The biggest problem with money is that it is never enough – too little or too much, never just right. After spending years with this problem, 16 years in Financial Literacy and last 10 years studying and working on it, I have been able to make sense of money and its role in our lives through one key concept – need. This article (in 2 parts) details the simple concept that is helping me find ‘enough’.
It is a basic and simple concept – need.
A question – What do I need? and its variations – What do I need it for? Do I need this? What do I need from my life, my relationship, my job, my break, my money… often bring it up in conversations and reflections.
Yet the ‘need’ is an often misunderstood and underrated concept in personal finance and making choices.
This part aims to answer, what is need?
Part 1 – What Is Need?
All our financial plans start from this common starting point – need.
- How much do I need to start my business venture/ new project? – Business Planning
- How much money would I need to retire peacefully without affecting my lifestyle? – Retirement Planning
- How much fund should I set aside to cover my/ family’s needs in case of emergencies? – Insurance Planning
- Investment Planning is done based on life cycle needs.
- Day to day money management too, is about balancing current, future and emergency needs with the money we have/ will have.
So, it is sensible that we test our understanding of this basic and recurring concept, all over again.
Question 1 – What is a need?
Children are often taught in financial literacy that our needs are food, clothing and shelter. But they are just our basic needs, necessary for living but not sufficient for life. Abraham Maslow’s popular theory of motivation is based on his model Hierarchy of Needs. In that model, the basic needs form the base, on which a pyramid of a variety of needs stands – security needs, social needs, self esteem needs and self actualization needs. Together, these are essential to our survival, well being and happiness – both for living and life.
So,
Question 2 – Are water and wine, food and feast, clothing and couture, shoes and Choos, our needs – former essential for survival, latter for life?
We wish! But, NO. And that is a critical difference to understand and appreciate in order to reclaim our life! Let us explore this, one step at a time.
Step 1 – Both – the former and the latter, in different categories mentioned above, at a basic level, fulfill the same need;
- water and wine – thirst
- food and feast – hunger
- clothing and couture – clothing
I know, I know. The latter – wine, feast, couture, Choos – transcend the hierarchical boundaries of needs and fulfill our social and self-esteem needs. Right? Good try. But, NO again. That is the popular narrative, not the right one.
“What is right is not always popular and what is popular is not always right.”
Step 2 – Self-esteem, by definition, is how one feels about oneself, how one jusges one’s OWN worth.
Basing our judgement of our own worth – fashion, brands, societal norms – that are transient and defined by someone else (many a times with an agenda), is contrary the very concept of self esteem.
Blindly following a trend or a norm, in order to ‘win’ friends may serve the purpose of belonging to a group, but at the cost of self-esteem and self actualization (being you).
A friend in need* is a friend indeed.
* pun intended
According to the Fundamental Human Needs theory by noted Chilean Economist Manfred Max Neef, needs are few, finite and classifiable. They are constant through all human cultures and historical across time periods. Note that needs are distinct from conventional notion of economic wants that are infinite and insatiable. This distinction is crucial to well being, freedom and in some cases, survival – financial or otherwise. And if we were to make the most of our money and mind, especially in today’s world – full of choices and opportunities, this is one skill we must build. Now!
