“Consumption Smoothing” is a coinage only an economist could love. But like it or not, it's something we all do on a routine basis in our short-term economic lives. If we get paid once a month, we try to budget to spend the same amount each week. I.e, we try to maintain a stable living standard per household member.
Smoothing Your Consumption
Uncle Sam provides three tax breaks for clergy, which makes their planning more complicated than for laypeople. This case study points out the four major ways clergy are advantaged by special income-tax, Social Security-tax treatment, retirement account, and housing provisions. The study also indicates how to include each factor in ESPlanner.
All personal financial planning questions, from Can I retire early? to When should I take Social Security? to What can happen if I invest in risky assets? boil down to the impact on your living standard.
ESPlanner is the only financial planning program that directly calculates your living standard and helps you achieve the highest living standard that your current and future economic resources can support.
Take the example of Jack and Jill Sprat, a middle-aged couple.
Jack is 51, Jill is 49
Their children have already graduated from college.
Housing: 25 years remain on their $350,000 mortgage. They pay $2,000 per year in property tax, $1,500 per year in homeowners insurance, and make a $2,255 monthly mortgage payment. Their last payment is due in 2033.
Retirement Dates: Jack 65, Jill 63 (year 2023)
Danilo and Gina Perez live in New York City. They are 30 years old and plan to have a child in five years and retire at 65. They are both busy bees with a typical, but also highly complex economic life. They want to have a stable living standard per household member over time, but don’t know how much to spend each year to make this happen.