Applying Maslow’s Theory in Identifying Financial Objectives

As a human being, our dreams and inspirations are endless. If one goal is met, we thrive to reach another and the ladder continues for our lifetime. During the process we sometimes thrive to achieve it by irrational spending, saving and investment.
For successful fulfillment of our goals and needs, it requires prioritizing and proper management of personal finance. This is the basics of Financial Planning. It helps you in drawing a blueprint highlighting what goals are achievable, how you can achieve them and what is the time horizon required to reach them.
Maslow Hierarchy of human needs is a classic theory highlighting need based approach in achieving goals of life. It is based on the assumption that every human being’s effort are directed towards fulfillment of basic physiological needs. The pyramid gives the hierarchy in prioritizing human needs. According to this model, when a need is mostly satisfied it no longer motivates and the next higher needs takes its place. However, low level needs like physiological and safety must be first satisfied before higher level needs like self-esteem are pursued.
maslow%2527s hierarchy businessballs Applying Maslow’s Theory in Identifying Financial Objectives
Financial Planning is also based on the same approach and the pyramid resembles the priorities one makes while planning for his/her financial well-being. Infact in both these exercise, prioritizing needs is the fundamental for achieving the highest degree of satisfaction.
The pyramid model of Maslow can be applied effectively in identifying financial objectives of life. The needs of human highlighted in the pyramids are the basic underline for setting life goals and working towards achieving them.
1. Physiological Needs: Are needs required to sustain life. A human being would like to meet these basic needs required for day to day living in all contingencies and emergencies. The unexpected event can arise from any situation like job loss, hospitalization, disability etc. Hence, planning ahead for these contingencies is the first priority to be set in. By creating emergency fund, six to eight months living expenses can be met in worst case scenarios.
2. Safety: When provisions for basic needs are created, the next level to achieve is safety and security for dependents to free from any kind of threats. The threats can emanate from death, disability or health problems. In financial Planning the objective is to protect income and assets to secure self and dependents from any threat of financial loss. The Protection comes from different kind of insurance-life Insurance, Health Insurance, insurance for protecting physical assets like house car etc. Through these one make sure the financial loss is minimized in case of happening of any unforeseen event.
3. Belongingness & Love Needs: This starts planning for higher level needs like social needs. Spouse and children are part of unit which completes a family for any human being. Love and affection for them drives the need of planning for a safe future for them. In Financial Planning, this needs get addressed through financial goals like an accommodation for providing shelter, planning for children future (Education & Marriage) and care for family at later years of life. By creating a corpus through regular investing, one aims for fulfillment of these objectives.
4. Esteem Needs: Once need for safety and loved ones are fulfilled, fulfilling esteem needs takes a priority. Self-Respect, recognition in society, contribution to society and maintaining the living standard in society are objectives one plan for. Buying a bigger car is an example of status symbol one want to achieve. Retirement planning is an important element of financial planning where an individual thrive for fulfilling all his social needs. Steady income post retirement, contribution through social services and maintaining a living standard are goals which an individual want to achieve in his/her retired life. To achieve this objective one need to build up a sufficient corpus which can fulfill the commitments and last for lifetime. By saving regularly and starting early goals of retirement planning can be achieved comfortably.
5. Self-Actualization: This is a state where an individual finally achieves everything that can be expected of him or her. Although as per Maslow hierarchy need theory this is the peak at which every human being aspires to reach, there is very less percentage who achieves self-actualization. Unlike lower level needs this need is never satisfied and as one grows psychologically, new need develops which continues to grow. In Financial Planning when all the objectives are achieved and one is happy with his/her goals fulfillment, the need to pass on the legacy to the next generation arrives. This goal is achieved through Estate Planning. A clear drafted estate plan helps in passing physical and financial assets to the next generation without any legal hurdles. Tax Planning too plays a major role in maximizing the legacy one wants to leave behind.
Thus, Financial Planning is a need based approach where one prioritizes goals and objectives and aspires to achieve them by creating a discipline in managing personal finance. Maslow Hierarchy model prioritizes the needs of a human being which forms the basis of setting financial objectives. Hence, a well drafted financial plan not only helps in smooth sailing but also gives a secure future.
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Applying Maslow’s Theory in Identifying Financial Objectives by
About Jitendra P.S. Solanki

He is a SEBI Registered Investment Adviser, a CFP and MBA (Finance) from IIT-Roorkee. A Fee Only Financial Planner at JS Financial Advisors, which he founded in 2011, he has spent more than 12 years in Financial Services. He specializes in writing detailed and holistic financial plans for his clients and work with Special Needs Families for social cause. To spread financial literacy among masses he frequently contributes articles for leading publications and has appeared on various personal finance shows on TV channels.


  1. John says:

    Excellent post! I like reading this blog. So far I used to think Maslow’s Hierarchy can apply to needs only, but you have briefed well how to apply the same to financial objectives. Keep sharing more such information.

    orlando financial planner

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