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Jun 3, 2019

What Could A Wedding Cost A Marriage?

by Julie Petrera

Julie PetreraSo you are getting married! What an incredibly exciting time! And along with the marriage comes… the wedding. Weddings take a lot of planning, but be sure to consider the financial planning aspect of the wedding, too. I don’t just mean reviewing the cost details with the caterer and the florist but understanding what the wedding could cost the marriage.

A marriage is about making a decision that you think will be good for you and your partner for the rest of your lives. The wedding itself, however, is sometimes not. Weddings are very expensive. They are grand events, and because wedding vendors know (and will remind you) that a wedding is a once in a lifetime event and therefore you should spare no expense.

But every dollar spent on the wedding, becomes a dollar not available to be spent in the marriage; this is called opportunity cost. And since the marriage is about the future, let’s calculate the future value of the opportunity cost of a wedding.

The future value of money = the value today + all the gains you could earn on that sum if you don’t spend it today + all the gains you could earn on the gains you earn. Mathematically, this is:

FV = PV (1 + i)n

Where:

FV is the future value

PV is the present value

i is the rate of interest or return

And n is the number of periods for which the investment will be held

According to Stats Canada via The Canadian Encyclopedia, the median age at marriage in Canada is about 301. And the average retirement age is about 652.

So there are about 35 years between the wedding day, and retirement. Therefore, 35 will become our ‘n’.

If we assume a real interest rate3 of 5%, we can calculate the value of each $1,000 you do not spend on the wedding, in terms of what it will be worth to a couple at retirement:

FV = $1,000 (1 + 0.05)35 = $5,516

That’s right–for every $1,000 you don’t spend on your wedding, you could have an additional $5,516 at retirement.

Therefore, if you cut $2,000 from the wedding budget, you will have over $11,000 more at retirement, and if you cut $10,000 from the budget, over $55,000 more at retirement! And so on.

Let’s Put These Figures In Context

  • By saving $1,000 on your wedding
    • You kick off your retirement with a vacation to Paris. Moneywehave.com suggests a vacation for two to Paris costs $3,000 USD or $5,000 Canadian4.
    • By saving $5,000 on your wedding:
      • You could also pay your child’s university tuition with the savings5, or pay for your child’s entire wedding!
      • By saving $10,000 on your wedding:
        • You could retire 6 months earlier! The median household income in the Canada is $76,0006, and Canadians usually live off about 70% of their pre-retirement income in retirement ($53,200). $10,000 on the wedding could enable you to spend more time with the one you love.

How To Save On A Wedding

  • Decide what is most important to you about celebrating this day. Is it a band, the dress, a special cake? Be willing to spend more on those items but be frugal on the less important ones.
  • Make a budget. Communicate your budget to vendors. Ask them what they can do for the price you are willing to spend on each element of the wedding.
  • Keep in mind what extra spending on a wedding can cost a marriage. The reason you decided to get married in the first place is spend your life with your spouse. Remember that money saved now is money that can be enjoyed more happily ever after!7

 

Julie Petrera, MBA, CFP, CIM is a certified financial planner. Julie is married! Twitter: @petrerajulie

 

 

1      https://www.thecanadianencyclopedia.ca/en/article/marriage-and-divorce

2      https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410006001

3      Real rate of return means the rate of return after adjusting for inflation in the same period

4      $3,900 / 0.78, https://www.moneywehave.com/how-much-does-it-cost-to-go-to-france/

5      http://nces.ed.gov/fastfacts/display.asp?id=76 Note: N would be reduced if the tuition payments were to start prior to 35 years after the wedding.

6      https://www150.statcan.gc.ca/n1/daily-quotidien/170913/dq170913a-eng.htm

7      All figures are approximate and for illustration purposes only. Past investment returns to not guarantee future results, and taxes are not taken into consideration