Self-actualization is the desire to become more and more what one is, to become everything that one is capable of becoming.
At the age of 52, Briggs Matsko was about to retire from his financial planning business. A friend heard about Briggs's plans and sent him a copy of this book. Briggs said that reading The New Retirementality not only changed his life but also gave him a new passion and mission for the work he thought he was going to leave.
I had the pleasure of meeting Briggs over breakfast while in California on a speaking engagement. He shared this story with me:
I had a real epiphany when I read The New Retirementality and realized that the most foolish thing I could do is retire early and go into a life of wondering how to make a difference. The opportunity for making a difference was right there in front of me in every client conversation. I just needed to change the conversation from being a numbers conversation to being a life conversation.
Briggs began by telling clients about his awakening and then giving them a copy of The New Retirementality to read before they came in for their appointment. He told them to come prepared to discuss the sort of life they were desirous of living before they entered a conversation on what to do with their money. When they came for their appointments, they already were primed to talk about the life they wanted to live.
Briggs has been quite generous in sharing with me some of the testimonials that his clients shared with him as a result of reading the book and engaging in a conversation with him. One client comment to Briggs stands out to me: "I need your help to start living the life I want to live and not wait any longer." This woman realized that she needed a relationship with a financial planner who would invest in her life and help her arrange her finances in a way that would lead to true self-actualization.
The New Retirementality conversation has transformed not only Briggs's life but the lives of his clients as well. Briggs quickly realized how hungry people are to enter a dialogue about how to bring their life into balance and stop delaying their dreams. Once this dialogue regarding lifestyle takes place, we are ready to move to the conversation of how to pay for the lifestyle we desire. But we are not really ready for the money conversation until we have experienced the dialogue about what we really want from our life. Money can either serve or impede a life worth living.
During our inspiring breakfast conversation, I mentioned to Briggs that, subsequent to the publishing of The New Retirementality, I had created a financial conversation called "Income for Life," where I overlaid Abraham Maslow's Hierarchy of Needs with a financial inquiry. When I mentioned Abraham Maslow, I thought Briggs was going to jump out of his chair. His eyes got as big as the over-easy eggs on his plate, and it was obvious that he just had to tell me something.
"What is it, Briggs?" I asked. "Are you familiar with Maslow?"
"One of the first things I did when coming back to work with my new vision," Briggs spilled out, "was to create an income dialogue with clients that I called "Matsko's Hierarchy of Needs," where we look at a client's emotional needs before making financial decisions. "I just couldn't resist," Briggs confessed regarding the play on Maslow's name with his own, "with our names being so similar and all."
Briggs had intuitively settled on the same solution as I did after engaging in the New Retirementality conversation, namely, that we need to design an income plan that simultaneously settles both emotional and financial ledgers.
Briggs and I had both independently observed that, too often, financial advice and financial planning are based on numbers and strategies outside of the very context they are intended to address: our quality of life and our sense of emotional well-being. You cannot simply number-crunch your way to emotional well-being and quality of life, but neither can you achieve these ends without crunching the numbers and making the necessary adjustments. There is a need for a Financial Life Planning approach that amalgamates both realms into one conversation.
According to studies by Cerulli and Associates, seven years ago the greatest fear of Americans was dying. Today, Americans' greatest fear is living. People are mortally afraid of living to be 100 and being poor. I call it the "bag-lady/poor-old-man syndrome." This socioeconomic anxiety is deeply rooted in the fear of outliving our money. With the confluence of an aging revolution, rising health care costs, and the erosive power of inflation on our money, it is easy to see how people may not be optimistic about their later years.
As a young man in Iowa, I remember vividly working with a social worker named Jeannie to create a charity for widows in our town who were living on minimal food and heat in the winter months. Jeannie discovered the problem by talking to grocery store clerks who said little old ladies were buying dog food when it was known they did not even own a pet. Jeannie walked the streets, and when she found an older house in somewhat disheveled condition, she would knock on the door and ask to visit. What she found was appalling.
Little old ladies would answer the door in winter months in full winter gear, because they had to turn their heat down to 55 degrees or risk having it turned off by the power company for nonpayment. Those who chose to heat neglected to eat, or they ate dog food, as Jeannie stealthily discovered by checking their cupboards. These women were too indoctrinated in Depression-era self-sufficiency to ask for assistance, and so we had to find creative ways to help them (e.g., anonymously paying their heating bills). This experience has stayed with me 25 years later in a visceral way—I don't want to be old and poor. None of us does.
We will all eventually need to engage in a conversation about developing an income stream that lasts as long as we do, and that outpaces the inflation that threatens to "rot" our nest egg slowly but surely. The best way I know to accomplish this task is to work Maslow's Hierarchy of Needs (with money in mind) and walk through the process of designing an income for life. I have developed a financial rendition of Maslow's Hierarchy of Needs for this purpose. (See Figure 17.1.)
Maslow taught that human beings are motivated by unmet needs, and that lower needs must be satisfied before the higher needs can be addressed. We must meet people's most basic needs (like physical survival) before they will be able to address other needs (like love or actualization). Rather than study rats (like Skinner) or the mentally ill and neurotic (like Freud), Maslow developed his theory by studying people such as Albert Einstein, Eleanor Roosevelt, and Frederick Douglas. The hierarchy Maslow offered was physical survival, safety, love, esteem, and self-actualization.
For the purposes of a financial/life discussion, I have taken the liberty of renaming and juxtaposing two categories: love and esteem. Love, in Maslow's definition, had to do with belonging—to a mate, to a family, to a community, or to a group. For a financial
discussion, I have titled this area "gifting," as this is most often the material expression of love.
What Maslow called esteem, I have called freedom in the financial/ life hierarchy. Maslow was referring to the self-esteem that results from doing things well and being recognized for the doing. In the Income for Life model, this is categorized under "freedom money," because unless people have the freedom to do what they want with their occupational lives, they will be missing the esteem and satisfaction that come from doing what they are best at. How many people do you know who long to apply themselves occupationally to something they are naturally good at?
There is also an aspect of financial freedom that allows us to address not just esteem but enjoyment as well. Hobbies and trips and exploration cost money, and if we don't prepare an income stream to address these costs, we may not realize those experiences.
I have placed freedom below gifting on the hierarchy, because from a financial point of view, it is quite unlikely that we will give money away to others before we are free to pursue a fulfilling life ourselves. However, there are exceptions to this rule; such is the case of parents who slave at jobs they hate in order to pay for a college education for their children. I happen to believe, however, that it is far healthier—from both emotional and financial perspectives—for people to secure their own freedom to pursue the lives they want. The kids can help with their college expenses by working and saving also.
Following are the phases of financial preparation we need for Income for Life planning.
Survival income is money that we have to have to make ends meet. How much do you need simply to survive each month? $3,000? $7,000? If you stripped away the frills and thrills and just paid the bills of survival, what would it cost? The majority of people have never taken the time to answer this most basic financial question: what is the cost of survival? The money needed to pay for your basic necessities is your survival income.
Safety income is money we must have to meet life's unexpected turns. What if everything doesn't work out as you hoped and imagined it would? In life, the one thing we can predict with great assurance is that things will rarely go exactly as planned. We are surrounded by risks—physical, familial, financial, circumstantial, and relational. Financial risks exist in every category of our lives. Look at the financial risk associated with a divorce—a path that hastens financial ruin, guarantees your assets will be cut in half, and diminishes your saving capacity.
Look at the risk of being disabled for a prolonged period of time. Forty-eight percent of mortgage foreclosures are due to the disability of the chief breadwinner versus only 3 percent due to the death of the breadwinner. If you are 35 years old, the chances that you will be disabled are six times greater than the odds you will die before age 65.
A leading risk in the minds of those individuals approaching retirement is the risk of outliving their money. Other top-of-mind risks are health and paying for health care, investment risk, loss of income, and financial needs within the family. As much as is possible, we want to protect ourselves against catastrophes to our bodies, our money, and our material things. The money needed to guard against these risks is your safety income.
Freedom income is money to do all of the things that bring enjoyment and fulfillment to life. What is the exact cost of the activities and indulgences that bring pleasure and relaxation into your life? Some people engage in low-cost relaxation activities (like walking), and others engage in high-priced activities (like walking after a golf ball). Travel, adventure, and personal growth/education are also some of the considerations to include when calculating the amount needed to fund your freedom.
Gift income is money for the people and causes that we care deeply about. As we move up Maslow's pyramid—securing our survival, safety, and freedom—our money can be utilized in the higher calling of bringing blessing to those people and causes we care deeply about. If you are a part of what has been characterized as "the sandwich generation," you are experiencing financial concerns on both ends of the generational spectrum. Many of us would love to do something for our parents and our children. Many of us also have aspirations to support causes and charities that connect with our heart and purpose. The money needed to pay for these gifts and benevolent annuities is your gifting income.
Dream income is money for the things we've always dreamed of being, doing, and having. What do you want to be? What do you want to do? What do you want to have? These are all part of the financial conversation necessary for paying the bills of self-actualization. For some people, only a career change will bring them to this place. For others, it may require part-time involvement in activities more closely aligned with their sense of passion and purpose.
The cost of self-actualization is the time it takes to do the things that bring meaning into our lives. If we do not own enough of our own time to engage in these activities, then we must negotiate with our work schedule and personal finances to make the time available. There is often a cost associated with being what we want to be.
There are also costs associated with doing what we want to do and having what we want to have. Some of us dream of owning a sailboat and spending a year sailing from port to port. Others dream of owning a recreational vehicle and seeing America. Whatever dreams and adventures have surfaced in your own musings on self-actualization, there will be bills to pay in the process. The money needed to pay these bills is your dream income.
In Chapter 18, I will introduce you to worksheets you can use to calculate the income needed to live the life you desire. I will share stories of people who have used this process to begin developing an income stream that helps them pay for the life they dream of living.
To complete this process (after sorting out all your income needs), you will need to examine your income sources to see how much you can address on Maslow's Hierarchy of Needs and determine the preparations and self-negotiation necessary to cover every level. Potential income sources include income from work, retirement funds, income-earning investments, Social Security, rentals, and/or other sources of income.
The final phase of the Income for Life discussion is to match your income sources against your income needs—which sources will pay for which needs. (See Figure 17.2.) If it's a case of having only enough to pay for survival and safety at this point, then you will at least have the comfort of knowing those two critical bases are covered.
You will also have a clear picture of how much you will need to meet your other needs. You can then set goals around saving and budgeting to expedite achieving the income necessary for funding
these important needs of freedom, gifts, and actualization. As one financial planner stated: "If your outgo exceeds your income, you may need to downsize to realize your upside." In other words, if your income isn't enough to meet your needs, you may have to negotiate with your needs.
By working through the exercises in the next chapter, you can bring both clarity and hope into your financial life. Get a handle on what you need and what you have. This exercise produces clarity. Get a handle on what you need to do to get what you want, and how long it will take to get there. This exercise also brings hope. Begin to view your income not as just a way to pay the bills but as a means to funding a life—the life you want.