Young Indians are opting to financing their weddings through short-term personal loans rather than using their parents' savings. Solid financial planning is crucial for weddings, including answering important questions about finances. Starting to save early and investing in mutual funds through SIPs is a better option than taking out a loan. Diverting retirement funds towards weddings should be avoided.
Young Indians Rethinking Wedding Financing
Many young Indians are now opting to marry late, with many choosing to first obtain higher education and build their career versus getting married early. Moreover, many youngsters are open to financing their weddings, at least partially, by taking short-term personal loans rather than diverting their parents' hard-earned savings and investment corpus.
A fun fact: The Indian wedding industry is worth a humongous ₹1,00,000 crore and is growing at a rapid rate. While weddings are emotionally charged events, solid financial planning is essential.
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Crucial Money Questions To Answer Before Tying the Knot
Before getting married, couples should answer important questions about finances and their behaviour towards money. These include technical and behavioural questions such as
- how much each earns and spends
- what each person's relationship with money is
- and how much debt each person has
Furthermore, it's essential to prioritize how to allocate the wedding budget and not let it dictate spending habits.
Couples should assess how much they can spend by considering family support, current savings, and how much each can save before the wedding day. Once the resources are accounted for, couples can decide where to allocate their funds, starting with the three most important expenses.
Keeping track of payments is also crucial. Finally, prenuptial agreements should also be discussed, and couples should make informed decisions about them.
Plan a Wedding without Breaking the Bank
The entire wedding expenditures are determined by many things. The number of wedding guests, the wedding location, the amount spent on jewellery, and so on are only a few of them. It also depends on whether the bride and groom share the cost of staging the event or if it is solely carried by one party.
In case you are organising a light wedding, it will still cost you somewhere between Rs 15,00,000 and Rs 25,00,000.
To plan your wedding budget, consider three key factors: the amount of support you'll receive from your family, your current savings (excluding emergency funds), and how much you can save between now and the wedding day.
Talk to your family about their contribution, or assume it's zero if you don't want to ask. Evaluate your savings, including investments that you can sell without relying on emergency funds.
Strategize how much you can save each month, such as reducing expenses or increasing income. Be mindful not to dip into emergency funds or long-term investments for short-term expenses.
Divide your budget into percentages to cover each spending category. Here’s an example of what that might look like, based on a ₹20,00,000 budget:
- 40% for the venue and catering
- 10% for furniture rental
- 10% for photography
- 5% for flowers and decor
- 10% for entertainment
- 5% for bride and groom attire
- 10% for miscellaneous items
Your budget percentages may look different based on which expenses you plan to include. Using this type of budgeting method can help you see at a glance how much you should be earmarked for each wedding expense.
Why investing is better than a personal loan
Ideally, you can take a personal loan to bridge temporary liquidity shortfalls but there are 3 things to remember:
- The rates of interest on personal loans are quite steep at 17-20%.
- Ensure that you have the facility to close your personal loan without any prepayment charges at any time after the mandatory cooling period of 6 months.
- Longer the tenure of a personal loan, more the interest you will pay.
Why investing is better than a personal loan
So, if you opt for a Rs 20 lakh loan, you may actually end up paying Rs -35 lakh more in interest, depending on the tenure.
Let’s say it takes you 3 years to pay the loan. You would have to make instalments of ~₹71,000 every month and end up increasing the cost of your wedding by 25% in the long run.
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In contrast, an SIP of ₹25,000 every month invested for 5 years in a portfolio earning returns at a CAGR of 10% would reach the target amount of 20 Lacs by the time it’s your wedding season, given that you start investing as soon as possible.
Stick to the plan and target a specific financial goal without diverting retirement or other funds towards the wedding. Higher education expenses typically come up 5-7 years before marriage. Therefore, people should ensure they have separate plans for both. Diverting retirement funds could compromise their financial status in the future or delay their goal achievement.
You should stick to the plan and target a specific financial goal without diverting retirement or other funds towards the wedding. Ensure you have separate plans for both. Diverting retirement funds could compromise their financial status in the future or delay their goal achievement.
Start an SIP for your future wedding today!
Starting to save early can help you meet your desired goals for funding your wedding. Even if a wedding date is not yet set, the process of saving should start right away. Additionally, investing in mutual funds through SIPs is a better option than borrowing money to fund wedding expenses.
Are you planning your dream wedding but worried about the financial burden it may bring? Don't fret! Instead of taking out a loan, consider starting a Systematic Investment Plan (SIP). With an SIP, you can save and invest small amounts regularly, which can add up over time and help you achieve your financial goals without going into debt.
Stack will curate your investment portfolio for you so that once your SIP begins you can enjoy the benefits of compounding and potentially earn higher returns on your investment choose your investment horizon, target amount and risk tolerance based on your wedding timeline & planning, and take the first step towards a debt-free wedding!