Financial management is an important way to achieve inter-period smoothing of residents' consumption, and internet financial management, with its convenience and universality, has rapidly penetrated into residents' households and exerted an important influence on their consumption behavior. A theoretical model of the impact of internet finance on residents' consumption has been constructed and the relationship between internet finance and households' residential consumption has been tested by using data from the 2017 and 2019 China Household Finance Survey (CHFS). It is found that, first, internet finance can significantly promote household residential consumption, and the use of instrumental variables, replacing the explanatory variables and changing the sample do not affect the robustness of the findings. Second, internet finance has an impact mainly through three mechanisms, such as obtaining interest returns, providing payment convenience and alleviating credit constraints. Again, heterogeneity analysis finds that this consumption-promoting effect is more pronounced in the east-central region, the lower middle-income and low-education households. In particular, if there are unmarried sons in the family, internet finance has no significant effect on consumption. Finally, the impact of Internet finance on consumption upgrading is further investigated in two dimensions: consumption level enhancement and consumption structure optimization, and it is found that internet finance significantly increases the proportion of development and enjoyment-oriented consumption, while significantly decreasing the proportion of survival-oriented consumption. Therefore, the development of internet finance helps to expand domestic demand and achieve the upgrading of residents' consumption, thus promoting the formation of a large domestic cycle pattern.