No one wants to splurge today and starve tomorrow or do the opposite. Rather, we want to enjoy a stable living standard through time. Economists call this consumption smoothing—maintaining your household's living standard through time and across times—good times and bad times. MaxiFi takes the guess work out of financial planning. It calculates what you should spend annually (your spending targets) to have a stable living standard.
Jack and Sue are considering taking out a mortgage on their home and investing in bonds. They want to reap the alleged tax breaks from having a mortgage and they are also keen on investing the equity in their home — but doing so safely since the mortgage repayment is a for-sure obligation.
John and Vanessa recently retired and are taking another look at their finances. They realize, given prevailing low interest rates, that their lifetime of saving matters to their ongoing spending capacity.
MaxiFi calculates how much life insurance is needed to fully protect survivors' living standards. But a household's need for life insurance changes annually as there are fewer years of labor earnings that will be lost through death and fewer years of survivor spending that need to be sustained.