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Until Death Do Us Part June marks the beginning of summer and the season for weddings. Weddings are on my mind as I write today because my daughter is recently engaged to be married in 2011 and as a family we are going through the joys and logistics of planning her wedding. As those that have gone through it will know, it seems there is more logistics than joy at this stage of the process. This is my first wedding as a dad and the expectations are many. But since this is a site about finance, I will focus on the money side of weddings. In my opinion, there are two central questions surrounding a wedding. The first is how much money is a reasonable amount to spend on a wedding. The second is what alternative use is there for the money spent? There are no right answers to these questions, nor wrong ones, but the answers reveal much about the couple as well as the parents of the couple and their attitude towards money. In a nutshell, weddings aren't cheap and only last a day. So what drives some couples to elope while others go through the ritual with an elaborate and expensive wedding? Money is certainly a factor. If neither the couple nor the parents have the money, then a small intimate gathering is the only alternative. If you go into debt to pay for a wedding I can virtually guarantee that you are headed for financial disaster. If you do in a few years your vows may gravitate towards "Until Debt Do Us Part." Don't go into debt to pay for a wedding. But what if you have options? What if you are one of the fortunate ones that can afford a wedding from either current income or savings? You've got to ask the question. How much to spend for one day? How much are the memories worth? If you ask a wedding planner the answer is that memories are priceless. If you ask the father of the bride, you will get a very different answer. So is there a middle ground? I think not. After thinking about this for a few weeks as the father of the bride and investment manager, all I can say is that a wedding is one of those events that you can't rationalize. You need to throw logic to the wind because no matter how much or how little is spent, if the money were invested instead, it would have a much higher expected value than a wedding. On my Financial Tales site I wrote a story called A Twenty Million Dollar Tale. It talks about the cost of college and is also a stealth tale about the power of compound interest. I haven't written a tale about weddings yet but when I do it will have the following visual. The average wedding in this country costs approximately $28,000 and is spent in 1 day. My daughter will be 24 when she gets married and her husband 25. If this $28,000 were instead to be invested for 40 years at a real 7% return it would grow to approximately $420,000. At that time, in the year 2050, my 64 year old daughter and 65 year old husband decide to start receiving income. Mind you, they can only do this if they chose 40 years earlier to get married at the court house instead of throwing an elaborate party. 40 years from now they decide to receive the 7% annually instead of letting it grow. How much can they get per year? They would receive an annual amount of $29,400. They will have more money to spend for an entire year 40 years from now than for 1 day. Let's repeat that line for emphasis—this is more money to spend for a year than for 1 day. Furthermore, they will get to spend it every year for the rest of their lives. They never have to touch the principal and after they live to the ripe old age of 90 plus, they can leave a legacy to their children, grandchildren, loved ones or favorite charity. The tradeoff is simple. You can spend $28,000 today for 1 day or you can receive a little more every year for the rest of your life after you retire in 40 years. There is much to consider when you think about weddings. In light of the alternative to a wedding, they are bad investments plain and simple. Good investments are things that appreciate in value and preserve purchasing power, while bad ones are those that lose purchasing power. Weddings depreciate in value immediately. So the answer is that no amount of expenditure is correct. Yet these terrible investments persist and have persisted. Is there a logical answer to the unseen value? Is there a future value to a wedding with all the fixings vs. a Justice of the Peace? I can't think of any, but I admit to a bit of tunnel vision on this topic. But if readers can enlighten me, please drop me a note at Financial Tales. If you do, please don't mention the improbability of a 7% real rate of return. The message is still the same. I think expensive parties are bad investments.
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