If you want to start your marriage right, then following these wedding spending rules so you don't end up broke and alone.
Given roughly half of marriages eventually end in a divorce and wedding ceremonies last for at most 12 hours in America, it's wise to spend as little as possible on a wedding just in case things don't work out.
If you're still in love and much wealthier after 10 years, you can then spend more lavishly on a wedding party. This is when you can renew your vows, invite your closest relatives and friends, and have a good time without feeling as much financial stress.
Despite such pure logic, the average cost of a wedding in America in 2020 was $19,000 according to The Knot's 2020 Wedding Survey. In 2021, the average cost of a wedding is running closer to $22,500, similar to pre-pandemic levels as people begin to gather again.
However, if you live in Manhattan, the average spend is closer to $77,000. In comparison, San Francisco weddings cost about $40,000 on average.
With the median household income in America at around $68,000 according to the latest US Census Bureau, spending $22,500 for a wedding is egregious. After paying taxes on a median $68,000 household income, the average couple is spending about 40% of their after-tax annual income on a wedding.
Why Couples Spend So Much On A Wedding
Here are some random responses I've received from couples who have spent $22,500 or more on their weddings:
“I wanted a night we'd never forget.”
“The wedding is more for our family than it is for us. We both have huge extended families that must all be invited.”
“Everything from the venue to the flowers cost so much nowadays. It's hard to spend less.”
“I already spent $18,000 on a ring. What's another $50,000 spread among 200 people?”
“I didn't want to spend $200,000 on the wedding, my wife did. I hate weddings and would rather have just gone to City Hall for a couple hundred bucks. It's all curated and fake for thirsty Instagram users.”
The problem is, a wedding only lasts a day. The opportunity cost of not investing the money in your new future cost result in hundreds of thousands of dollars in lost wealth.
New Wedding Spending Rules To Follow
Given I came up with engagement buying rules thousands of love birds have followed since 2010, it's only appropriate I come up with wedding spending rules for financial freedom.
Controlling wedding costs is arguably much more important than overspending on an engagement ring. At least with the engagement ring, it can be reused (aghast!), resold or passed down. Once your wedding is over, the money is gone forever. All that's left are pictures, videos, and hopefully wonderful memories.
Marriage is a leap of faith. Nobody goes into a marriage thinking they will breakup. But divorces happen all the time, even after having children. Therefore, let me provide you some wedding spending rules that will give you a 70% or greater chance of marriage success.
If you follow one of these wedding spending rules, I believe your marriage will last longer and you'll have more wealth than the average American who does not follow any of these rules.
And if for some reason your marriage ends before the average duration (eight years), or you end up having a lower household net worth for your age than the average, then you can simply blame each other for all your mistakes!
Here are my top wedding spending rules to follow.
Wedding Spending Rule #1 Spend no more than 10% of your newly combined household income.
If he makes $60,000 and she makes $80,000, then they should spend no more than $14,000 on a wedding. If their newly combined household income is $1,000,000, then they can ball out on a $100,000 wedding.
In other words, to spend the average $22,500 on a wedding in America, a couple should earn at least $225,000. For the median household income of $68,000, consider spending up to $6,800 for a wedding instead.
$6,800 might not sound like a lot. But it forces you to think about a more frugal venue and invite only the people that matter the most to you.
My wife and I had a $3,000 wedding on the beach with 16 guests. The beach was free. $3,000 included two roundtrip tickets to Honolulu from San Francisco and a Korean BBQ for 16 guests at our favorite restaurant.
Spending no more than 10% of your newly combined household income on a wedding is the easiest and most practical wedding spending rule to follow.
Wedding Spending Rule #2: Spend no more than 2% of the value of your combined pre-tax retirement plans.
Let's say at age 30, she has a Financial Samurai-recommended $150,000 in her 401(k). At 35, he has a Financial Samurai-recommended $300,000 in his 401(k); this couple can spend up to $9,000 on a wedding.
By drawing the couple's attention to their retirement savings plans, there will be a natural tendency to spend less given spending more means a later retirement. The more you hate your job, the less you will end up spending on a wedding as a result.
For more: Recommended 401(k) Savings By Age
Wedding Spending Rule #3: Spend no more than 50% of your combined side-hustle gross income.
Post-pandemic, the act of side hustling for more income has boomed. No longer are as many people solely relying on their day job income given how precarious things are. Instead, more people are taking on side jobs teaching, consulting, blogging, and starting online businesses to diversify their income streams.
Here are 20 side hustles you can do right now.
Spending no more than 50% of your combined side-hustle gross income is my favorite modern-day wedding spending rule. Let's say the couple has a combined W2 gross income of $120,000. In addition, they also makes $24,000 selling t-shirts and trinkets from their Etsy store. The couple can now spend up to $12,000 on their wedding.
The couple probably won't spend so much given how much sweat they had to put into their side business. But they will feel good knowing that they've bolstered their income sources and can if they want to.
Wedding Spending Rule #4: Spend no more than 10% of your annual passive income.
Side-hustle income requires work. Passive income, on the other hand, requires little-to-no work at all once the investments are made. This is why everybody needs to focus on building their after-tax investment accounts for financial independence.
If the couple happens to save and invest aggressively for eight years to generate $30,000 in annual passive income, they're free to spend $3,000 on a wedding. Below is a table that ranks the best passive income streams. I've spent the last 10 years carefully analyzing these passive income investments as the world changes.
As a reality check, to spend $22,500 on the average American wedding, a couple would need to earn $225,000 in annual passive income. To earn $225,000 in annual passive income would require $5,625,000 in invested capital generating 4% returns or a 4% dividend.
In other words, the average American is spending way too much on a wedding based on the average American's investment amounts.
The key to retiring early or achieving financial independence is generating enough passive investment income to cover your desired living expenses. Therefore, I love this wedding spending rule because it focuses a couple's attention on investing for their future.
Wedding Spending Rule #5: Spend no more than $1,000 per year you've known each other.
If you guys started dating in college at 21 and decide to get married seven years later, you guys can spend up to $7,000 on a wedding. If you guys started off as work place friends at age 25, married other people, got divorced, and decided 20 years later you were always meant to be together, then spending up to $20,000 is probably OK. At 45, your wealth should be much greater than the typical newly wed.
When you've already gone through the ringer once, you presumably have a better idea of what you want with your superior earnings power in your early-40s. By then, you probably won't want to spend $20,000 because you have less people to impress.
Wedding Spending Rule #6: Spend as much as your respective parents want to spend.
If a couple is lucky enough to have wealthy parents who love them so much to cover all the costs of their wedding, then they should go right ahead and accept their generosity. However, every time generosity is accepted, there might be a mental debt overhang that will way on the couples.
If the parents who are paying for the wedding are not wealthy, then the newly weds might have to support the parents more later in the future.
I've always taken the view that as adult children, we should actively try to give back to our parents, not take from our parents. After all, they spent 18+ years taking care of us.
As a father of two young children, I'm exhausted every day. Of course, all I want are for my children to be happy. And if my children can find their life partners before I pass, I will be able to die a happier man. However, I hope he is financially independent enough to pay for the wedding he and his partner wants.
I'll happily pay for any auxiliary expenses. However, I hope he and his partner have the maturity and financial acumen to spend responsibly on their one-day event.
Save Your Marriage By Spending Appropriately
You're obviously free to spend more money on your marriage if you want to, especially if you're rich. But spending $22,500 for a wedding is truly a ridiculous amount for the average American household who only earns about $68,000 a year.
The key to a great wedding is having the people you care about most there to celebrate your special day. If your guests really care about you, you won't have to spend lavishly on a wedding. Further, the more you spend on a wedding, the more your guests will feel responsible spending more on you at the registry.
Getting married is a leap of faith. Therefore, it's wiser to start small and work your way up. You can always throw a lavish parter years later when you're much wealthier and no for sure you'll be together for the rest of your lives.
One of my friend's brothers got married and spend $160,000 on a wedding. My wife and I attended. It was a wonderful wedding with endless shrimp cocktail and lobster. Unfortunately, the couple divorced just three years later. The groom later said that marrying her was the biggest mistake of his life.
Then my own friend, who is also a doctor, got married. He spent about $140,000 on the wedding. Despite having a beautiful son, they haven't lived together for five years. She wanted to pursue her prestigious ophthalmology job at Wilis Eye Center. He wanted to build his cardiology practice in a different city.
The less you spend on a wedding, the lower your expectations will be. And one of the big secrets to being happy is having low expectations. If you end up spending six-figures on a wedding for 200 guests and it rains, you will be devastated. But if you spend $500 on a beach wedding and it rains, you may feel incredible joy.
Follow One Of My Wedding Spending Rules
If you follow at least one of my wedding spending rules, you’ll be able to get your marriage off to a great financial start.
Not only can you use the money saved to buy a house, pay your life insurance annual premium for the year, make your future child a 529 millionaire, or bolster up your respective retirement accounts. With a stronger finances, you’ll likely have much less money fights because you’ll have more of it.
As I review my wedding spending rules, my favorite is #2. Spend no more than 1% of your combined pre-tax retirement accounts on a wedding. Financial independence starts with saving, and the easiest thing everyone can do is max out their 401(k) and IRA.
Based on this rule, the average responsible American couple should spend between $2,000 – $5,000 on their wedding, not $22,500+.
What makes a great wedding is the presence of your friends and family. You don't have to spend a small fortune trying to impress them because all they want to do is celebrate you.
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