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Consumption Smoothening

Updated on March 16, 2023

While savings are essential, it is often difficult to carve out savings from the cycle of daily spending. The concept of consumption smoothening refers to the balance that needs to be achieved between the essential spending at present and the savings that need to be built for the future.

Benefit of consumption smoothening

It helps an individual understand the funds needed for maintaining the standard of living at present and at a future date most significantly in the post-retirement phase. The idea is to understand the consumption patterns of an individual along with their savings pattern and to achieve a balance between the two to secure the financial future of the person. This study is quite subjective and needs to be constantly adapted to the changing income levels, changing spending levels, changing economic situations and market scenarios, etc.