Ep.55- Wedding Planning Part 3 - The Smart Way to Pay for A Wedding (4 Minute Read)
Read Time: 4 Minutes.
This is part 3 of a 3-part wedding budget series.
- Check out part 1, if you are wondering if a wedding planner is worth the cost.
- Check out part 2, if you want to know how to set a realistic budget.
Now it's time to pay for a wedding. The goal of this article is to help you pay for a wedding without going into debt.
Ask yourself these 5 questions. They are designed to start from the most effective strategy to the least effective.
QUESTION 1: WILL YOU SAVE ENOUGH BY YOUR WEDDING DATE?
You may not have the whole budget saved by the time you start planning. But you can save consistently during your engagement period.
Do a simple math by multiplying monthly savings (e.g. $2,000) by the number of months (e.g. 15) , and then add your current available savings to it (e.g. $10,000), to see if you can save enough by your wedding date. In this case, the total amount is $40,000 ($2,000*15+$10,000).
If the answer is yes, you shouldn't worry. You can save more money by going down to steps 2-5. But you don't need to.
If the answer is no, go to #2.
QUESTION 2: CAN YOU INVITE FEWER GUESTS?
The single biggest factor that impacts wedding costs is the size of the wedding. As the wedding size decreases, so do many expensive aspects of the wedding. For example, when you downsize a wedding from 300 guests to 200, you can save at least $5,000 ($50/guest), as you can book a smaller venue, have fewer tables/chairs, fewer centerpieces/linens, a smaller wait staff, less food, and a smaller bar tab. You get the point.
If the answer is yes, cut down your guest list by assuming $50 per guest, until your new budget is smaller than your anticipated savings.
If the answer is no, go to #3.
QUESTION 3: CAN YOU ASK FAMILY TO CONTRIBUTE?
In many cases, it may not make sense for your parents to cash flow your wedding, or neither may you want to. However, when your decision is between getting into debt, and asking for help, it is a good idea to ask your parents/family members to pay for certain items. Having parents/uncles/aunts pay for $500 here, another $1,000 there, can have a huge impact on decreasing the amount you have to pay yourself.
If the answer is yes, figure out who are the close family members that are in a good financial position to help. Be specific on what item you would like them to pay for, not how much you want them to contribute.
If the answer is no, go to #4.
QUESTION 4: CAN YOU ASK FOR CASH THROUGH HONEYFUND?
If all the steps above have failed to help you meet your budget, you may want to ask for cash instead of a traditional wedding registry. One popular way to do so, without asking people to mail you checks, is to sign up a Honeyfund (not sponsored). At the end of your wedding, you can use this money to pay for any gap you may have.
If the answer is yes, set up a Honeyfund, and clearly communicate to your guests to contribute to the fund, instead of things.
If the answer is no, go to #5.
QUESTION 5: DO YOU HAVE SAVINGS IN YOUR 401K?
WARNING: Step 5 should only be used as your last resort, as it involved borrowing, which I typically do not recommend.
If you have gone through steps 1-4, and you still ABSOLUTELY need to borrow money to fund your wedding, the cheapest way is to borrow against your 401k, because it essentially is a 0% loan. It is a much better tactic than borrowing from your credit card. However, you can only do this if you have your money in an employer-sponsored 401k plan, not an IRA.
Here is how it works. You can borrow up to 50% of your vested amount. Typically, you pay a low interest rate (usually 4-5%). Because you are actually paying the entire payment (including the interest) to yourself, it is essentially a 0% loan, thus making it the cheapest way to borrow. The only loss is the opportunity cost of potential earnings through investing.
If the answer is yes, go to your employer's retirement 401k plan website. You should be able to set up a loan against your 401k.
If the answer is no, you may want to postpone your wedding, until you can save more.
Clap on Medium if you enjoyed the article. If you are involved in your wedding planning, best wishes to you. I hope these tactics can help you manage your budget.
I publish a new story every Friday, subscribe on Medium.