As marriage proposals continue to take place and people start to plan their weddings, some couples are realizing that they may be in over their heads financially.
In a recent study, married couples who went into debt to cover costs for their nuptials spent an overall average of $10,726, which ultimately doubled the wedding estimate they initially budgeted for. Northwestern Mutual Advisor Sonia Sykes believes that the problem is couples not setting real monetary expectations.
“A lot of people do not think about what it all entails when planning a wedding. The tedious details of it,” she says. “For example, someone was planning a destination wedding. You would think that outside of the flight, you would have to pay for something like a hairstylist. But with a destination [event], you still have to pay for their travel expenses, hotel accommodations, and the services. This person even had to budget in the type of lighting she needed for her wedding.”
Every single detail comes at a cost. Knowing this, it is important to financially prepare before jumping the broom. This could mean taking out a loan to ensure your big day happens.
What is a wedding loan? A wedding loan is an unsecured personal loan that you can take from a bank or credit union to cover your wedding expenses. The average wedding loan can be around $30,000. With inflation, it may increase in years to come. No matter the amount your loan may be, it is imperative to know there are pros and cons to this. Everyone should be aware of what these are so you can make the best decision for yourself.
A couple of pros that are associated with wedding loans include having access to funds faster and protecting additional savings you may have for other necessities. It is a convenient way to focus on wedding planning and to make the process less stressful. The cons that can come with wedding loans are that a loan, of course, is a new debt. With this new debt, the interest rates could have you paying for years to come. A second con to think about is there is a chance of spending more than you may have budgeted for or anticipated because of the likelihood that you will have extra funds from the loan.
If you are considering going the loan route, there are certain steps that you need to take when it comes to applying for one and having the right resources to make smarter money management decisions as you plan for the wedding of your dreams.
Speak With an Expert
According to Sykes, “Once a client sits down with a financial advisor, we have to look at personal finances, find the surplus that the couple may have, and then agree on what the couple’s overall estimates are going to be. You then speak with your bank and apply just like you would for a regular loan. The bank is going to look at your credit score, payment history, debt to income ratio, and a few other things. With a secured loan, you would use collateral and with a non-secured loan is when you set up a monthly payment with the bank to pay back the loan.”
Couples do not have to apply for wedding loans alone. Having the right support by speaking with a financial advisor is the perfect first step.
Evaluate Your Current Lifestyle
“When working with clients, they begin to notice they have to start cutting things out of their budget. Even when you plan on getting a loan, there are still some lifestyle changes people have to make,” noted Sykes.
When you start thinking about planning for a wedding, you have to pay more attention to your current spending habits. You may not be able to afford the bi-weekly visits to the spa or eating out at restaurants as often. Whatever lifestyle you have grown accustomed to, there needs to be some necessary changes made to intentionally maximize your overall budget.
Get Aligned on Your Wedding Vision
A question that Sykes likes to ask her clients is, “What are you willing to sacrifice in order to reach your goals?” You may want your wedding to be extravagant or something simple. Either way, your wedding details, from the venue, the amount of guests, to the table centerpieces, have to be taken into account. Having an open mind to cut some less important things about your wedding day out will not only save you money but will also provide more room to prioritize other things about your nuptials that are of greater importance.