Family, Marriage, Retirement, Saving, Seniors, Weddings
May 12, 2016
The average cost of a wedding is now more than $30,000. As I have explained in How to Budget for a Wedding, spending even $3,000 on a wedding is a bad move if you have credit card debt, have yet to build a large emergency fund, or aren’t on pace with your retirement savings.
But for those of you who are thinking about spending for a blow-out wedding, I want you to seriously think through the long-term cost of your decision. Money you spend today you won’t have for tomorrow. Sounds obvious. But I don’t think you’ve carefully thought through what that really means. If you spend $30,000 on a wedding today that is $30,000 you don’t have to put toward other long-term goals.
Invest $30,000 for 18 years and earn a 5% annualized return and you could have nearly $75,000. Why 18 years? Well, I’m thinking maybe you and your honey are going to start a family. That $75,000 is going to go a long way to covering a chunk of college costs. (Even after accounting for inflation, annual tuition and fees at a public university for an in-state student might run about $20,000 a year in 18 years.)
Or let’s talk about retirement. Maybe you and your honey have spent your single years paying off student loans, or perhaps working off some expensive credit card debt from those days before you got financially on top of things. That’s okay. But please don’t spend big money on a wedding if you haven’t been paying attention to your retirement. The five-figure wedding cost of today is a potential way to turbo charge your retirement fund into six-figures. Investing the $30,000 for retirement and earning a 5% annualized return would leave you with about $165,000 in 35 years.
I can’t stress this enough: A big wedding is a want, not a need. And please don’t tell me you (or your daughter, or son) deserve a big wedding. Really? I think they deserve a financially secure future. I think they deserve knowing their parents are not short-changing their own future to pay for an expensive wedding.
You can still have a fantastic, wonderful, meaningful and joyous wedding. All that takes is creativity and focusing on what really matters. Spending money you don’t have for a party you can’t afford doesn’t sound like a joyous act to me.
Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
I have checked all the beneficiaries of every investment account and insurance policy within the past year.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.
Credit & Debt, Saving, Investing, Retirement