Understanding the Maslow’s Hierarchy of Financial Needs

If you took an introductory psychology or marketing course, you probably learned about Maslow’s hierarchy of needs which explains how human motivation impacts our lives.  Maslow’s theory applies to many disciplines, including education, businesses, and marketing where motivation training can lift individuals to their highest potential. 

I was a psychology major at college, and recall the professor telling us that we would never reach our potential, and few we knew, would. That piqued my interest and remained so to this day. Marketers use the hierarchy of needs to understand a customer’s psyche to evaluate their motivations when they shop for things they need or want.

Though not as well known as Freud, Abraham Maslow, an American psychologist, had a more humanistic and optimistic view of personality, focusing on psychological health and growth. He claimed individuals prioritize their needs according to a motivational theory in psychology. They will satisfy the most innate survival needs, rising to the highest level of self-actualization. Self-actualized individuals are those with the most significant motivation who can reach their potential and achieve contentment and fulfillment.

Maslow’s Hierarchy of Needs: The Pyramid

 We will discuss each level, applying them to our financial needs. Maslow’s hierarchy of needs is typically represented by a pyramid though he did not create it. The pyramid looks like this:

Maslow hierarchy of needs wikipedia commons may 2022 


Rising To Self-Actualization

 Maslow studied human motivation using the hierarchy of needs of five categories. starting at the first level of physiological conditions in order of priority by satisfying the lowest level before moving up to the next level until we may get the pinnacle of achievement of self-actualization. 

Maslow believed that getting to self-actualization would be a rare achievement for the average person. The first four levels deal with deficiency needs which individuals should reasonably complete before rising to the highest level of self-actualization, referring to personal growth needs.
Although Maslow intended a hierarchy, he recognized that “hierarchies are interrelated rather than sharply separated,” and people may go on a less strict path.

What Is Maslow’s Hierarchy of Financial Needs?

 This hierarchy ranges from more concrete physical needs such as food and water, rising to emotional needs, and to more abstract concepts such as personal growth and self-fulfillment. According to Maslow, when one meets a lower requirement, they move to the next level on the hierarchy when the need is met. Later on, he added two more stages, aesthetic and cognitive needs, and lastly, added self-transcendence for the last or eighth level, above self-actualization, in 1969, shortly before he died.

As we go through each level, let’s consider our financial needs, from the lowest stage of basic physiological needs to self-actualization at the top. We’ll discuss how we can achieve the most desirable need of self-actualization, and wealth distribution takes place.


1. Physiological Needs

Like most living things, humans are motivated first and foremost by our survival. It would be hard to excel at anything else without satisfying our living needs. At the bottom of the pyramid is the lowest level that applies to our physiological needs to survive life. We need to quench our thirst, feed our hunger, breathe air, and have a roof over our heads where we can be warm, and sleep. Many unfortunate people struggle with these needs and may have financial setbacks, requiring them to work longer hours.

From a financial perspective, your income and cash flow support your abilities to attain food, housing,  and other essential expenses. You may be on a tight budget and want to save money. To better themselves, individuals should seek opportunities to get as much education and training in high-income skills as possible to generate more income.

2. Safety & Security Needs

The second level represents safety and security needs that are essential. Attaining a feeling of safety and security is paramount to all beings. Success means being comfortable at the home and the workplace and taking care of your health and wellness. Your job security helps you face paying your bills, taking care of your family, and building successful experiences. 

Feeling safe and secure, you should protect your family and assets from life’s unwanted surprises and accidents that may occur. Protection can come in the form of an emergency fund and insurance. 

Individuals should begin to build a strong financial foundation. Being financially-minded, you should allocate some of your savings to an emergency fund for unknown risks that may creep up on you. You can create separate bank savings account for emergencies that would provide you with a cushion to help you feel safe and secure. If you don’t have enough savings to establish an emergency fund, consider living stingy so that you can maximize your savings more quickly. 

Unexpected costs may emerge from events like a job loss, dental procedure, or pet surgery. Sometimes it’s for good things like when unexpected opportunities knock at your door that require you to have money available.

Through secure employment, you may get company benefits, including an employer-sponsored 401K retirement plan, health insurance, and other goodies. You may want to review the amount of insurance you have for full family coverage.

Throughout life, the average household may encounter unwanted surprises. You can’t predict those events, but your preparation will let you sleep better at night. Protect your family, property, and other assets with relevant insurance, including life insurance, disabilities, homeowner/renter’s insurance, and other types.

3. Social Needs

As humans, we are social creatures seeking love, intimacy, and belongingness with our families and friends, workplace, and community. We count on our interpersonal relationships to fulfill our social needs. We connect with others face-to-face, by telephone, on smartphones, and on social media, extending us into various circles. 

We care not just about belonging but respecting others and building our reputations. Our demographics reflect where we live, our occupation, income, and net worth. Our need for affiliation with others we respect is essential and fulfills our emotional requirements. 

Set financial goals to prepare for your future.  We need access to good (or better) credit to buy cars and homes with loans at attractive interest rates. Creating a financial plan to help you achieve your goals will require saving for your children’s college tuition, contributing to tax-advantaged retirement accounts, and growing taxable investments. Make sure you are paying off your debt and avoiding high-cost debt by paying off your credit card balances each month.

4. Esteem Needs

After fulfilling the previous three needs of physical survival, feeling safe, secure, being loved, and belonging, we arrive at esteem needs. At this advanced stage, we may have abilities, competence, and accomplishments that provide recognition, prestige, and a reputation.

We have a sense of personal value and self-confidence coming from increased income, promotions, and honors in our field, profession, or own business, validating our goals and accomplishments. You may be approaching retirement and managing your wealth for the next stage in your life.

Your self-esteem comes from acceptance in society and our community. You’ve achieved a desirable social status reflected by your demographics: where we live, our occupation, income, and net worth. You may be reaching financial freedom through excellent money management at this stage. Those with low self-esteem may compensate for those feelings through overspending to fit in with those we admire. 

But Danger Sometimes Lurks

Success can be a double-edged sword. This level is tricky if you emphasize gaining social status and keeping up with a high lifestyle. Marketers often use the hierarchy of needs to gain greater insight into customers’ psyche and how we shop. They play with our emotional biases, especially with our need for self-esteem and status, often causing us to make purchases we don’t need. 

Some people stumble at this level by keeping up with the Jones, overspending to maintain their position, and begin to experience inflation creep. You may be making a high income but living a high life is costly. Your net worth is taking a big hit from relying on too much debt.

Maslow states: “One cannot choose wisely for a life unless he dares to listen to himself, his own self, at each moment of life.” His words suggest an urgency to be more mindful and practice conscious spending so you avoid credit card debt that will outpace your resources.

People make mistakes by believing that getting more stuff will make them happy. That is a false assumption, as the rich are not always content with what they have. Finding a sense of purpose and potential can be more satisfying.

5. Self-Actualization Needs

In Motivation and Personality (1954), Maslow states, “What a man can be, he must be.” His quote refers to this level addressing self-actualization (sometimes called self-realization), the highest order motivation which drives us to pursue and fulfill our potential to achieve everything we can.

Every person is capable and has the desire to move up the hierarchy toward self-actualization. However, life happens, disruption of progress may occur, and we fail to meet lower needs. It could come from a significant illness, a divorce, or a job loss. The interruption may also come from ruining your finances through greed and self-centered nature.

Maslow estimated that only 2% of people would reach self-actualization, though it is unclear how he determined that number. He studied 18 people he handpicked as self-actualized individuals, including Abraham Lincoln, Albert Einstein, Mahatma Gandhi, Viktor Frankl, Eleanor Roosevelt, and Mother Teresa.

He found that self-actualized individuals have a combination of 15 unique characteristics:

  • They perceive reality efficiently and can tolerate uncertainty.
  •  Accept themselves and others for what they are.
  •  Spontaneous in thought and action.
  •  Problem-centered (not self-centered).
  •  Unusual sense of humor.
  • Able to look at life objectively.
  • Highly creative.
  •  Independent-minded.
  • Concerned for the welfare of humanity.
  • Capable of deep appreciation of essential life experiences.
  •  Establish deep satisfying interpersonal relationships with a few people.
  •  Peak experiences.
  •  Need for privacy.
  • Democratic attitudes.
  • Strong moral/ethical standards.

These are characteristics of successful people who are often leaders of organizations and businesses.

A financially self-actualized individual would be engaged in legacy planning, including business succession planning. After carefully managing finances, enjoying upper-income levels, and benefiting from a robust financial plan, we are thinking about our children.  At this level, the self-actualized would prepare to distribute their wealth through tax and estate planning to the next generation or generational wealth and charitable donations. You not only secure financial freedom for yourself but you are enabling those you love and care for to have a financially secure future. 

Final Thoughts

Maslow’s hierarchy of financial needs can help us understand our motivation as it relates to our finances. We sometimes mismanage our finances by not protecting our assets properly, overspending, taking on too much costly debt, and not having enough to save and invest so we can be in better financial shape. Emotional biases play a role in disrupting our goals. The hierarchy of financial needs provides a framework of better handling our wants and needs.

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