What are you sacrificing, to pay for your wedding?

Wednesday, 19 September 2018

The biggest no-no is borrowing money to get married, especially a high-interest loan.

OPINION: Your wedding day is a magical day. Nerves, romance, heart-felt vows and the start of a new life as a couple.

The emotions a wedding evokes cannot be captured on a spreadsheet, so you might argue an accountant would be well advised to steer clear of this domain.

But weddings are also the domain of diamond dealers, wedding dress designers, florists, caterers and stylists – all of which come at a hefty price.

I'm often asked how much you should spend on a wedding – and the answer is: it depends.

* You can have a cash bar at your wedding - but don't expect presents

Hannah McQueen: Don't start married life in debt.

* Low prices are driving Kiwi brides to buy wedding dresses from China, but quality isn't a guarantee**

My rule of thumb is a wedding should cost no more than 20 per cent of your take-home (after-tax) pay, or what you can save within a year – whichever is lower. This should be the top end – what you could stretch to, without crippling yourself.

My rationale is if you're saving 20 per cent of your income, you're in pretty good financial shape, so by spending that much you're sacrificing a year of progress.

Your wedding should cost 20 per cent of your take-home pay.

The average New Zealand wedding is said to cost $35,000. To put that in context, $35,000 would pay a $460,000 mortgage for an entire year (assumptions: 25-year term, 6 per cent average interest rate). If you put your $35,000 on that same mortgage as a lump sum, you'd save yourself almost $33,000 in interest – matching that rate of return anywhere else would be tough.

Apply my 20 per cent rule to the average $35,000 wedding bill and you would have to be earning $180,000 after tax, or roughly $250,000 gross, for your wedding budget to be in this ballpark. This isn't many people.

This isn't to suggest your wedding isn't worth it – but with a generation of people facing huge difficulty getting into the property market it's worth giving some context to what you might be sacrificing in order to have a big wedding.

I was lucky - my parents paid $10,000 for my wedding, but the caveat was if we divorced within ten years, we had to pay them back. This year we celebrated 20 years of marriage – so we escaped the claw-back clause!

Often families do want to come to the party and pay for or contribute to the wedding. If your parents want to chip in you need to decide: do you reduce your contribution and perhaps make some progress that year, or do you opt for a bigger wedding?

The biggest no-no is borrowing money to get married, especially a high-interest loan. If this is the position you're in, you need to seriously downsize your expectations or delay the wedding until you can save enough to pay for it in cash. Financial issues are the number one cause of relationship breakdown, so starting married life with extra debt makes no sense.

While I don't want to rain on your wedding day dreams, and I know the value of your wedding day cannot be expressed in dollars, the cost most certainly can.

Hannah McQueen is an author, authorised financial advisor, accountant and founder of enableMe.