Lesson 004: Needs vs. Wants
Updated: Sep 21, 2020
In 1943, Abraham Maslow introduced us to his hierarch of needs concept. The basic premise is that needs must be satisfied from the bottom up. For example, if one's physiological and safety needs are not met, love and belonging, esteem, and self-actualization cannot be fully realized.
Physiological needs - food, shelter, sleep, homeostasis
Safety needs - security (personal, financial, emotional), health and well-being
Love/belonging - friendships, intimacy, family
Esteem - recognition, status, importance, and respect from others
Self-actualization - happiness, pursuit of goals, freedom to use one's abilities and talents, reaching one's potential
Although money can't buy happiness, it provides the means for fulfilling many of the basic human needs that must be satisfied in order for happiness to be achieved. At the end of my BPFT002 post, I recommended the first 9 minutes of a Casey Neistat YouTube video that makes this point very effectively. If you haven't watched it yet, do so now.
As you look through Maslow's stages and the elements included in each, it is easy to see how money is needed by most in our society in order to obtain food to eat, a place to live and sleep that is safe in terms of providing protection from weather as well as other people, and basic transportation for commuting to/from employment. But as we move up the pyramid, money becomes less necessary for meeting our needs for things like friendship, respect, and happiness. That's not to say we aren't good at justifying why we spend a lot of money in these areas.
Marketing has done a very effective job of selling us on the idea that socializing at fancy restaurants brings us closer to our friends, that family time isn't fun without a trip to a popular theme park, and that you can gain status and respect from others by driving a certain vehicle or buying a certain house. I have no issue with people spending money on any of these things. I've done so myself. It's only when we feel we have to spend money on these things to fulfill a need, when we are not saving money for retirement or other priority items, and/or when we are building large debt balances in order to pay for these wants, does this become problematic.
I'm a big fan of Seth Godin and I particularly liked this post from 1/19/2019:
Run out of chocolate, and that’s a shame. Run out of oxygen and you’re doomed.
Sometimes, we overdo our reliance on chocolate. It’s better in small doses–too much and it loses its magic. And sometimes we confuse the thing we want with the thing we need…
If your day or your project or your organization focuses too much on finding the next piece of chocolate, you might forget to focus on the oxygen you actually need.
From a personal finance standpoint, are you too focused on finding the next piece of chocolate and ignoring your need for oxygen? You don't have to give up chocolate, just know when you've had enough.
When we are constantly bombarded with the message that "more is better", when do we know when we've reached enough? Vicki Robin, co-author of the book "Your Money or Your Life", suggests a good definition of enough might be when you have all that you need, some of what you want, and even the occasional luxury.