Financial literacy and you

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SERIES 01: FINANCIAL PSYCHOLOGY

How much money do you need right now? N1 million, N5 million or N10 million?

What exactly would you do with the money if you happen to be given right now?

‘Definitely, I will spend it on my needs’.

The question is: ‘What are your needs’? What hierarchy of needs are you on?

Maslow’s hierarchy of needs explains that everyone is on either of five (5) hierarchies of needs:

Self-Actualising Needs: The highest level of Maslow’s Hierarchy of Needs is self-actualising. This is when people focus on personal growth, legacy, and making a positive difference.

Esteem Needs: Fourth on Maslow’s Hierarchy of Needs includes the desire for personal achievement, accomplishment, stbusiness_maslows_hierarchy_of_needs_3d_powerpoint_slides_and_ppt_diagram_templates_1atus, and earning respect.

Love and Belonging Needs: These social needs include the desire to be accepted and loved, and share affection.

Security Needs: The next level of Maslow’s Hierarchy of Needs includes the desire for safety and security.

Physiological Needs: Maslow believed that needs such as food, water, air, and sleep are the most basic, fundamental, a
nd instinctive. All other needs described in this hierarchy become secondary until core physiological needs are met.

The most pressing things you think of doing with any sum of money you get tells where you are on the hierarchy. Naturally, humans are conditioned to move away from pain towards pleasure. It is therefore natural that humans will move up the hierarchy. Humans will tend to spend first on meeting physiological needs, then security needs, love and belonging needs, esteem needs and then self-actualizing needs.

Humans tend to focus on meeting short term pleasure as against preventing long term pains. The natural conditioning is the movement away from pain towards pleasure, that is, to spend away from pain towards pleasure.

However, oftentimes, the difference between making smart financial decisions and foolish financial decisions come down to whether we are conditioned to think about money in terms of long term pain and pleasure, or short term pain and pleasure. It’s all about your financial psyche.

To develop the right financial psyche however requires 2 essential ingredients: Discipline and Goals. (Watch out for Series 02).

Image credit: Slidegeeks.com

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