Consumption, when it comes to personal finance, holds a few different meanings depending on the economist you speak with and the particular type of economics you’re studying. For the sake of simplicity, we’re going to define consumption as your cash flow. Consumption is what you’re doing with the money that’s flowing into your bank account. This includes any purchase from buying a house to ordering Chinese takeout when you don’t feel like cooking, how much you save, the financial products you purchase (e.g. insurance) and paying your bills, including debts.
We’re breaking down all kinds of weird financial jargon, check out some other commonly used terms: