham Maslow was a famous psychologist who came up with the idea that people are motivated to satisfy certain needs in a hierarchical order. We can use his theory to learn the basics of how to improve your wealth

3. Love and Belonging

Family, intimacy, and friendship are less about money and more about time. While you need a certain amount of money for this, spending quality time together over a board game or a nice picnic in the park doesn’t have to involve a high price tag.

4. Esteem

Self esteem is about acquiring the skills you need to promote achievement and fulfilment. Finding your purpose, your mission, and your values is a key step to self-actualisation.

5. Self actualisation

Self actualisation is about how you can use money to achieve personal growth and fulfilment. It is not about how others see you and treat you but how you treat yourself.

Chris Budd, author of The Financial Wellbeing Book sent me a tweet recently to explain that “we derive most well-being from social relationships then from having purpose. So the role of money is therefore to get us through the first steps of physiological and safety so that we can then move on to love and esteem. You don’t need money for self-actualisation!”

Jason Butler, personal financial well-being expert suggests that materialism arises from insecurities. I myself have written about how my own insecurities impacted on my relationship with money in a new co-author book I have coming out in March as part of International Women’s Day. Jason suggests that focusing on improving effective money habits that are aligned to our values are essential for financial well-being.

So what can this teach us?

  1. That employers can really support how employees move up the hierarchy. Love and belonging and esteem can be supported with a good manager providing praise and recognition to their staff.
  2. Showing our children how important it is to grow and invest money to provide them with strong financial foundations is so important.
  3. Building good savings habits will enable you to be more stable and feel safe.
  4. The hierarchy can help explain the motivation behind why people behave in certain ways.

What steps can you take to improve your wealth?

Take a look at your spending; are you meeting your basic needs first?  If you are overspending on that nice new lippie, then it could be time to reassess your priorities and consider whether they are out of line.

How we feel about ourselves is reflected in our mindset. We waste energy feeling anxious, or stressed or overwhelmed about money. Focusing on moving these emotions to joy and happiness and success is where you will begin to gain the most fulfilment.

Our behaviour drives our emotions and our emotions drive our emotional state. Working with a financial coach can be hugely supportive as it can enable you to start changing those negative emotional and behavioural habits.

Fear and doubt are often the biggest killers, particularly financially. They can prevent you from earning what you deserve to earn, and can hold you back. They can also cause us to stay in unhappy relationships or stay in jobs and careers which make us deeply unhappy.

We can learn to move away from fear and doubt and live in a place of discomfort and growth. Being courageous and desiring those habits so much that we create them for ourselves.

How can we use Maslow’s hierarchy of needs to improve our wealth?

Thinking about using this hierarchy of needs can help you to make better financial decisions and improve your wealth. It can help to make you more mindful of whether a potential spend is a basic need or something higher up the hierarchy.

If you are an over-spender, think about whether you are attempting to bypass your own needs of a lower level in preference for those of a higher level.

Ask yourself what need you are satisfying. Once your psychological needs are met, focus on enjoying life, pushing boundaries, exploring how you can use money to have greater well-being in your life and for others. Money is less about money and more about happiness. When we focus on creating happiness we automatically gain financial wealth.

What are your thoughts?

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