Needs & Wants In Financial Planning

Maslow’s Need Hierarchy Theory is a practical and wise approach to how you can plan your financial outlay to take care of basic needs as well as wants. What it calls for though is a proper understanding of how to differentiate between the two

- 

Avoiding being poor and hoping to be rich are both goals that should be addressed. The first step to achieve this is to identify and prioritize them. To do it efficiently you should understand the psychological needs that drive life goals. A financial plan is not just about arriving at a destination but also about the journey being undertaken. Ends and means are both important, and psychological needs are relevant to both. While creating a financial plan and planning for financial goals, it is a best practice to divide your financial goals between needs and wants. When we ask people what their needs are, it differs from person to person.

This is because everyone might be at different stages of life and hence may have different needs. For a person below 25 years of age, the pressing need is often education; a person between 25 to 30 would often have a first job and the needs at this age would be first home, first car, marriage, etc. At age 30 to 40, the needs differ as they would include a child’s education, maybe a second job, accumulating wealth, etc. While in age 40 to 60, the needs change to maybe upgrading home, child’s marriage, child’s higher education, etc. and age above 60 is a retirement period and here is when you may wish to pursue your hobby or wish to go on a world tour, cover medical expenses, and so on.

Change In Needs With Change In Age

Maslow’s Need Hierarchy Theory