A Maslow’s Hierarchy For Financial Independence: Overflowing Buckets Concept of Wealth

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You might be familiar with Abraham Maslow’s hierarchy of needs which is a motivational theory in psychology and human development framework comprising of a six-tier hierarchical model of human needs.

Denis Waitley created a similar hierarchy for achieving financial independence and wealth that he terms the “Overflowing Buckets Concept of Wealth.”

While Maslow’s hierarchy is a pyramid, Denis describes his framework as steps that lead down to financial independence. 

Under this framework, the journey to abundance, personal fulfillment, and financial independence becomes a downhill flow instead of the typical uphill struggle.

And if you read Denis’ classic personal development title and worldwide bestseller, The Psychology of Winning, everyone can make this journey with a little discipline and patience.

Essentially this is a blueprint for how to chase your passion and not your pension, which is another life principle touted in Denis’ teachings

Overflowing Buckets Concept of Wealth

• Picture your life as a five-step stairway with each step representing a tier in the hierarchy.
• Picture yourself standing at the top and Fulfillment is waiting for you at the bottom.
• Complete this visual by placing a large, empty bucket on each of the five steps and labeling the buckets from top to bottom:
  
  1. Survival
  2. Financial Stability
  3. Quality of Life
  4. Financial Security
  5. Financial Independence.

The objective is to fill each bucket with money as you progress down the stairway so that when one bucket overflows, it begins to spill into the next bucket.

Like Maslow’s hierarchy of human needs, this hierarchy for wealth is progressive which empowers you to put first things first in their order of importance when it comes to your financial life.

In other words, the financial needs like Survival and Financial Stability must be satisfied before you can attend to anything else.

For example, you can’t have financial security without having your basic survival needs of food, shelter, physiological needs, and so forth met.

These five-tiers or buckets to financial independence are: 

1. Survival
   This is how you budget your basic needs of food, shelter, and basic existence.
   
   To satisfy this bucket:
   
   • You must have income beyond your basic cost of living.
2. Financial Stability
   This any extra money just beyond your cost of living. It’s a state of stability that allows you to remain solvent in the event of sudden, unforeseen changes and emergencies in your life.
   
   To satisfy this bucket, you must have:
   • A savings account of at least three months of income, but ideally six months’ income.
   • Adequate permanent and transferable medical insurance that remains intact, regardless of your employment status
   • A whole life insurance policy that accumulates cash value and has a level premium and additionally some term life insurance
   • Disability income insurance that covers at least 70 percent of your monthly income, but preferably 100 percent.
3. Quality of Life
   Once your basic cost of living expenses is covered and you have established financial stability by allocating contingency funds, you can begin to focus on your quality of life.

   This is where you determine what standard of living will give you the type of life you desire: your home, education, recreation, possessions, travel, etc.
   
   To satisfy this bucket, you must have:

   • Established a consistent, track record of budgeting for these items with a monthly amount of savings
4. Financial Security
   Once you fill your Quality of Life bucket, a little extra discretionary income will trickle over into the Financial Security bucket.
   
   Denis defines financial security as the amount of assets will you need to give you a guaranteed income after taxes, at your desired retirement age to live the quality of life you desire without depending upon day-to-day employment or the government.
   
   In the U.S., less than 5 percent of people ever reach financial security. However, keep in mind this is not based on salary. Many individuals in the top income brackets never reach this bucket of Financial Security but yet many middle-income Americans do.
   
   To satisfy this bucket, you need:
   • To put about 10 percent of your spendable income into an appreciating investment fund at the first of every month. You budget for this as you do for your utility bill or mortgage payment and you treat it as the most urgent bill you need to pay.
5. Financial Independence
   This is achieved when you beat the target date you set for retirement.
   
   The purpose of creating and building personal assets is to be financially independent of having to work, while you still have your health and are still young enough to enjoy these assets.
   
   Personal freedom is when work is a choice and not a necessity.
   
   Reaching Financial Independence looks like:
   • You are doing what you want, when you want, and how you want.
   • You are healthy and your energy levels enable you to do virtually anything you desire. 

This truly does make chasing your passion and not your pension one of the greatest goals you can set and reach.