Believe it or not, I didn't always envision having a personal finance career. In fact, my degree is in the life sciences - I majored in human biology (specifically, genetics, psychology and evolution) with a minor in environmental science.
I LOVE science. The logic of it, the reasoning, the analysis, the rationale.
When I entered into the world of finance, I didn't anticipate leaning back on my scientific brain some two odd decades later. However in the world of advice only financial planning, I'm often left explaining to prospective clients WHY they need someone like me. The best way that I can possibly explain this is through....
Maslow's Hierarchy of Needs
As many science majors do, I studied the infamous Maslow's Hierarchy of Needs of a human being. Starting from the bottom and working our way up, we progress up the ladder from our basic psysiological needs of food and shelter and work our way towards the pinnacle of the tower, Self Actualization.
Financial security is a BASIC NEED, which then allows us to discuss some of the more psychological needs that we have as humans.
Have food, water and shelter? Check, check.
It's time to talk financial.
Financial Hierarchy of Needs
There is a financial hierarchy of needs, too! Before you jump into the world of DIY investing or ensuring you maximize your TFSA, we must create and attend to our own basic financial needs! So let's take Maslow's hierarchy and apply it to financial planning:
THE BASIC NEEDS
Cash Flow - At the very basis of creating financial safety is understanding basic cash flow - income & daily expenses, and attending to our basic food, housing and transportation needs. It's for this reason that most of our comprehensive engagements start with financial management.
Financial Safety - We all need to have a Plan B before we have a Plan A. Ensuring that you have a proper risk management plan in place is vital for your basic financial needs. Example: emergency funds, proper health and life insurance.
THE PSYCHOLOGICAL NEEDS
3. Wealth Accumulation - This is where we start to build your net worth. Paying down debt, saving for future goals and building up a proper investment portfolio falls under this.
4. Financial Freedom - So many people want it, but don't know how to get there. This could mean FIRE, setting yourself up for a properly funded retirement dream, working when you want not because you have to, etc.
SELF FULFILLMENT NEEDS
5. Legacy - Once you've created the wealth, now you create your legacy. This involves proper estate planning, ensuring you are being as tax efficient as possible with wealth transfers, and succession planning for businesses.
This, of course looks different for everyone. And this is what we focus on at Modern Cents.
(Notice there is no line item for 'buy mutual funds').
Making your own "Financial" Hierarchy of Needs
I challenge you now to look at everything you want to accomplish financially. Challenge EACH AND EVERY ONE of those ideas. Have you attended to them all? Any of them? Where do they fit on your Financial Hierarchy? What have you (or have you not) accomplished?
Check in with yourself often - every month, at least. What are you doing to give yourself financial safety? Are you giving your own Financial Hierarchy of Needs the time and attention that YOU DESERVE?
Once your Financial Hierarchy of Needs is taken care of, you can start to focus on creating a life that feels right for your own path to self actualization. And we are here to support you with NO judgment, as we walk down the road to fulfilling your own basic financial needs.
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