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If you’ve ever decided to save less cash in your retirement account so you could do more traveling or support an expensive hobby, you might be “soft saving” (and not even know it).
Soft saving is about choosing to spend money on things you enjoy today and stashing money away less aggressively for your later years. People who take this approach are more concerned about what they’re doing tomorrow than what they’ll be doing at age 65 or 70.
“Soft saving is being more mindful about your lived experience now and not being willing to sacrifice too much in favor of your future yet,” says Rebecca Palmer, a certified financial planner in Washington, D.C., and head of guidance for financial planning platform Fruitful. “So, the balance between prioritizing future you versus current you.”
“I really felt allergic to this idea of budgeting when I was getting my own financial life together,” says Nicole Lapin, a Los Angeles-based financial expert, author and host of the “Money Rehab” podcast. “It felt really scary. It felt like, ‘Wow, I can’t have any fun.’ Where are the extras?”
The pros and cons of soft saving
“Soft saving invites people to just start,” Palmer says. “It does need to be consistent for it to work, though. It can’t be just, ‘Oh, I’ll save a little when I want to.’ Consistency here is really important so it can be increased later.”
The advantage to starting with a higher savings percentage, Palmer says, is that “if stuff comes up, you might need that space.”
Is soft saving smart for long-term goals?
“I actually don’t think this is an irresponsible strategy,” Ray says. “I like the idea of reframing the conversation to, ‘Is your money supporting the life that you want to have today?’”
Good financial planning is about being aware of your decisions, Ray says, and she does her best to make sure her clients understand the pros and cons of their choices. If they understand the tradeoffs and choose to take certain steps anyway, “I think that’s OK,” she says.
Palmer points out that it’s important that people don’t stop investing for retirement, even if it’s not a huge percentage. “If they don’t do some investing for the long term early on, they’re going to miss out on a massive amount of compounding interest, and later you have to work twice as hard to get half as far,” she says.
How to find the middle ground
Soft saving doesn’t mean no saving — it means saving some while giving yourself room to enjoy your life.
“What I do is show them, ‘If you do that, here’s what that means for the lifestyle you can afford when you’re in your 50s and 60s,’ so they understand the impact of the choices that they’re making,” Ray says.
To set yourself up for success, try saving first and spending what’s left. Lapin refers to it as making your “end game” money moves first. “I like to think about paying my future self, that old lady Nicole,” Lapin says.
And make sure you’re leaving room in your budget for some extras. “Whatever that small indulgence is for you, allow for it in the overall plan so it keeps you on track and keeps you from binging later on,” Lapin says.
In the end, soft saving is a great way to get started, Palmer says, but you have to couple it with a consistent system for bumping up your savings over time.
“Don’t rely on memory or willpower or ‘shoulds,’ — automate your soft savings,” Palmer says. “Then maybe have a check-in point for increasing that. Bump it up a little every quarter, every year, whatever that cadence is so you’re slowly building the space for more savings over time.”