Maslow’s Hierarchy Of Needs And Frugality

Maslow’s Hierarchy Of Needs is a theory in psychology conceived by Abraham Maslow in 1943. The theory first appeared in his paper A Theory of Human Motivation. Maslow’s Hierarchy Of Needs is typically represented as a pyramid consisting of five levels — i.e., physiological, safety, love/belonging, esteem, self-actualization as the one shown below.

Image from Wikipedia

Maslow’s Hierarchy Of Needs As A Framework For Frugality

The topic of wants versus needs comes up often when we discuss frugality. However, there’s a lot of gray areas and differences in opinion on this subject. After I thought about this for a while, I recall something I learned in Biology called Maslow’s Hierarchy Of Needs which does a good job of clearly explaining “needs“.

Needs: Physiological and Safety Needs

The first two levels of the theory is a good definition of needs in the context of frugality. At this most fundamental level, we are looking to fulfill our physiological needs. If you need to save as much money as possible and practice frugality, this is the level where you should operate. Your primary focus is on fulfilling the basic human needs — such as, food, warmth, water, and other bodily needs.

The next level is also considered frugal and in the realm of needs. Safety needs is the desire for:

Personal security
Financial security
Health and well-being
Safety net against accidents, illness, and other adverse impacts

Many of these safety needs can be addressed by personal finance risk management techniques.

The comparison is clean and simple with respect to the first two levels: anything that falls within the physiological and safety needs are considered frugal. However, you should note that you could over-fulfill these needs and turn them into wants. For example, a basic home cook meal fulfills your need for food, but a fancy Filet Mignon and Shrimps dinner goes beyond your basic needs.

Other Levels: Love/Belonging, Esteem and Self-Actualization

Although next three levels of the Maslow’s Hierarchy Of Needs do not cleanly align to “needs” or “wants”, I would like to include them here for completeness and make a few observations. These levels include:

Love/Belonging – The need to be loved and belong.
Esteem – The need to be respected, to have self-esteem, self-respect, and to respect others.
Self-Actualization – The need for achievement.

Some observations:

You could be frugal and fulfill all of these needs.
You could spend a lot of money and never fulfill any of these.
By overspending money on “wants” and not addressing your physiological and safety needs, you could jeopardize the fulfillment of love/belonging, esteem, and self-actualization needs.

11 Comments

MoneyGrubbingLawyer
September 3, 2008, 9:35

Great article, Pinyo.
Even those who pratice admirable frugality tend to focus a significant portion of their spending on the fulfillment of the Love and Esteem levels. Our need for food is fulfilled with UN rice rations, shelter is met by the most rudimentary of structures. As soon as we move beyond true necessities, we are in the realm of the relative luxuries that occupy the top of the hierarchy. We choose diverse foods not because they fulfill a need, but because they fulfill a “want” and aid in our self esteem and acceptance. The same goes for the reason we buy houses that are more than shacks, that we decorate, that we wear anthing more than basic clothing.
The needs vs. wants debate is full of grey areas- Maslow’s hierarchy helps illustrate the lines that are drawn. An sculpting class can be a need, it’s just a need a the highest levels.
Tracey
September 3, 2008, 9:49

You were looking to write more home run quality articles? I think you just wrote one.
This is an excellent conceptual connection. I was especially struck by the realization that many of us use spending to try to satisfy those upper three levels and how quixotic that really is.
Greener Pastures
September 3, 2008, 10:24

Need vs want is always an interesting question. How much do we all need, anyway? When I think about people in other countries, the answer to that question is, a lot less than we “get by” with right now.
God Bless America!
Great article, stumbling.
Mr. ToughMoneyLove
September 3, 2008, 10:36

Coincidentally, I was listening to an audio CD during my commute this morning on microeconomics. The theme of today’s lecture was built around this fundamental economic concept: consumer purchasing decisions are primarily based on self-interest.
A simple concept no doubt but one that cannot be overlooked.
vilkri
September 3, 2008, 12:46

This is one of the best posts I have read. I like the way you make the connection to frugality. I think it is so easy to forget what really matters in life (and with our finances) that it is equally easy to get lost in all the “noise” with which we get bombarded every day. Once you are lost, it is easy to get into trouble.
Andy
September 3, 2008, 14:34

Hey – I studied this theory last year when sitting for my PMP exam, never thought to apply to the world of pf. You’ve done a great adaptation.
Pinyo
September 3, 2008, 16:50

@MoneyGrubbingLawyer — Thank you. You comment also further illustrate the point.
@Tracey — Thank you. I don’t know about home run quality, it’s hard to judge my own work. I can usually tell when I did a lousy job, but not the other way around. By the way, I had to look up what “quixotic” meant — another new word for me.
@Greener Pastures — Great point about looking outward; especially at other culture to understand wants versus needs. I saw a show about folks in Tibet last night and they have far less than we do, yet they appear to be super content with their lives.
@Andy — Now I am curious…how does Maslow’s theory relate to Project Management?
Kat
September 3, 2008, 23:23

I was pleased to see you say that you can be frugal and achieve the 3 highest tiers on Maslow’s hierarchy. In fact, for me, I believe that my choice to work less (and be frugal) is helping facilitate those higher levels, especially the creativity piece as part of self-actualization. Thanks for the food for thought ….
Data Entry Lady
September 4, 2008, 8:24

Many are having to figure out what they “NEED” versus what they “WANT” in today’s economy. What are considered needs today are very often what were wants yesterday. The list of material things that we become attached to never ends. Do we NEED a PC or a TV or a car? It’s relative.
observer
September 4, 2008, 21:04

Hey – I studied this theory last year when sitting for my PMP exam, never thought to apply to the world of pf
I had no idea there are exams for this sort of thing.
doctor S
October 22, 2008, 16:35

This is the biggest trouble people have today is dciphering what is a need versus what is a want. Maybe if more people read and really took in Maslow’s theory people would act differently? I am going through this current struggle with several individuals in my life. I should probably show them the chart, but they will get quite mad!