A couple’s wedding day is one of the most memorable days of their life and the start of a wonderful life together. However, the average cost of a wedding can be in excess of $100,000. While some couples are fortunate and receive an abundance of financial gifts from family and relatives, many couples today pay almost all of their wedding costs out of their own pockets. Thus, we are faced with the question of can a couple really avoid debt for their wedding? Seven out of ten couples pay for their weddings with savings, but thirty percent use credit cards and loans for all or part of the cost. Our Financial Advisors however, caution strongly against adding excessive debt to a new marriage as this can weaken even the strongest relationships. Here are five reasons you should avoid getting into debt for your special day:
1. Work Together and Budget to Build Good Financial Habits
The main reason why couples end up in debt for their wedding is that they want to spend more than they have available. However, if couples sit and work together on a budget that is feasible, this can prevent imprudent borrowing and together they learn to build the necessary financial skills for two people becoming one. Thus, planning a wedding is the start for a couple to work together as a team, especially on their finances. Creating a budget for the big day can keep expenses from spiraling out of control. Affording your dream wedding may mean having a longer engagement to save up enough money. You don’t want your marriage to end before it begins, so make time to talk about finances with your significant other.
2. The Existence of Prior Debt
Relationship experts say that money and finances are the number one reason why couples fight so talking openly about your finances should rank as a high priority. Oftentimes, couples get married without any clue about each other’s financial position or the extent of their debts. Some people are often embarrassed by or ashamed of the debt they have accumulated and may not be upfront about it in discussions. Partners need to be aware of potential red flags, such as if your fiancé always pays with a credit card rather than cash or if they never seem to have money. This may be a sign of someone living beyond their means or spending more than they have and possibly in heavy debt. They are usually prone to accumulating more debt, as an easy way of dealing with their problems and will not hesitate to borrow for wedding expenses. However, this ultimately will lead to a heavier financial burden for both of you when the honeymoon is over.
3. The True Cost of Debt
Credit card and short-term debt carry very high interest rates, which can make financing your purchases expensive. Short-term debt at most financial institutions carry an interest rate of 9% to 13%, while credit cards from these companies carry an interest rate of around 25%. This is significant, when we take into account the interest rate that we receive on our savings and investments, which is about 1% to 3%, given the global economic and financial landscape. Therefore, couples should be more conscious of the benefits of using cash for their wedding day, rather than racking up heavy debt levels.
4. Planning for Other Responsibilities
There are many things that you will need to spend on for your wedding, including a wedding planner, food, drinks, favors, venue and, especially the dress. However, our Financial Advisors recommend that engaged couples sit and plan for their married life together and not just for the wedding day. This helps identify other significant goals on the near horizon, such as buying a home, having children, or simply, furnishing your new apartment. You probably would not be able to afford everything, so it is important that you prioritize, which may eventually mean cutting back on your plans for the big day. When you think about it numerically, for a couple expecting to be married for fifty-plus years, the wedding day is a very small or 0.01% part of the marriage. Couples are urged by our Advisors to focus on long-term, relationship-building goals, such as spirituality, financial security, personal integrity, respect for each other, and healthy communication skills as these help to maintain a happy marriage, especially through the hard times.
5. Planning for the Unexpected
Couples should reconsider their well-planned dream wedding if the total cost will lead to financial hardship during the first months of your marriage or even a long-term financial burden. Taking steps to reduce wedding costs can help to avert problems with debt. In addition, couples are advised to take into consideration the risk that something does not go according to plan, especially if you are planning to borrow. You cannot control how the economy will affect your job or business or your ability to find a new source of employment. If one, big unplanned event after your wedding would throw your wedded bliss into disarray, it is time to take a closer look at your wedding plans. A great way to deal with this risk is by having an emergency fund. Putting three to six months’ worth of your combined income in a fund such as the UTC TT Dollar Income Fund, in the event of an emergency only, is a great way to be financially prepared for your married life. In addition, while the use of credit cards and short term debt are not usually recommended, having the ability to borrow some funds can make a big difference when times get tough. Keeping a sizable balance on your credit card is a good way to make sure there will be something left to borrow if you have no other choice.
Financial planning is certainly not the most romantic task on your wedding checklist. Nevertheless, getting married is about the union of two people becoming one, and it lasts more than a day. Unless a careful eye is kept on expenses, the celebration can easily get out of control. If you are concerned that the high price tag for your wedding will put you into debt, you should really consider if a dream wedding is worth a long-term financial burden. Fighting over financial issues down the road can spell disaster for a new marriage. Our advisors strongly recommend that you avoid starting your marriage in debt because you held a wedding you could not afford. You can have a wonderful wedding and still be conscious of the amount you are spending with proper planning and control.
A Financial Advisor at the Unit Trust Corporation can work with you to make better financial decisions and achieve your financial goals.