November 23, 2017
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Time To Revisit Maslow

Jason LaBarge
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May 3, 2017

As a financial professional, it is very important in my everyday interaction with clients to understand psychology and the impact emotions have on saving and retirement planning. In fact, I joke that my job is really 10 percent about the numbers and 90 percent about managing emotions. While I may say this in jest, it is accurate on many levels.

In 1943, Abraham Maslow issued his landmark “A Theory of Human Motivation,” in which he outlined his classic “hierarchy of needs.” In this paper, he defined physiological, safety, belonging/love, esteem, and self-actualization to describe the pattern that human motivations generally evolve through. The idea is generally illustrated through a pyramid with physiological at the bottom and self-actualization at the top.

When we evaluate our financial situations, we can easily determine where we are within the hierarchy of needs. If you do not find it easy to determine where you are, it might be beneficial to consult with a professional. Obviously, the first two or three levels should be easy to determine. Do you have a home? Do you feel safe in this home? Are you healthy? Do you suffer from a medical condition that keeps you from living the kind of life you want? Are you going to run out of money someday? Can you live off the monthly income you are receiving? But if you look deeper, you can think about things: “Do we want to retire in this home?” “Do we want to go south for the winter?” These are questions that need to be answered before you can move into the next level of love/belonging.

Love/belonging can also be addressed by determining where you want to live throughout retirement. Do you want to be closer to the kids and grandkids? Do you need to be closer to your family to be able to achieve the next level on the hierarchy? Are you happy in your marriage? Do you need to work on your marriage now that you aren’t going to work 40 hours a week and will be spending more time together?

Esteem is the need to feel respected and to have self-respect. Being retired offers several of us a level of self-respect and achievement. Others engage in a hobby or a second career of sorts. Some people volunteer at organizations they love. Achieving positive self-esteem and self-respect is more difficult for some than it is for others. In whatever way it works for you, I look at this level as finding your passion. They call retirement your golden years for a reason. This is the time to really focus on the things that you love and are passionate about.

The final level to Maslow’s hierarchy of needs is self-actualization. Self-actualization is described as one achieving their full potential. Do you feel that you have accomplished everything you set out to do? I like to think of this as the bucket list. I have clients who travel. I have clients who purchase boats, cars, etc. While these items offer physical signs of happiness and fun, when I think of self-actualization, I think of that feeling one gets after achieving something they have set out to achieve and got through hard work and persistence. Self-actualization to me is something that is ongoing and is something we are always working toward. From the financial perspective, this can be thought of as constantly making changes to the portfolio to address things like market risk, inflation and longevity risk.


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