Also, remember you want to smooth consumption with an uncertain future. If utility is something like logarithmic in wealth, then your behavior’s influence on your expected utility is going to be dominated by the small fraction of possible futures where you have a much lower wealth than expected.
The utility of consumption smoothing between a wealthy future and a poorer present probably pales in comparison to consumption smoothing between a poorer present and a potentially much poorer future. Living in a studio apartment so that your median possible future self has more savings and less debt and can afford a slightly larger mansion would be foolish. Living in a studio apartment so that your worst-off possible future self has more savings and less debt and is slightly less likely to be homeless during economic hardship, not so foolish.
Also, remember you want to smooth consumption with an uncertain future. If utility is something like logarithmic in wealth, then your behavior’s influence on your expected utility is going to be dominated by the small fraction of possible futures where you have a much lower wealth than expected.
The utility of consumption smoothing between a wealthy future and a poorer present probably pales in comparison to consumption smoothing between a poorer present and a potentially much poorer future. Living in a studio apartment so that your median possible future self has more savings and less debt and can afford a slightly larger mansion would be foolish. Living in a studio apartment so that your worst-off possible future self has more savings and less debt and is slightly less likely to be homeless during economic hardship, not so foolish.