Updated: Jan 20, 2020
Anyone who has planned a wedding in the past 10 years knows two truths.
Weddings are expensive.
Weddings are stressful.
I have always thought that it is crazy to spend tens of thousands of dollars on a party. Which is exactly what a wedding is when you boil it down. Getting married is cheap but having a wedding party is expensive.
Somehow it has become the cultural norm for young couples to start their lives together by going into debt to pay for a big party.
I recently stumbled upon an article from a MarketWatch with an irresistible headline "Want to retire rich? Have a small wedding and invest the rest". I felt like this was an article published specifically for me.
The premise of the article was that by having a $1,000 wedding young couples could retire millionaires and never have to worry about saving ever again. Even I had a hard time believing that the financial cost of a wedding could be that significant.
So, I decided to dig into it and answer the question can a $1,000 wedding really make you a millionaire?
In a nutshell here is the argument the author of the MarketWatch article made: If a couple has a $1,000 wedding and invests the rest of what they would have spent on a wedding they could retire with $1.77 million without ever saving another dime towards retirement.
That claim appears prosperous, here are the assumptions the author made to come up with that figure.
The couple is both 25 when they get married.
The assumed cost of a typical wedding is $40,000.
So with a $1,000 the couple invests the other $39,000.
The couple retires at 65 which gives them a 40-year investing timeline.
The investment earns 10% per year during those 40 years.
Are these assumptions realistic?
I do believe that having a $1,000 wedding and investing the rest of what a traditional wedding costs would set most couples up for future financial success. However, I think some of these assumptions are a bit unrealistic.
Let's tackle them one by one.
Average age people are getting married
First, the assumption that a couple gets married at 25. This would have been true 30 years ago. However, today couples are pushing back marriage until later in life when their careers are established and their finances are more under control.
The average age people's first marriage is
29.8 for men
27.8 for women
So, 25 is not an outrageous claim but a more realistic assumption would be to split the difference and round up to make the math simple and assume an average age of 29 for couples getting married.
The average cost of a wedding
Next, let's look at the assumption that the average wedding costs $40,000. I'll admit when I first read the article, I thought this was a low number. I know plenty of people who have spent $50,000 or more on a wedding.
I was surprised to learn from the Nerdwallet that the average cost of a wedding is $33,931. Let's make the math simple and round that up to $34,000.
Anytime I see an article calculating the opportunity cost of a big purchase, I immediately get put my guard up. Often times the author inflates the assumed investment returns to make their point seem more important.
I'm reminded of Suze Orman who claims Millennials are "pissing $1 million down the drain" on coffee. In that article, Suze assumes young investors should expect a 12% average return on investments. That is frankly not a realistic assumption when making a financial plan.
The author of the MarketWatch article is not quite as outrageous as Suze Orman but they still assume a 10% average return over 40 years, which is still too high. When making Investment assumptions it's important to be conservative.
Investment returns are not guaranteed. If you make a financial plan based on a 12% rate of return and you get a 5% rate of return you won't have enough income to fund your lifestyle in retirement.
Wealth management firm PWL capital projects a 6.5% future return from the stock market. This is a much more reasonable assumption so let's go with that.
So, can a $1,000 wedding really make you a millionaire?
The MarketWatch article projected that a $1,000 wedding could give that couple a $1.77 million net worth by age 65. This number was based on some inflated assumptions.
Let's review my more realistic assumptions.
The average age of a couple getting married is 29. This gives them a 36-year investing time horizon.
The average cost of a wedding is $34,000. So, with a $1,000 the couple would have $33,000 to invest over the next 36 years.
The couple receives an average rate of return of 6.5% over those 36 years.
By the time the couple reaches age 65 the couple would have a net worth of $340,000. That is a far cry from $1.77 million. This goes to show when you see outlandish claims made by people on the internet the first thing you should do is a fact check their assumptions they made to come up with that claim.
That being said, the general point still stands. Any couple getting married would be much better off if they stuck to a $1,000 wedding and focused the rest of their financial resources on investing.
$340,000 still works out to be $10 for every dollar spent on the average wedding. Put another way the true cost of a $34,000 wedding is not $34,000, it is $340,000. A great reason to say "I don't" to a traditonal wedding.
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions