Conquering Finances: What is a Need?

So far in our look at finances and budgeting I’ve discussed a little about why budgeting is so important and about how to find out what your current income vs. expenses (or cash flow) looks like.

Today I wanted to begin to look at how perspective changes the way that we make financial decisions and can help us maintain a positive cash flow where our income exceeds our expenses.

Let’s start with the idea of needs. So what is a need? If we look at the study known as Maslow’s Hierarchy of Needs, we can see different levels of need that are basic to pretty much everyone. We must meet the most basic needs first if we want to be able to successfully fulfill all our needs. Although psychologists have added to the original 5 levels of need, his concept that certain needs must be fulfilled before others is important.

First comes our physiological needs: air, water, food, sleep, reproduction, etc. These are the things that human life in its most basic capacity cannot survive without.

Next comes the need for safety. This encompases things such as shelter, security, order, laws, stability and anything that helps eliminate our fears.

After that are our social needs. We all need to feel like we belong and are loved. This need can be met through good relationships with people like our spouses, families, friends, co-workers, etc.

Fourth we have our self-esteem needs. This includes things like accomplishment, mastery, independence, and responsibility.

Next are cognitive needs. Most basically this is a need to learn, understand, and give meaning to things.

Next are aesthetic needs.  We need to be able to see and appreciate beauty, balance, and order.

Seventh we have what Maslow called our self-actualization needs, the need to meet our personal potential, succeed in our goals, experience growth and success.

Lastly we have the transcendent needs. This is the need to help others achieve self-actualization.

So you may be wondering now what all this has to do with money and finances. Interestingly, we can see that money isn’t on the list of needs. That’s because money in itself really isn’t a need. Money is simply a way to meet a need. We can find ways of meeting many of our needs without money. In fact many of our needs can’t be met through money. When we try to meet a need with money that can’t be, it’s like throwing it in a garbage can because all that happens is that we have less money to meet the needs that that money can be used for.

Another important part of this is an inner assessment of how effectively we use our money to meet our needs. We have to start by fulfilling the more basic needs first or the money that we spend on other needs really won’t be effective.

It’s important for wise money management to be able to honestly self-reflect and decide what need you are meeting with each purchase you make. No one can tell you how best to do this because no-one but you really knows when your needs are met, although generally the same we are all individuals.