How to plan for your wedding

Indian weddings are known for their lavishness. There’s light, there’s food, there’s song and dance. But the colour you see the most at any Indian wedding is gold. However, all that glitters comes at a cost. Wedding expenses have been rising fast. While no data is available regarding the same, anecdotal evidence can tell you that  weddings today are more opulent than they used to be.

So how do you manage these costs? If you don’t want your wedding costs to eat into your parents’ retirement savings, or you want to pay for your own wedding, plan your finances properly. Here are a few financial planning tips.

Start investing

Planning early for a wedding – even if you do not know the exact date – is always a good thing. Starting to plan early will allow you enough time to accumulate money. For one thing, it allows you to set aside smaller sums, which is more manageable than one or two large lump-sums. You will be able to slowly build up to the amount required.

Secondly, when you have time on your side, you can invest in equity instruments. Equity instruments are risky and are only suitable for long time frames. However, they also offer superior returns to bank deposits or debt funds, allowing you to reach your goal with relatively smaller savings.

It’s also a good idea to know approximately how much you need to save. You can arrive at this by looking at average wedding costs today and inflate this cost by the number of years you have before the intended wedding. You can use calculators at this link.

Where do you invest?

As said earlier, equity is a great option if you have a longer timeframe. If the wedding is at least 4-5 years away, include about 40-50% of your savings into equity. The equity portion can be in the form of aggressive hybrid funds or moderate-risk pure equity funds (typically, funds that are oriented towards large-cap stocks). Invest the rest in debt funds such as corporate bond funds or short-duration or medium-duration funds. Remember that debt funds are better-returning, more liquid and more tax-efficient than bank fixed deposits.

If the planned wedding is much farther away – say you’re saving up for your child’s wedding well down the line – you can get more aggressive. Step up equity exposure to 60-70%, and start including mid-cap and more aggressive funds. 

If it’s a shorter timeline, then stick only to debt-oriented options and do not venture into equity.  If your timeframe is 1-2 years away, then a combination of liquid, ultra-short and low-duration funds work well. If you have a couple more years than this, then you can consider including fund categories such as conservative hybrid funds and equity savings funds in addition to pure debt funds. This can help you get a little better return. 

Gold is integral to any wedding. Therefore, if you have a few years before the wedding, you may want to accumulate gold gradually. Here, avoid going for gold savings schemes than jewelry shops typically run. Instead, invest in gold ETFs or gold mutual funds. These are a more effective, liquid, and low-cost way to benefit from gold price movements. You could make small investments in such funds/ETFs until the wedding, at which time you can liquidate the investment and buy the jewelry.

Plan who will spend how much

Now, let’s get to the actual wedding and expenses. In India, talking about money during a wedding is almost a taboo. However, with wedding expenses increasing, it becomes essential that the people involved talk about who is spending and how much. Ideally, try to spread wedding costs between the bride and the groom’s sides so that neither side is overly burdened.  

Once done, you can move on to the next step, which is budgeting.

Budgeting

And, from a financial perspective, this is the most important part of the wedding plan. Also the most complex. There are too many variables to account for.

Start with whether you want to a lavish wedding or a simple one. Then decide on whether you are going to use a wedding planner or take a do it yourself approach. Then find out how much things are likely to cost. These are the direct, known expenses you will have – dresses and jewellery, venue, decorations, and food.

This apart, there can be indirect expenses. For example, would you like to get your house repaired or renovated before the wedding? Would you have relocation expenses to deal with? Would you go on a fancy honeymoon? Would you have to bear the cost of travel and accommodation of some of your friends and family?

At the end of this exercise, you will have a fair idea of your budget. Add a generous margin – say 15% or more – for inflation and unplanned expenses. Fixing a budget that’s within your means will help narrow down choices such as venue, food, and so on. Budgeting will also see to it that expenses don’t add up to an alarming sum that you will find hard to bear.

While you are planning and spending for your wedding, don’t lose sight of your other financial goals. Marriage expenses are just that, expenses. They are not going to give any returns. So if you want to fulfill other life goals, do not empty your coffers over wedding expenses. Earmark certain investments for certain goals. As far as possible, do not spend money which is earmarked for, say, your retirement.

A little bit of planning with your investments and little bit of prudence with your expenses can ensure that your finances stay in order. Remember to start early and invest wisely.