Investopedia

Continue to Site »

Consumption Smoothing

Filed Under » , ,
Dictionary Says

Definition of 'Consumption Smoothing'

The ways in which people try to optimize their lifetime standard of living by ensuring a proper balance of spending and saving during the different phases of their life. Those who overspend and put off saving for retirement to enjoy a higher standard of living often have to work longer or reduce their standard of living in retirement. Those who over save will live a more frugal lifestyle while working to enjoy a better lifestyle while retired. In each case, the overall standard of living is less than optimal.
Investopedia Says

Investopedia explains 'Consumption Smoothing'

Saving for retirement is a delicate balancing act. By having a a better understanding of the saving and spending requirements to smooth out standard of living, one can have a a better overall standard of living, at least in theory. But this is easier said than done, and striking this balance is one of the major challenges of financial planning.

Articles Of Interest

  1.

    Delay In Retirement Savings Costs More In The Long Run

    The effects of compounding make it cheaper over the long term to save for retirement.

  2. Two Roads: Debt Or Financial Independence?

    A higher income won't make you richer - unless you learn to live on less.

  3. Standard Of Living Vs. Quality Of Life

    What is the difference between a standard of living and quality of life? Find out in this breakdown.

  4. Retirement Planning Basics

    Realizing your post-work goals need not be daunting. We'll tell you everything you need to know to get - and stay - on track.

  5. Stop Keeping Up With The Joneses - They're Broke

    Conspicuous consumption could be robbing you of future wealth.

  6. Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".

  7. The Economics Of Stay-At-Home Moms

    If an at-home mom was getting paid for all of the work she does, how much would she get?

  8. Women: Invest In Your Financial Literacy

    Learning about money may seem intimidating, but it's not as hard as it looks.

  9. 6 Financial Benefits Of Spring Cleaning

    This year, combine your spring cleaning strategies with your big-picture financial objectives.

  10. Financial Statement: Extraordinary Vs. Nonrecurring Items

    When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  2. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  3. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  4. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  5. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  6. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
Trading Center