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If you’ve ever chosen to save less cash in your retirement account so you can indulge in more travel or support an expensive hobby, you might be engaging in “soft saving” without even realizing it.
Soft saving involves prioritizing spending on things you enjoy now and saving money less aggressively for the future. Those who practice soft saving are more focused on their immediate experiences than on their finances at age 65 or 70.
Rebecca Palmer, a certified financial planner in Washington, D.C., and head of guidance for financial planning platform Fruitful, explains, “Soft saving is about being more mindful about your current experiences and not being willing to sacrifice too much for your future yet. It’s about striking a balance between prioritizing your future self and your present self.”
“I really felt resistant to the idea of budgeting when I was getting my own financial life in order,” says Nicole Lapin, a financial expert, author, and host of the “Money Rehab” podcast. “It felt daunting. It felt like, ‘Wow, I can’t have any fun. Where are the extras?’”
The advantages and disadvantages of soft saving
“Soft saving encourages people to just get started,” Palmer notes. “However, it needs to be consistent to be effective. It can’t be sporadic; it must be a regular practice that can be increased over time.”
Palmer suggests that starting with a higher savings percentage can provide a safety net for unexpected circumstances. “If unexpected expenses arise, having that extra savings can be beneficial,” she explains.
Is soft saving a wise choice for long-term objectives?
“I believe this strategy is not irresponsible,” Ray states. “I prefer reframing the conversation to focus on whether your money is supporting the life you want to live today.”
Ray emphasizes the importance of being conscious of your financial decisions and ensuring that clients understand the consequences of their choices. If they are aware of the trade-offs and still choose certain actions, “I think that’s acceptable,” she adds.
Palmer stresses the significance of continuing to invest for retirement, even if it’s a small percentage. “If individuals neglect long-term investing early on, they will miss out on significant compounding interest. Later on, they will have to work much harder to achieve half as much,” she warns.
Finding a balanced approach
Soft saving does not mean not saving at all; it means saving some money while allowing yourself to enjoy life.
“I show them what their choices mean for the lifestyle they can afford in their 50s and 60s so they understand the impact of their decisions,” Ray explains.
To set yourself up for success, prioritize saving before spending. Lapin refers to this as making your “end game” financial moves first. “I focus on paying my future self, that older version of myself,” Lapin shares.
Additionally, make sure to allocate some room in your budget for indulgences. “Include that small treat in your overall plan to stay on track and prevent overspending later on,” Lapin suggests.
Ultimately, while soft saving is a good starting point, Palmer advises combining it with a consistent system for gradually increasing your savings over time.
“Don’t rely on memory or willpower. Automate your soft savings and have regular check-ins to increase your savings incrementally. This way, you can gradually build up your savings over time,” Palmer concludes.
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