Measuring the Fabric of Felicity
4 Pages Posted: 11 Oct 2018 Last revised: 10 Jul 2019
Date Written: September 21, 2018
We steer our financial course through life choosing how much to spend and how to invest what's left, periodically updating our choices as circumstances evolve. This is the essence of financial planning: specifying in advance a desired spending and investment policy conditional on relevant aspects of our life, varying investment opportunities, and our preferences for the benefits derived from our wealth. It's a pretty simple problem to put into words but finding an optimal solution has occupied some very bright minds for the past 60 years. In this note we conduct a survey to start exploring some of the practical issues involved in transitioning from theory to practice.
Keywords: Decision Making under Uncertainty, Risk, Utility, Risk Aversion, Coin Flip, Heuristics, Rules of Thumb, Portfolio Selection, Lifetime Portfolio Selection, Saving and Spending
JEL Classification: B12, B16, B20, C00, C10, C11, C50, C57, C73, D03, D81, D83, E00, G00, G02, G11, G12, G14, G17, G23
Suggested Citation: Suggested Citation