With my youngest daughter getting married at the end of this year, a well-meaning friend whose child just got engaged sent me some “rules of thumb” he found for celebratory spending, asking if I thought these guidelines were appropriate.
The rules he sent me were:
— Parents paying for a wedding shouldn’t spend more than 15 percent of their annual income on wedding costs.
— The happy couple should spend no more than 10 percent of their newly combined household income on the wedding.
— Spend no more than $1,000 per year you’ve known each other.
— Spend whatever your parents want to spend/give you for the wedding.
— Maximum spending should be your non-retirement account savings balance plus any money saved in the months leading up to the ceremony, while keeping your emergency fund ready to protect you for three to six months.
I’m not a big fan of those rules or, quite frankly, almost any hackneyed idea people use to govern financial decisions.
Ultimately, the success or failure of these and all financial rules of thumb is based on the circumstances of the people trying to live by them.
As father of a bride-to-be (who has been known to read this column), I could see some families labeling them restrictive, others excessive and the whole discussion would devolve into some sort of Bridezilla versus Wedking Kong death match (Godzilla fans will know what I did there).
I don’t need that kind of stress in my life.
So let’s talk instead about these rules as examples of why one-size-fits-all advice doesn’t wear well on most people.
The late Lynn Hopewell, a sage financial adviser and former editor of The Journal of Financial Planning, once noted that “Rules of thumb are for people who want to decide things without thinking about them.”
I’ll ponder these rules in a way that doesn’t create family strife and drama in my house or yours, but also remembering that spending decisions can ramp up the tension whether they are about a party, a vacation, necessities or luxuries.
The need for these rules stems from the price tag on weddings. The Wedding Report says that the expected average cost of a wedding in 2022 is $27,000.
That’s an enormous ticket in a country with a median household income of roughly $67,500; it’s enough to make you wish for a mathematical axiom, a proposition that’s assumed to be true for the sake of studying its validity.
If one or two people have a successful experience using one of these aphorisms, it can quickly become the next person’s truth. We’ve all seen “It worked for me” morph into a “These are the rules” meme.
That seems to be what happened here.
I’m not going to dwell on the high costs of weddings and the value — or lack thereof — of throwing fancy parties. I started dreaming of my kids nuptials in the first few minutes of their lives, and have saved and planned for about 30 years.
That gave my girl a budget that worked for me, and that she is now making work for her. I could be just as happy for less money, but it doesn’t feel outrageous given the planning.
I could see my friend’s rules of thumb creating family strife, depending on the situation. Let’s gauge some of that.
— Parents paying for a wedding should not spend more than 15 percent of their annual income on wedding costs.
Parents shouldn’t be pressured into overspending on a wedding (or a college education, a graduation gift, travel sports and any number of other things). This limit is arbitrary, based on income and not savings.
By this rule, a family would need a household income of $180,000 to afford the average wedding. And a family earning the median income would stop spending at $10,125.
Appropriate spending is circumstantial. The question is whether you can afford what you want, and whether you can do away with the things that don’t matter to keep costs in line.
If mounting wedding costs start testing this rule, it might be a helpful tool to get people focused on cutting back.
— The couple should spend no more than 10 percent of their newly combined household income on the wedding.
Again, an almost arbitrary number. Almost 40 years ago, I attended a wedding of a lacrosse teammate in his early 20s; he and his new bride had minimum-wage jobs; the wedding was held in the clubhouse of the apartment complex they lived in.
Despite spending almost nothing, the couple remains happily married, in large part because their financial desires and habits are aligned.
If you’re fighting over this rule, it’s a sign of tension that will be around when the music is a memory in a picture book.
— Spend no more than $1,000 per year you’ve known each other.
So to have the average wedding expense, you would have had to know each other for over a quarter of a century? Highly unreasonable.
Spending shouldn’t be arbitrary, but this rule is. Wedding spending — in fact, all spending — should reflect a family’s means, desires and more.
— Spend whatever your parents spend/give you to spend.
If a couple can live within a parental budget, this is a great rule because they’re not tapping their own savings. But if parents have little or nothing to contribute, the party is off.
I gave my daughter a budget that’s reasonable; if she comes in below it, she can pocket the difference. I don’t know if she’ll get the cash, but it’s good motivation to keep spending in check.
— Limit spending to your savings balance plus money you save in the months before the ceremony, minus enough to keep emergency funds ready to protect you for up to six months.
By this rule, you could wipe out all savings except for retirement monies and an emergency fund. That’s a recipe for disaster; with finances being a root cause of so many divorces, stressing your accounts to pay for a wedding is playing Russian roulette with your marital future.
Chuck Jaffe:
[email protected]; on Twitter: @MoneyLifeShow. Chuck Jaffe is a nationally syndicated financial columnist and the host of “Money Life with Chuck Jaffe.” Tune in at moneylifeshow.com.