Fall/Winter 2009: The Experts
Don’t rely on borrowed funds to pay for your nuptials—or your ever after. Being smart with your green will help you stay in the black for life…or at least for the honeymoon.
By Hillary Geronemus
Once upon a time, weddings were affordable. And once upon another time, brides and grooms didn’t have to house-hunt in a mortgage crisis. But times have changed, says Barry Armstrong, a Boston-based financial adviser and host of WBIX’s Money Matters radio show, and not always for the easier. “When I got married, my wife’s parents picked up the tab for the reception, and my folks paid for the rehearsal dinner.” Now, he says, a good chunk of the expenses falls on the bride and groom—and given that the average, non-spectacular Boston wedding comes in at between $50,000 and $75,000, this is no easy task. To help avert fiscal misfortune, he offers this crash course in finance and a little motivation to stay on budget.
If we’re reading this, is it too late to start saving? Depends on who’s asking. If you’re a parent, ideally you would have started saving for the big day when your kid was 13 or 14, but realistically it happens once the college bills are paid. If you’re the bride or groom—the sooner the better. Put whatever cash you can part with into a safe and secure money market account.
And if there isn’t any money in the bank to begin with? The last thing a wedding should do is create financial hardship. So when money is tight, be sure to set a realistic budget based on what you can really afford (see Budget Basics). I never, ever advise parents to refinance a home or take money out of a 401k—that will only delay their retirement. But if you have no other choice, a home equity line of credit (for those planning on paying it off in the short term) or a home equity loan (for long term) is not a bad idea. Whatever you do, avoid anything called a bridal or wedding loan. There are no bargains there, just high interest.
We have the money. Now, how should we pay the bill? Charge it, especially if you have a credit card that can give you cash back, which I prefer over airline miles (Capital One and American Express both have good ones). You can certainly get 1 percent back—the HSBC Weekend card even gives you 2 percent if you charge on a Saturday or Sunday. Just be sure you have the cash to pay the bill in total. Regardless of how you pay, don’t hand over the money up front. I’ve heard some horror stories of caterers and photographers going bankrupt before the big day—leaving the bride and groom in the lurch.
If there’s any money left over after wedding expenses, what should we do with the extra loot? For most young couples, their first goal is to buy a house or a condo. If that’s the case, put the cash into a money market account. Your money is easily accessible and will give you a strong rate of return given the time frame. If you’re thinking more long-term, I recommend a balanced mutual fund, which is a combination of stocks and bonds. It’s pretty conservative as far as investments go, there are no penalties, the money is completely liquid, and it gets taxed at half the rate of a CD. Most important, you can link it to your personal checking account, which means you can set up an automatic savings plan.
So are you saying we need to merge bank accounts? I think it’s a good idea, especially before you exchange rings. That way you can learn about each other’s finances and credit history. That Free Credit Report commercial (the one with the guy playing guitar in his wife’s parents’ basement) isn’t that far from the truth, and it’s better to know what you’re getting into before the wedding bells ring.
Armstrong Advisory Group, 144 Gould St., Ste. 155, Needham, 781-433-0001, armstrongadvisory.com.
Armstrong’s tricks for setting a wedding budget that won’t break the bank.
Talk Is Anything But Cheap
With so many people involved, the key is to have a lot of open conversations. Of course, it’s the couple who needs to get this dialogue going between the families, regardless of how painful and unpleasant it may seem.
Set a gross dollar amount, the total amount you’re comfortable spending that won’t put you in debt. Then, work backwards. Although very few people actually stick to this figure, if you have no guidelines to work from, you can easily get out of control.
Pick Your Poison
Decide what’s the most important element of the wedding and what you’re willing to sacrifice to get that. Sit-down dinner instead of a buffet? A 10-piece band or the perfect location? Once you know what you want, everything else will fall into place.