New-wedding-spending-rules-to-follow-if-you-dont-want-to-end-up-broke-and-alone
00:00:00.000 | Hello everybody, it's Sam from Financial Samurai and I'm doing this podcast from Sonoma Valley.
00:00:06.640 | I'm here at a friend's place and finally, finally taking our first family vacation.
00:00:12.840 | And I gotta admit, it's so far so good.
00:00:15.720 | Our son is about 18 months old now and we waited this long because, well, we were just
00:00:22.160 | kind of wussies as parents, frankly.
00:00:23.840 | We were just, you know, wanted to just stay home, didn't want to deal with the hassle,
00:00:28.080 | the packing.
00:00:29.260 | We definitely didn't want to get on a flight.
00:00:31.680 | So we said, well, let's do a staycation for as long as possible until he starts sleeping
00:00:36.960 | well.
00:00:37.960 | And so now he's sleeping a little bit better now.
00:00:39.480 | He can sleep like 8 to 10 hours through the night, most of the time.
00:00:44.040 | And we thought if we can drive up to Sonoma or Napa, it's only about an hour to hour 15,
00:00:50.080 | hour 30 minutes away.
00:00:51.560 | We could drive during his nap time and all will be good and so far so good.
00:00:55.480 | So the next trip will be Tahoe and then, maybe after 2 years old, we'll take a flight to
00:01:00.880 | Hawaii.
00:01:02.040 | So in this podcast, I want to talk about a fun topic which is wedding spending rules
00:01:06.780 | to follow if you don't want to end up broke and alone.
00:01:10.280 | So I'm going to my friend's wedding in November and I know it's going to be an amazing wedding.
00:01:14.980 | So it just got me thinking about how much the average American should spend on a wedding.
00:01:19.400 | Did you know that the average cost in America for a wedding is around $33,000 according
00:01:24.900 | to the Knotts 2017 wedding survey?
00:01:28.120 | If you live in Manhattan, the average spend is closer to $77,000.
00:01:33.800 | In comparison, San Francisco weddings are only about $39,329.
00:01:39.340 | So I'm telling you folks, San Francisco is not as expensive as folks make it out to be
00:01:44.800 | compared to Manhattan.
00:01:45.800 | Manhattan is way more expensive than San Francisco.
00:01:49.140 | So with the median household income in America at around $60,000 according to the US Census
00:01:54.560 | Bureau, what is going on with couples who are willing to spend roughly 70% of their
00:02:00.000 | annual after-tax income on such ephemeral pleasure?
00:02:04.720 | So I went ahead and asked some readers and asked some random folks who have spent $33,000
00:02:10.160 | or more on their weddings to hear what they had to say.
00:02:13.280 | Here were some of their responses.
00:02:15.580 | One woman said, "I wanted a night we'd never forget."
00:02:19.000 | Well don't we all.
00:02:21.180 | Another guy said, "The wedding is more for our family than it is for us.
00:02:25.560 | We both have huge extended families that must all be invited."
00:02:30.120 | Another woman said, "Everything from the venue to the flowers costs so much nowadays.
00:02:35.000 | It's hard to spend less."
00:02:37.440 | A guy said, "I already spent $18,000 on a ring.
00:02:41.120 | What's another $50,000 spread among 200 people?"
00:02:44.480 | That's a good point.
00:02:45.700 | And finally, here's my favorite response from a guy.
00:02:48.040 | "I didn't want to spend $300,000 on a wedding.
00:02:51.100 | My wife did.
00:02:52.180 | I hate weddings and would rather have just gone to City Hall for a couple hundred bucks.
00:02:56.520 | It's all curated and fake for thirsty Instagram users."
00:03:01.200 | Well said.
00:03:02.640 | So given I came up with the engagement buying rules, thousands of lovebirds have followed
00:03:07.920 | since 2010.
00:03:08.920 | If you Google "engagement buying ring rules" you'll see Financial Samurai's article up
00:03:14.280 | top.
00:03:15.280 | It's only appropriate I come up with wedding spending rules for financial freedom.
00:03:18.800 | Controlling wedding costs is arguably much more important than overspending on an engagement
00:03:23.440 | ring because at least with the engagement ring it can be reused or resold.
00:03:29.040 | You won't get the price you paid but you'll get something.
00:03:33.040 | Whereas a wedding you don't get anything.
00:03:35.280 | I'm certain that if you follow my wedding spending rules your marriage will last longer
00:03:40.680 | and you'll have more wealth than if you spend what the average American spends on a wedding.
00:03:46.420 | And if for some reason your marriage ends before the average duration of 8 years or
00:03:50.760 | you end up having a lower household net worth for your age than the average, then you can
00:03:55.980 | simply blame each other for all your mistakes.
00:03:59.080 | So here are 5 wedding spending rules to follow.
00:04:03.000 | 1.
00:04:04.000 | Spend no more than 1% of your newly combined household income.
00:04:07.880 | So if he makes $60,000 and she makes $80,000 then they should spend no more than $1,400
00:04:13.600 | on a wedding.
00:04:14.600 | If their newly combined household income is $1,000,000 then they can ball out on a $10,000
00:04:19.440 | wedding.
00:04:20.440 | Only when the couple starts earning $3,000,000 or more should they come close to spending
00:04:25.400 | what the average American spends on a wedding.
00:04:34.480 | You can see from the chart in the post the real median household income in America is
00:04:39.000 | around $60,000.
00:04:41.000 | We've just now surpassed our 1999 highs.
00:04:45.560 | That's almost 20 years of no income growth.
00:04:48.320 | Therefore if the typical American follows my 1% rule, they should limit their wedding
00:04:52.760 | cost to roughly $600.
00:04:55.720 | Casual weddings in your backyard are not only intimate, but cost effective.
00:05:00.880 | 2.
00:05:02.240 | Spend no more than 1% of the value of your combined pre-tax retirement plans.
00:05:08.600 | So everything starts with I think savings and contributing to your 401k and IRA and
00:05:14.880 | so forth.
00:05:15.880 | It's the easiest thing everybody can do to save for retirement.
00:05:19.440 | So let's say at age 30 she has a financial samurai recommended $150,000 in her 401k and
00:05:26.440 | at 35 he has a financial samurai recommended $300,000 in his 401k.
00:05:31.720 | This couple can spend up to $4,500 on a wedding.
00:05:35.740 | By drawing the couple's attention to their retirement savings plans, there will be a
00:05:39.900 | natural tendency to spend less given spending more means a later retirement.
00:05:44.680 | The more you hate your job, the less you will end up spending on a wedding as a result.
00:05:49.700 | The third rule, spend no more than 50% of your combined side hustle gross income.
00:05:56.240 | Let's say the couple has a combined W-2 gross income of $120,000, so that's day job income,
00:06:01.680 | but also makes $20,000 selling t-shirts and trinkets online.
00:06:05.660 | The couple can now spend up to $10,000 on their wedding, but I bet they won't because
00:06:11.080 | everybody who side hustles knows how exhausting it can be to make extra money outside of their
00:06:15.720 | day job.
00:06:16.720 | And why are people side hustling?
00:06:18.360 | They're side hustling because they want to retire early and live a life of freedom, but
00:06:22.760 | they do have the green light.
00:06:23.960 | They do have the green light to spend $10,000 because they can.
00:06:26.760 | They're so far ahead of everyone else who just relies on only one source of income to
00:06:32.160 | survive.
00:06:33.160 | I think that's one of the biggest mistakes Americans, human beings have who really want
00:06:37.760 | to achieve financial freedom.
00:06:39.640 | Just relying on your job is a no-no.
00:06:41.120 | Four, spend no more than 10% of your annual passive income.
00:06:47.480 | Side hustle income requires work, so the next step is to build passive income because it
00:06:52.160 | requires little to no work at all once the investments are made.
00:06:55.840 | And that's why I encourage everyone to build their after-tax investments beyond their pre-tax
00:07:01.120 | retirement accounts.
00:07:02.660 | If the couple happens to save and invest aggressively for 10 years to generate $30,000 in annual
00:07:07.200 | passive income, they're free to spend $3,000 on a wedding.
00:07:11.240 | My guess is they won't, or maybe they will, because they didn't start generating passive
00:07:16.880 | income for a wedding.
00:07:17.880 | They started generating passive income to one day be free, so it really is a little
00:07:22.040 | bit painful.
00:07:23.120 | But $3,000 is not that much for a wedding.
00:07:25.900 | It's pretty reasonable depending on your wedding-size party.
00:07:28.800 | And as a gut check, I'd be willing to spend up to $20,000 a year on a wedding based on
00:07:33.300 | my current passive income of about $200,000 that took 19 years to build.
00:07:38.480 | I'm 41 now, she's 38 now.
00:07:42.440 | Could we spend $20,000 for our friends and family?
00:07:45.600 | I think we could, but man, I think I'd rather just spend like $5,000 on a great dinner party,
00:07:52.880 | do some speeches, some drinks, I don't know, maybe like 50 of our closest friends and family,
00:07:58.260 | and then just save and invest the remaining $15,000 or donate it to people who actually
00:08:03.640 | need the money.
00:08:04.960 | Alright, so five.
00:08:08.320 | Spend no more than $1,000 per year you've known each other.
00:08:11.800 | Or you can do $1,000 per year for as long as you've been dating.
00:08:16.120 | So if you guys started dating in college at 21 and decided to get married 7 years later,
00:08:21.280 | well, maybe you guys can spend up to $7,000 on a wedding.
00:08:25.140 | It's a pretty easy rule.
00:08:27.320 | Let's say you guys started off as workplace friends at age 25 and then you married other
00:08:33.080 | people, you got divorced and decided 20 years later you were always meant to be together,
00:08:38.320 | then spending up to let's say $20,000 is more digestible.
00:08:42.280 | When you've already gone through the ringer once, you presumably, you should have a better
00:08:46.800 | idea of what you want with your superior earnings power in your early to mid 40s.
00:08:52.120 | And by then you probably won't want to spend $20,000 because you have less people to impress.
00:08:57.280 | Or, I guess maybe you will spend happily $20,000 because you're just YOLOing life and your
00:09:03.400 | midlife crisis and you know, you understand your morality and mortality.
00:09:08.480 | Every case is different.
00:09:10.080 | And finally, I've got this great, great rule.
00:09:14.240 | This is a bonus rule that I think maybe many people, many people take advantage of.
00:09:19.400 | Feel free to spend as much as your respective parents want to spend.
00:09:23.440 | If a couple is lucky enough to have wealthy parents who love them so much to cover all
00:09:27.280 | their costs of their wedding, then they should go right ahead and accept their generosity.
00:09:33.040 | And if it turns out the newlyweds accepted their respective parents' help in spite of
00:09:36.960 | the fact their parents are financially struggling, then the married couple will simply have to
00:09:41.480 | take care of them financially for the rest of their lives.
00:09:45.360 | It's interesting.
00:09:46.520 | I've always taken the view that as adult children, we should actively try to give back to our
00:09:51.240 | parents, not take from our parents after they spent 18 years taking care of us.
00:09:56.680 | You know, I'm only like 18 months into being a father and man, it is hard work.
00:10:03.640 | It's so hard.
00:10:04.640 | It's so hard that I'm already thinking about taking a vacation and going back to work.
00:10:08.680 | That's how hard it is.
00:10:09.680 | Think about it.
00:10:10.680 | So many people just want to leave work to, you know, just chill out and maybe be parents.
00:10:14.040 | But I'm telling you folks, being a stay at home dad is a tremendous amount of work.
00:10:18.860 | And also, you know, I'm writing and I'm doing this podcast.
00:10:21.720 | So there's always something to do.
00:10:23.720 | And if my son doesn't insist on being a man and paying for his own wedding when he's,
00:10:29.040 | I don't know, 28, 30, 35, whatever the age he gets married is, I'm going to send him
00:10:35.600 | this post.
00:10:36.600 | I'm going to send him this podcast and say, hey, buddy, I think it's important to pay
00:10:42.320 | your own way because you're an adult now.
00:10:46.200 | You're a man now.
00:10:47.200 | I'll be there for you.
00:10:48.200 | I'll always love you.
00:10:49.200 | I'll support you.
00:10:50.920 | But when it comes to your own relationship and spending money on a probably six hour
00:10:55.720 | to seven hour event, I don't think spending thousands and tens of thousands of dollars
00:11:02.120 | on a wedding is a good idea, son.
00:11:05.640 | So you're obviously free to spend more money on your marriage if you want to, especially
00:11:09.440 | if you're rich.
00:11:10.960 | But spending 33,000 for a wedding is truly a ridiculous amount for the average American
00:11:14.860 | household who only earns about 60,000 a year in 2018.
00:11:20.520 | You know, I guess a lot of parents pay for the wedding and hopefully they can afford
00:11:26.080 | it because if you are a parent in your 60s, 70s, yes, it's going to be a proud moment.
00:11:32.760 | I know I'm going to be so proud if and when my son gets married and finds the love of
00:11:38.000 | his life.
00:11:40.000 | Maybe I'll just open my wallet and pay for everything, but I'd like to see some skin
00:11:43.760 | in the game.
00:11:44.760 | I'd like to see some rational thinking because at the end of the day, I am a finance oriented
00:11:49.240 | person.
00:11:50.240 | I write a personal finance site and I have a personal finance podcast.
00:11:53.520 | If you annualize the cost of the wedding, the cost is $12,045,000.
00:12:01.400 | And you're asking, "What am I talking about?"
00:12:03.800 | Well, simple.
00:12:04.800 | $33,000 is the average cost of the wedding.
00:12:07.640 | Times that by 365 days, that's an annualized cost of $12,000,000.
00:12:12.760 | And goodness forbid something bad happens at the wedding.
00:12:15.720 | I went to one wedding and this guy on the dance floor spilt red wine on the bride's
00:12:21.280 | couture dress.
00:12:23.520 | That was an awkward, sad moment.
00:12:26.000 | She started crying.
00:12:28.220 | Goodness forbid a drunk friend gives a terrible speech in front of everyone.
00:12:33.160 | And goodness forbid thunderstorms wash out the outdoor venue.
00:12:37.440 | Everybody's got to go from outside to inside, right?
00:12:40.480 | That would be not so good.
00:12:42.280 | So if your wedding isn't perfect, then you're really going to be upset.
00:12:45.440 | Divorce rates are about 46 to 50% in the United States and Australia.
00:12:51.080 | Only Sweden surpasses the United States in terms of divorce rate at 55%.
00:12:56.160 | And then conversely, it's interesting.
00:12:58.720 | Only Italy, well not only, Italy, Spain, Singapore, Poland, Greece, they all have divorce rates
00:13:04.760 | at 18% or less.
00:13:06.480 | So I wonder what's going on there.
00:13:08.720 | If you follow at least one of my wedding spending rules, you'll be able to get your marriage
00:13:12.720 | off to a great financial start.
00:13:15.260 | Not only can you use the money saved to buy a house, make your future child a 529 millionaire
00:13:20.800 | if you want, or bolster up your respective retirement accounts, you'll likely have much
00:13:26.160 | less fights, money fights to begin with because you'll have more of it.
00:13:30.860 | As I review my wedding spending rules, I gave five.
00:13:34.560 | I gave five to give some kind of variety.
00:13:37.920 | But my favorite is number two.
00:13:40.720 | Spend no more than 1% of your combined pre-tax retirement accounts on a wedding.
00:13:47.080 | Based on this rule, the average responsible American couple should spend between $2,000
00:13:52.720 | to $3,000 on their wedding and that's it.
00:13:55.760 | Not $33,000 crazy dollars.
00:13:59.920 | In case you're wondering, we spent about $3,000 on our wedding in 2008 and we have no regrets.
00:14:07.440 | That $3,000 included the cost of two round trip tickets to Hawaii, the beach ceremony,
00:14:12.880 | and the wedding banquet for 16 people at our favorite all you can eat Korean barbecue place.
00:14:18.480 | We decided to invest the $50,000 we were thinking of spending on various investments instead
00:14:24.200 | and that money has since grown to about $150,000 and it has grown to generate passive income.
00:14:32.120 | So folks, please, please follow these wedding spending rules if you're thinking about getting
00:14:37.240 | married.
00:14:38.240 | Get your marriage off to a great start.
00:14:40.880 | It's going to be a great time no matter how much you spend because you're going to spend
00:14:44.200 | time with your friends and family and that's what matters at the end of the day.