Average propensity to consume measures the percentage of income that a person or an entire nation spends rather than saving or investing.

The average propensity to consume (APC) measures the percentage of income that is spent rather than saved. In general, low-income households are seen as having a higher average propensity to consume than high-income households. In either case, the propensity to consume can be determined by dividing average household consumption, or spending, by average household income, or earnings. The economy's average propensity to consume increased to 53.57% and its marginal propensity to consume was 87.5%. The inverse of the average propensity to consume is the average propensity to save (APS).

Average Propensity to Consume

Caveat emptor is a neo-Latin phrase that can be translated as "let the buyer beware." This phrase is used in instances when the buyer responsible for due diligence before making a purchase.

_Caveat emptor_ is a Latin phrase that can be roughly translated in English to "let the buyer beware." 1:28
The inclusion of a caveat emptor disclaimer is intended to resolve disputes arising from information asymmetry, a situation in which the seller has more information than the buyer about the quality of a good or service. A caveat emptor disclaimer is intended to resolve disputes that arise from information asymmetry, a situation in which the seller has more information than the buyer about the quality of a good or service. For example, if Hasan wants to buy a car from Allison–under the caveat emptor principle–he is responsible for gathering the necessary information to make an informed purchase. At the same time, such statements, as well as the legally mandated quarterly reports they accompany, reinforce the principle of caveat emptor, cementing the expectation that the buyer has access to all the information they need to make a reasonably informed decision.

Caveat Emptor

Consumption smoothing is an economics framework that describes how people change their spending patterns (or smooth) based on changing income levels.

Consumption smoothing is the practice of optimizing our standard of living by ensuring a proper balance between spending and saving during the different phases of our lives. Consumption smoothing is creating a balance between spending and saving during the different phases of our lives to achieve a higher overall standard of living. By having a better understanding of the saving and spending requirements to smooth out the standard of living, it is possible to achieve a higher overall standard of living, at least in theory. Consumption smoothing is the practice of optimizing our standard of living by ensuring a proper balance between spending and saving during the different phases of our lives. 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.

What Is Consumption Smoothing?

Discretionary income is the amount of an individual's income that is left for spending, investing, or saving after taxes and necessities are paid.

Discretionary income is the amount of an individual's income that is left for spending, investing, or saving after paying taxes and paying for personal necessities, such as food, shelter, and clothing. Discretionary income is what is leftover from disposable income after the income-earner pays for rent/mortgage, transportation, food, utilities, insurance, and other essential costs out of their disposable income. Discretionary income is derived from disposable income, which equals gross income minus taxes. After paying for necessary expenses out of disposable income, the average consumer spent all of their discretionary income and then some, using credit cards and other debt instruments to make additional discretionary purchases beyond what they could afford. Discretionary income and disposable income are terms often used interchangeably, but they refer to different types of income.

Discretionary Income

Dissaving is spending money beyond one's regular income by borrowing or by dipping into cash reserves. Both individuals and governments can be dissavers.

Dissaving is spending money beyond one's available income. This may be accomplished by tapping into a savings account, taking cash advances on a credit card, or borrowing against future income via a payday loan. When dissaving occurs on the macroeconomic scale, it indicates that an entire population or government is spending all available funds, is not investing or saving, and is borrowing to keep afloat. If the practice is unchecked, dissaving may continue in a downward spiral until an individual's savings and available credit are exhausted. It means to spend above one's income by dipping into savings, buying on credit, or borrowing money.

Dissaving

The state and stability of an individual's personal finances is called financial health. Here are a few ways to improve it.

Table of Contents
What Is Financial Health?
Understanding Financial Health
Measure Your Financial Health
How Financial Health Is Determined
Improving Your Financial Health
Rules and Tips for Financial Health
Business Financial Health
 To improve your financial health, you need to assess your current net worth, create a budget you can stick to, build an emergency fund, and pay down your debts.
Financial experts have devised rough guidelines for each indicator of financial health, but each person's situation is different. Table of Contents
What Is Financial Health?
Understanding Financial Health
Measure Your Financial Health
How Financial Health Is Determined
Improving Your Financial Health
Rules and Tips for Financial Health
Business Financial Health Typical signs of strong financial health include a steady flow of income, rare changes in expenses, strong returns on investments that have been made, and a cash balance that is growing and is on track to continue to grow. To get a better grasp of your financial health, it might help to ask yourself a few key questions—consider this a self-assessment of your financial health:
How prepared are you for unexpected events?

Financial Health

Green Monday refers to one of the retail industry's most profitable days, occurring on the second Monday in December.

ComScore: Last Week We Saw Strong Online Shopping

Green Monday refers to one of the retail industry's most profitable days, occurring on the second Monday in December. The winter holiday season includes the year's most profitable retail sales days: Black Friday, Cyber Monday, and Green Monday. Cyber Monday retailers often simultaneously have Cyber Monday sales occurring at the same time as its Black Friday sales. Green Monday is also known as Cyber Monday 2 in retail circles due to the high volume of online shoppers seeking last-minute holiday deals. Cyber Monday describes the Monday following Thanksgiving when online retailers offer above-average deals to entice consumers to shop online.

Green Monday

An inflexible expense is one that cannot be adjusted or eliminated by a company or individual. 

What is a Debt-to-Income Ratio? Why is the 43% Debt-to-Income Ratio Important?

My Debt is Several Years Old. Can Debt Collectors Still Collect?

An inflexible expense is one that cannot be adjusted or eliminated by a company or individual. Lenders typically look at five criteria to evaluate personal loan applications: credit score; current income; employment history and equated monthly installment. Both improve the credit utilization ratio, which is the amount of debt divided credit limit, and can account for up to 30 percent of a credit score. The debt-to-income ratio (DTI) equals total monthly debt payments divided by gross monthly income. For example, a borrower with $6,000 in monthly income and $2,000 in monthly debt payments has a DTI ratio of 33 percent.

Inflexible Expense

The life-cycle hypothesis (LCH) is an economic theory that pertains to the spending and saving habits of people over the course of a lifetime.

The life-cycle hypothesis (LCH) is an economic theory that describes the spending and saving habits of people over the course of a lifetime. A graph of an individual's spending over time thus shows a hump-shaped pattern in which wealth accumulation is low during youth and old age and high during middle age. A graph of the LCH shows a hump-shaped pattern of wealth accumulation that is low during youth and old age and high in middle age. The Life-Cycle Hypothesis (LCH )is an economic theory developed in the early 1950s that posits that people plan their spending throughout their lifetimes, factoring in their future income. The life-cycle hypothesis (LCH) is an economic theory that describes the spending and saving habits of people over the course of a lifetime.

Life-Cycle Hypothesis (LCH)

The Post-9/11 GI Bill provides education benefits to military veterans who have taken part in active-duty service after Sept. 10, 2001.

H.R.3218 — Harry W. Colmery Veterans Educational Assistance Act of 2017

S.3447 — Post-9/11 Veterans Educational Assistance Improvements Act of 2010

Post-9/11 GI Bill (Chapter 33) Payment Rates for 2021 Academic Year (August 1, 2021 – July 31, 2022)

Post-9/11 GI Bill Eligibility for Active Duty Veterans

The Post-9/11 GI Bill is a U.S. law that provides education benefits to military veterans who have taken part in active-duty service after Sept. 10, 2001. The Post-9/11 GI Bill has several benefits, including:
Up to 100% tuition and fee coverage (up to the national average of $26,042.81 as of the 2021 academic school year)
A monthly housing allowance (based on where the school is located)
Up to $1,000 a year for books and supplies
A one-time relocation allowance
The Yellow Ribbon Program (partial support to attend private or out-of-state universities)
If you are a qualified service member, you can transfer all 36 months or a portion of your Post-9/11 GI Bill benefits to a spouse or child. The following percentage of benefits apply based on post-9/11 active-duty service:
100%: Requires at least 36 months or a Purple Heart received on or after Sept. 11, 2001
100%: Requires at least 30 continuous days on active duty and discharged due to service-connected disability
90%: Requires at least 30 months but less than 36 months The Post-9/11 GI Bill, along with the original GI Bill (1944) and the Montgomery GI Bill (1984), represents a continued effort by the federal government to provide benefits to veterans returning from duty. Service members may be eligible if they served at least 90 aggregate days on active duty after Sept. 10, 2001, or were honorably discharged from active duty for a service-related disability after serving at least 30 continuous days following Sept. 10, 2001.

Post-9/11 GI Bill

Quality of life is a highly subjective measure of happiness that is an important component of many financial decisions.

Table of Contents
What Is Quality of Life?
Understanding Quality of Life
Quality of Life Factors
Countries With the Best Quality of Life These markers may include access to good healthcare, loving relationships, meaningful work or volunteerism, making time for hobbies you enjoy, good rest, healthy food, and the ability to perform an enjoyable form of exercise all help to improve the quality of one's life.
In addition, studies have found that practicing gratitude, meditation, and treating any mental health disorders, can improve your quality of life. The possibility for harm that could affect their enjoyment of life is weighed against earning a higher salary provided by an unpleasant job to provide the type of lifestyle the worker desires for themselves and their family members.
Hours spent at the job versus free time can be another measure of the quality of life. Some primary indicators of quality of life include income and job, housing, education, life-work balance, interpersonal relationships, infrastructure and services, and access to cultural and leisure activities. If you are looking to improve your quality of life, work on improving your work-life balance, relationships, home, and health by eating nutrient-rich foods, getting enough rest, and finding ways to exercise.

Quality of Life

Savings is the money left over after subtracting consumer spending from disposable income. Learn about high-yield savings, CDs, and money market accounts. 

Table of Contents
What Are Savings?
Understanding Savings
Types of Savings Accounts CDs have early withdrawal penalties that can erase interest earned, so it is best to keep the money in the CD for the entire term. Shopping around for the best CD rate is critical if you want to maximize your investment.
One's savings rate is the percentage of disposable personal income that is kept rather than spend on consumption or obligations. Note that all bank savings vehicles come with federal deposit insurance (FDIC) of up to $250,000 per depositor per institution.
A savings account pays interest on cash not needed for daily expenses but available for an emergency. Bank accounts offer several types of savings products from standard deposit accounts to checking and money market accounts or CDs. Online-only accounts may be examples of high-yield savings accounts, which can offer as much as 20-25x higher interest on deposits than the national average.

Savings

Showrooming is the practice of examining merchandise or products in a store and then buying them online for a lower price. 

Webrooming and Showrooming: What Exactly Is It?

Consumers Are Showrooming and Webrooming Your Business, Here's What That Means and What You Can Do About It

What Is Showrooming and What Should You Do About It?

The term showrooming refers to the practice of visiting brick-and-mortar retail stores to research merchandise before purchasing it online for a lower price. Online retailers can offer better prices for the same products because of lower overheads and, in most cases, may not charge consumers sales taxes.
To combat the growing clout of online retailers, brick-and-mortar retailers, such as Walmart (WMT) and Target (TGT), are using a number of different marketing tactics, including in-store pickup for online purchases. Other tactics include:
better in-store experiences
price matching
buying online but testing out in the store
allowing in-store returns and exchanges for online purchases
curbside pickup, common during the COVID-19 pandemic
Smaller stores and boutiques must combat showrooming in more creative ways. Online retailers benefit and can offer free shipping to their consumers.
Brick-and-mortar retailers are responding, offering in-store pickup, better in-store experiences, and price matching. The term showrooming refers to the practice of visiting brick-and-mortar retail stores to research merchandise before purchasing it online for a lower price.

Showrooming

Social commerce is the use of networking websites such as Facebook and Pinterest as vehicles to promote commercial products and services.

Social commerce uses networking websites such as Facebook, Instagram, and Twitter as vehicles to promote and sell products and services. Some of the marketing tactics social commerce employs include:
Inviting users to vote on product style or choices
Offering personalized buyer options
Applying large and striking graphics to attract viewer clicks
Using videos to show the product in use and from multiple angles
Encouraging user-submitted photos, commentary, and feedback
Using celebrity endorsements of the product line
Linking directly to the checkout or shopping cart
Offering promotions or giveaways to users who share the product on their feeds The popularity of social networks such as Facebook and Instagram allows vendors to showcase their products and quickly respond to follow buyer-led trends and fads.
Social commerce is a growing and changing field of online marketing that works in conjunction with social media and online shopping growth. While social shopping is a collaboration of online shoppers networking together, social commerce collaborates with online vendors. Social commerce encourages social shopping tools such as forums and communities in which buyers and sellers discuss their online shopping experiences and compare notes.

Budgeting and Savings

More in Personal Finance

Terms in Budgeting and Savings