What you can learn from the pyramids

You might be familiar with Maslow’s hierarchy of needs. It’s a psychological model that’s been around since 1943 and is useful to describe human motivation.

Let’s start at the bottom of the pyramid. These are extremely powerful motivational drivers, for example, when you’re desperately hungry, meeting that need becomes your absolute priority. More dramatically, if someone was trying to drown you, the instinctive urge to breathe might turn you into a murderer yourself.

Assuming your basic physiological needs are met, you’d move up to the next level of the pyramid and seek out safety and stability. That might mean looking for job security, for example.

Once that second layer of needs is satisfied, you’d look for interpersonal relationships that give you a sense of love and belonging.

Only when that is achieved would you focus on building your self-esteem.

Ultimately, you’d aim to reach the peak of self-actualisation – those moments when you feel completely fulfilled and content with your place in the world. However, the minute you urgently need to use the loo, you’d find yourself back at the bottom of the pyramid again.

You can read more about Maslow’s hierarchy of needs on Wikipedia. The image below shows a modern-day meme to bring it up to date.

Maslow wifi battery

Bruce Sellery is the money columnist at various places including CBC/Radio Canada, Yahoo Finance, and MoneySense magazine.

Like Maslow, he has devised his own model to illustrate where investors should put their attention. He calls it the Priority Pyramid. You start at the bottom, and once you’ve mastered each level, you can move on to the next.

Priority pyramid

Bruce Sellery is the money columnist at various places including CBC/Radio Canada, Yahoo Finance, and MoneySense magazine.

Like Maslow, he has devised his own model to illustrate where investors should put their attention. He calls it the Priority Pyramid. You start at the bottom, and once you’ve mastered each level, you can move on to the next.

Before you do anything else, you need to pay attention to your cashflow, at the base of the pyramid. Make sure your income exceeds your expenses. If not, you need to earn more, or spend less.

After that, the next layer to focus on is paying off any expensive debt you may be carrying, such as credit cards.

Once you’ve done that, you can start saving. Bruce recommends putting away 10% of your gross income.

The next level is about tax-efficiency, such as ISAs and pensions or maybe inheritance tax planning. This is where you might start looking for expert external advice.

Investment performance is above that. Bruce doesn’t recommend you spend your time monitoring the markets. Instead, he says ‘focus on the basics’. We endorse that. As financial planners, we help with this, by recommending low-cost, diversified funds that are proven to give you the best chance of achieving long-term returns.

Lots of people are happy there, and never aspire to attain the peak of his priority pyramid – in the video, he suggests playing with market timing. But we’d urge something different. We’d say leave your investments alone, but, if you have enough money put aside and can afford to take risks, you can put a small amount into speculative or ‘fun’ investments.

Name: Lance Baron

Certified Financial Planner (CFP) based in East Sussex, UK. We support people in Southeast England with more than £500K to invest by building a financial plan that will help them live the life they want… until age 100