May 26, 2016
Weddings bring out the worst in our bad-money habits. I have known too many couples that have gone into credit card debt to pay for a wedding. Love doesn’t mean paying 15% interest-or more!-for a special day. And I have seen way too many parents nearing retirement who pull money out of their retirement savings, or stop contributing to their retirement accounts for a year or two, or use a home equity line of credit to pay for a child’s wedding. That is insane. Love never means having to jeopardize your future to pay for a wedding.
Some questions I wish all couples would think about as they plan a wedding:
• Can we afford it? Please review my tips for deciding if your finances can take on paying for a wedding.
• Can our parents afford it? If you have any sense that your parents will have to make any sacrifice to their financial security to cover the wedding costs, you must not accept a penny from them. I don’t care if they insist that they want to pay for the wedding. Of course they do! They are your parents. But here’s the more important issue: You need to show your love by putting their financial security first. If they are borrowing from the 401(k), or from their home equity, or god-forbid are going to run some credit card debt to finance the wedding, you need to say: No Thank You. I have always said it is important to Say No Out Of Love Rather Than Yes Out of Fear. Don’t be afraid to be the adult and put your parents financial security first. Trust me, it not only is for them. Let’s jump 15, 20 or 30 years into the future: if your parents aren’t financially secure, it’s going to fall on you to help them out. Start helping them now, by not asking them to spend money that should be saved.
• Can our friends afford it? Being gracious hosts starts months before the wedding. Please think carefully about the expectations you have for bridesmaids and groomsmen. The tab to be a central part of a wedding (especially a destination wedding) can be a major imposition.
• Do we really need gifts? I have no doubt that your family and friends are thrilled to be part of your wedding celebration. But you’ve been on the other end of the invitation enough to understand how it can unleash a lot of spending. Getting gussied up for the event can often entail plenty of spending: for a new outfit, or accessories. Or maybe a special trip to the salon. Anyone with young kids is going to need to hire a babysitter. So right there they’ve got some major costs. Then there’s the gift issue. Look, if you are into gifts, at the very least make sure your registry includes an abundance of moderately priced items. Or if you’re less wedded to gifts, maybe add something like this to the invitation: “We look forward to your presence. Presents not expected.” Or “Your presence is a gift.”
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.
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.