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If you\u2019ve ever decided to save less cash in your retirement account so you could do more traveling or support an expensive hobby, you might be \u201csoft saving\u201d (and not even know it).<\/p>\n
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\u2019re doing tomorrow than what they\u2019ll be doing at age 65 or 70.<\/p>\n
\u201cSoft saving is being more mindful about your lived experience now and not being willing to sacrifice too much in favor of your future yet,\u201d says Rebecca Palmer, a certified financial planner in Washington, D.C., and head of guidance for financial planning platform Fruitful. \u201cSo, the balance between prioritizing future you versus current you.\u201d<\/p>\n
Is soft saving new?<\/p>\n
While revenge saving<\/a> has gotten more attention recently, soft saving isn\u2019t a new phenomenon \u2014 for years, people have chosen current wants over elevated saving for future needs<\/a>. But today\u2019s soft saving trend is a purposeful mindset shift.<\/p>\n Jesica Ray, a certified financial planner with Brighton Jones in Washington, D.C., recently talked to a young client who didn\u2019t want to focus on retirement savings<\/a>. \u201cThey said, \u2018I\u2019m not going to do that because I don\u2019t really care what\u2019s in that bucket when I\u2019m 50 years old, I care about using that money now and knowing it\u2019s not tied up in some retirement account that I can\u2019t access until I\u2019m 59,\u2019\u201d Ray says.<\/p>\n Soft saving is often attributed to Gen Zers who\u2019ve watched their parents navigate strict rules around money and budgeting<\/a> \u2014 and they don\u2019t want to take that same approach.<\/p>\n \u201cI really felt allergic to this idea of budgeting when I was getting my own financial life together,\u201d says Nicole Lapin, a Los Angeles-based financial expert, author and host of the \u201cMoney Rehab\u201d podcast. \u201cIt felt really scary. It felt like, \u2018Wow, I can\u2019t have any fun.\u2019 Where are the extras?\u201d<\/p>\n The pros and cons of soft saving<\/p>\n In some cases, soft saving serves as a gentle entry to a consistent savings habit, which can be a boon for people feeling anxious about how to approach financial planning<\/a>.<\/p>\n \u201cSoft saving invites people to just start,\u201d Palmer says. \u201cIt does need to be consistent for it to work, though. It can\u2019t be just, \u2018Oh, I\u2019ll save a little when I want to.\u2019 Consistency here is really important so it can be increased later.\u201d<\/p>\n One disadvantage, however, is that if your savings rate is smaller as a person in your 20s, it may be tough to boost it in your 40s \u2014 especially if you\u2019ve experienced lifestyle creep and have more financial obligations like a mortgage<\/a> and children. It\u2019s easier to downsize your savings rate than to upsize it.<\/p>\n The advantage to starting with a higher savings percentage, Palmer says, is that \u201cif stuff comes up, you might need that space.\u201d<\/p>\n Is soft saving smart for long-term goals?<\/p>\n \u201cI actually don\u2019t think this is an irresponsible strategy,\u201d Ray says. \u201cI like the idea of reframing the conversation to, \u2018Is your money supporting the life that you want to have today?\u2019\u201d<\/p>\n 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, \u201cI think that\u2019s OK,\u201d she says.<\/p>\n Palmer points out that it\u2019s important that people don\u2019t stop investing for retirement, even if it\u2019s not a huge percentage. \u201cIf they don\u2019t do some investing for the long term early on, they\u2019re 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,\u201d she says.<\/p>\n How to find the middle ground<\/p>\n Soft saving doesn\u2019t mean no saving \u2014 it means saving some while giving yourself room to enjoy your life.<\/p>\n The key to making soft saving work is to keep an eye on future you \u2014 are your choices going to force you to work until age 75? If so, you may want to tweak your approach. Consider having a financial professional<\/a> run the numbers on your planned savings rates over time.<\/p>\n \u201cWhat I do is show them, \u2018If you do that, here\u2019s what that means for the lifestyle you can afford when you\u2019re in your 50s and 60s,\u2019 so they understand the impact of the choices that they\u2019re making,\u201d Ray says.<\/p>\n To set yourself up for success, try saving first and spending what\u2019s left. Lapin refers to it as making your \u201cend game\u201d money moves first. \u201cI like to think about paying my future self, that old lady Nicole,\u201d Lapin says.<\/p>\n And make sure you\u2019re leaving room in your budget for some extras. \u201cWhatever 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,\u201d Lapin says.<\/p>\n 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.<\/p>\n \u201cDon\u2019t rely on memory or willpower or \u2018shoulds,\u2019 \u2014 automate your soft savings,\u201d Palmer says. \u201cThen maybe have a check-in point for increasing that. Bump it up a little every quarter, every year, whatever that cadence is so you\u2019re slowly building the space for more savings over time.\u201d<\/p>\n More From NerdWallet<\/p>\n Kate Ashford, WMS\u2122 writes for NerdWallet. Email: kashford@nerdwallet.com. Twitter: @kateashford.<\/p>\n