"Soft savings" is nonsense if you are serious about financial planning.
Financial success requires discipline, work, and patience. Anyone telling you otherwise is lying to you.
A new financial trend, particularly among Gen Z, is called “soft-saving,” and it is becoming more popular among the financial planning community.
Purported “experts” (bloggers and only influencers) are hawking this strategy, claiming you can save money without making large initial deposits or committing to a long-term savings plan. This trend also pretends that it is possible to save money without changing your lifestyle or making major financial sacrifices.1
This leaves one wondering how one saves without a plan or even measurable target. Here are the savings strategies of “soft-saving”:
Use a round-up app that automatically transfers the difference between your purchase and the nearest dollar to your savings account.
Use a financial budgeting app that allows you to monitor your expenses and create a personalized plan (not sure how this helps you save, but I guess it helps you buy another app).
Do not focus on retirement, but instead focus on personal growth and mental well-being. It’s more important to feel fulfilled now than save for the future.2
This savings trend is a direct result of “side-hustle” and MLM3 culture. The idea that you can just willy-nilly save and it “will all work out”—a savings plan that requires no work, quantifiable measures, or long-term plan—is like the claims that you can work from your cell phone for a few hours a day and build a successful business.
Reality Check
If you want to avoid working until you die, and have a nice life somewhere along the way, you should be using your twenties through your forties (and possibly your fifties) to save and plan for your future.
Do not listen to anyone who tells you it’s more important to “live in the moment” than to balance the moment you are in with the future you want to have. Delayed gratification is the secret to all success—trust me, you will wish you saved when you’re 65 and still working for someone else and renting an apartment alongside roommates.
Do Hard Savings Instead
If you want true financial freedom and the satisfaction that comes from working towards it, here are the 10 things you need to do right now when it comes to saving:
Set a budget: Track your income and expenses to understand where your money is going. Allocate a specific amount to savings each month as part of your budget. Rounding up from a Starbucks coffee purchase will not be enough savings for anything—you might as well just not save at that point.
Pay yourself first: Treat savings as a non-negotiable expense. Directly transfer a portion of your income into a savings account before spending on other items. Invest in your future; it’s the most important obligation you have.
Automate savings: Set up an automatic transfer from your checking account to your savings account on payday. This makes it easier to save consistently without having to think about it—and without being tempted to skip a monthly savings to cover an impulse purchase.
Cut unnecessary expenses: Review your spending habits and identify areas where you can cut back. This might include dining out less, canceling unused subscriptions, or finding cheaper alternatives. And yes, this means cutting back on things that you pretend are contributing to your “mental well-being” when we all know it’s just an excuse to spend money.
Create savings goals: Have specific, achievable goals for your savings. Whether it's an emergency fund, a down payment on a house, or a vacation, having clear objectives can motivate you to save. If you do not have savings goals, you need to think long and hard about what you imagine your life to look like in 5 or 10 years. Do you want to be doing the exact same thing? If you are not growing, you are dying.
Use windfalls wisely: If you receive unexpected money like a bonus, tax refund, or gift, consider allocating a signficant portion of it to savings rather than spending it all.
Avoid impulse buying: Before making a purchase, especially for big-ticket items, give yourself time to consider whether it's a necessity or a want. Delaying gratification can help prevent unnecessary spending.
Shop smart: Look for discounts, use coupons, and compare prices before making purchases. Taking advantage of sales and promotions can help stretch your dollars further.
Reduce debt: High-interest debt can eat into your savings. Consider paying off debts, starting with those with the highest interest rates, to free up more money for savings.
Invest wisely: Once you've built up an emergency fund and have extra savings, consider investing in opportunities that align with your risk tolerance and financial goals. Investments often grow your savings over time.
Understand That Tradition Exists for a Reason
Much of the blogosphere/Twittersphere dedicated to highlighting the benefits of “soft-saving” focus on how it departs from tradition. This reminds me about the story from Chesterton’s 1929 book, The Thing, about how people react when they find a fence with seemingly no purpose.
In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.
Hard savings (or just savings) exists because it works. Don’t fool yourself into thinking living for the moment is some new fancy way of approaching finances.
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MLM = multi-level marketing