Financial planning: The opportunity cost of a lavish wedding

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Published: August 5, 2019 3:42:44 AM

Instead of splurging on your wedding, it is better to utilise the money to buy a home, travel the world, or just save for a rainy day

Wedding costs, how to reduce Wedding costs, how to plan Wedding costs, wedding planning, getting married, financial planning for marriage, dream wedding, marriage, budgetThe prospect of enjoying an early retirement with the funds set aside for a lavish wedding versus blowing it up for a day or two of merriment makes many millennials choose to have a simple wedding.

The need to keep up with trends and maintain social status results in weddings getting bigger, flashier and costlier as the years go by. Such huge sums of money can easily jeopardise the financial health of all stakeholders at best and bury them in a difficult debt situation at worst.

Down payment for a home
A home loan would cover on an average not more than 70-80% of the market value of the property (provided the loan applicant has a good credit score). So, if we assume the cost of a standard 3BHK in a metro city to be `1 crore, the loan would cover not more than `80 lakh, leaving the down payment fund requirement of `20 lakh. Plus, there are other major expenses like charges for registration, stamp duty, title deed, GST, brokerage, interior decoration, etc., which might raise the total non-loan expenses to be over `35 lakh. Also, if you have more funds, you can lower your loan burden further and save more on loan EMI payouts in the future. As such, you can make major headway in your home-buying plans if you ditch a lavish wedding.

Funding higher education
Higher education has always been a focal point for people across the world. It opens up doors to better job opportunities and a better life. Prioritising higher education over a luxurious wedding is an investment that is likely to pay much higher dividends.

Building an emergency fund
It is a well-known financial mantra to have at least six months’ worth of expenses as a cushion against any unforeseen challenges that life may throw your way. Whether it is losing your job, recovering from an illness or accident, or helping your family out, knowing that you have an emergency fund can give you peace of mind that is more valuable than the excitement of an opulent wedding.

Securing family assets
It is a common practice in India to liquidate family assets, whether it is property, stocks, or jewellery, to fund a wedding thereby losing valuable capital appreciation. Choosing to have an economical wedding that fits within your budget is a smart way to ensure that your family assets are not liquidated and continue to appreciate. Long-term capital appreciation over short-term gratification is a win-win for all!

Not having to rely on loans
Taking a loan from well-meaning family, friends, or your bank to finance a dream wedding may seem like an easy thing to do until you have to start paying off the loan. This leads to a financial burden on the family or the young couple, especially considering the fact that the loan may come with hefty interest charges. A budget wedding ensures that the wedding day is a sweet memory rather than an event with a bitter aftertaste.

Affording an early retirement
The aspirations of millennials are different from those of their parents’ generation. Baby-boomers looked forward to a quiet life after retirement, pottering around the house, playing with the grandkids, enjoying their hobbies, or spending time with family and friends. Millennials, on the other hand, are looking to retire in their early 40s or 50s with travelling around the world being high on their list of life goals. The prospect of enjoying an early retirement with the funds set aside for a lavish wedding versus blowing it up for a day or two of merriment makes many millennials choose to have a simple wedding. The opportunity costs of a lavish wedding, whether it is buying a home, travelling the world, or just saving for a rainy day, seems more attractive to them than the glamour of an opulent wedding.

(The author is CEO, BankBazaar.com)

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