"Hard Dollars vs.Soft Dollars" and How it Matters to You

Hard Dollars vs. Soft Dollars and How They Matter to You

What are hard dollars? What are soft dollars? One thing is for sure if you don’t know, you better learn. It is really quite simple, although when I first heard…I had no idea. Honestly, I thought about hearing for first time about hard water. We’ll start with hard dollars.

Think about it this way, if it is “hard” to earn the dollars, they are probably hard dollars. Your paycheck would be considered hard dollars. Cash and currency in your pocket literally and figuratively speaking are considered hard dollars. Not much of a detailed meaning but I think you grasp the idea.

Soft dollars are usually money and value that is created with hard dollars as in growth from an investment, life insurance death benefits that have been bought by paying your premiums in return for a large death benefit which by far outweighs the amount of hard dollars used to pay those premiums.

Now, how do these two types of hard and soft dollars matter to you? I’ll answer that with a question, as I do to avoid tough questions sometimes! Seriously, how do you want to pay for your burial in 100 years? Would you like to pay with hard or soft dollars? Let me ask that another way. Would you like for your loved ones to use money out of the checking account or would you prefer they use a life insurance policy that you paid $50,000 over your lifetime to receive the $500,000 death benefit from your typical term policy? The difference in hard & soft dollars in this example would be the difference between $500,000 and the $50,000 (hypothetical of course) you paid for the policy.

I know my wife would much rather prefer that she paid for the burial with the soft dollars than take away new shoe money or clothes money. I’m joking, so to speak. Although quick, knowing that many readers fully understand what it is I’m talking about here. And it goes without saying, that if I get, I know you can.

So, the moral of the story, get some soft dollars. Max out the contribution to your 401k your employers is offering and match it to maximize the soft dollars you’ll get in return. Look into a universal life policy and jam some cash into it to get back and combine with the soft dollars you’ll gain in return. And then send me a check for the advice to help me recover some of the hard dollars used for shoes and clothes! Just joking.