The High Cost of Weddings: 4 Consequences to Newlyweds

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™



My wife and I have four children – all boys – and I used to joke that this was a strategic financial planning decision because it meant that we wouldn’t need to pay for any wedding expenses in the future.

The short-lived Kardashian celebrity wedding covered by the E! Network was said to have cost $10 million. And TLC’s “Say Yes to the Dress” routinely shows brides and their parents forking out tens of thousands of dollars for a dress. According to Bride Magazine, the average cost of a wedding in 2010 was $26,501. Sure, that’s chump change next to the Kardashian debacle, but seriously, 26 grand? Are you kidding me? These days the average cost of a wedding almost makes a year at Northeastern University affordable.


Running of the Brides at Filene's Basement


The news gets worse for frugal brides: just last week Filene’s Basement filed for bankruptcy protection. For years, Filene’s advertised an annual bridal sale where dresses sold for $249 to $649 – a huge markdown from full retail prices of $900 to $9,000. Now that the 102-year-old retailer is closing its doors, their annual “Running of the Brides” event is a thing of the past.

The cost of dresses, photographers, caterers, flowers and honeymoon all add up.  So what kind of impact does this sort of expense have on newlyweds? Here are four consequences:

1. Debt.
Some couples start their marriage deeply in debt. Sure, it’s not unusual for most twenty-somethings to have school loans to pay back, but adding debt to pay for an expensive wedding compounds the problem and often strains a couple’s resources and adds stress to a young marriage.

Couples can avoid wedding debt by listing what they really want and identifying what they can do without. Learning to prioritize is a key financial skill for couples to develop. What is more important... to have a down payment on a house or a big wedding with a costly open bar? If you can afford both, great! If not, make some concessions: invite fewer people, change the venue, use a DJ rather than a band. In all cases, couples should make a budget and avoid wedding debt by putting money aside. The old wedding custom of “something borrowed something blue” wasn’t referring to bank or credit card debt.


2. Lost Opportunity.
The biggest cost of a wedding isn’t the actual dollar spent on the event itself. It’s all the money you could have accumulated if it were saved instead. Economists call this “Opportunity Cost”. Here’s a hypothetical example using a 25-year old bride who invites fewer people to her wedding and consequently cuts her wedding expenses by $10,000. If she saves that $10,000 over her working life of 40-years, her savings could grow to more than $70,000 assuming a five percent interest rate. Some would say that the true cost of inviting the extra guests wasn’t $10,000, but $70,000.

3. Obligation to Dom and Dad.
I often advise parents that they should not create a retirement problem down the road by trying to solve a wedding funding problem for one of their kids today. According to wedding planners, the tradition of having the bride’s parents pay for everything is slowing fading away. Why? Because newlyweds realize that if mom and dad can’t afford to pay for their own retirement, they’re going to have to have to invite mom and dad to live with them, or pay for their assisted living.


4. Crime?
Here’s a weird story. Earlier this year, police say that one Pennsylvania couple resorted to crime in order to pay for their wedding. April Carter, 24, and Joseph Russell, 23, allegedly stripped more than $7,000 worth of copper wire from 18 utility poles and then sold it to a salvage company. PennPower officials inspected the area and found that transformer ground wires had been cut. Surely there are better ways to plan and pay for a wedding than resorting to theft! I can’t imagine that spending a honeymoon in the clink would be much fun either…

5 Money Tips Every College Freshmen Should Know

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™


For many college freshman and their parents, the next few weeks will be the beginning of a new adventure. I should know since another one of my boys heads off to college this year. The freshmen are leaving home, orientation is in full-swing and the students are sizing each other up and getting used to their new surroundings. Similarly, parents are getting acclimated to new surroundings too – an unusual silence in the home and questions about how best to fill the hours that were previously spent with our sons and daughters watching their sporting events and attending their school activities.

Saying Goodbye: Toy Story 3                        © Disney/Pixar

As a parent, I have conflicting emotions; I eagerly anticipate the wonderful experiences my son will enjoy over the next four years, and like Andy’s mom in Toy Story 3, I have feelings of melancholy and longing. Parents of college freshmen will fondly remember reading bed-time stories and taking their sons or daughters to the soccer fields on Saturday mornings. For those of us who can’t comprehend that it has already been 18 years since our kids were born, they will quickly show us that the next four years will go even faster.

Members of this year’s freshman class, most of them born in 1993, grew up just as the internet was starting to take off. This was incredibly helpful for parents like me who often turned to their kids to get tips on how to use the “interweb” or how to fix their computers. Yet for all the help our kids have given us, we are still their parents and can offer valuable advice too – even if they won’t recognize our wisdom for a few more years. As Mark Twain once said, “When I got to be 21, I was astonished at how much the old man had learned in a few short years.” 

Here are five money tips every college freshmen should know.

1. Go to Class. While it may be tempting to sleep-in and skip that early Monday morning English 101 class, doing so is like throwing money out the window. I hate to state the obvious, but college is expensive. According to a newly released Sallie May study, college costs last year averaged $21,889, and some schools like Northeastern University cost more than $50,000 per year. Assuming a schedule of four classes that meet three times per week over a fifteen week semester, each class skipped costs between $120 and $275. That’s some expensive shut-eye.

2. Don’t get a credit card. Sure, the guys sitting behind the sign-up table may be offering some free t-shirts and cool merchandise as an enticement to get you to apply for their credit card, but they’re not there to help you. College campuses are where many young Americans are introduced to credit and the possibility of spending beyond their means – a problem confronting the nation as a whole. If you must use a credit card, avoid non-academic debt. It might seem like a good idea to put that restaurant tab or your new iPad on a credit card, but it’s not. Learn to save, and then splurge.

3. Don’t hang out with big spenders. You’re a college student, so live like one. Don’t pretend to live a lifestyle you can’t afford. Some kids have parents with deep pockets while others are on their way to financial ruin. Hanging out with these free spenders can lead you to spend more than you can afford. Instead, socialize in the dorms, learn to cook in your apartment, use your student ID and take advantage of campus activities and student discounts.

4. Have a Spending Plan. Set a weekly budget for spending categories like food, entertainment, road-trips and the like. At the start of each month, estimate how much income you’ll receive and decide how much you want to allocate to each category. If you anticipate taking a date to an expensive restaurant, skip your morning cup at Starbucks that month or reduce spending in other areas. It is amazing how little things can add up. A couple of energy drinks, lunch at the local Chipotle, several ATM fees and a couple of apps for your iPad means that at the end of the month you may find yourself looking at a large part of your budget going towards “inexpensive” things you splurged on without thinking. Spend less than you earn.

5. Get a job. Being broke in college is no fun. If you would like to spend more, you’ll need to earn more. If you need or want a job, look for ones that you can eventually put on your resume or will bolster your internship options later on. Alternatively, seek out positions that add to your personal development. Like to mountain climb? Work at a rock gym. Enjoy cooking? Get a job in a restaurant. Want to help people? Try a non-profit. Finally, remember the story of Facebook and consider starting your own business. It could be that you have an idea that might be the next big thing, but it could equally be a simple babysitting service, tutoring, or buying and reselling stuff on eBay. Above all, remember that your first “job” is to graduate on time. Earning some extra cash each month is great but those semesters of school don’t come cheap.

Now stop worrying about money and get out there and have some fun. I’ll see you when you come home for Thanksgiving!



This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/five-money-tips-every-college-freshmen-should-know

Word Pictures: Imagining Your Financial Future

By Steve Davis, CFP®


One of my sons is a high school senior and last Friday my wife and I took him on a college tour. Years ago, during those cold and rainy spring days at the Otis Street Little League fields, I thought this day would never come. My folks used to warn, “They grow up so fast”, but I imagined myself stuck at the ball fields forever. With four boys playing back-to-back games, some of those days never seemed to end. But time marches on.

When we arrived at the Massachusetts College of Art in downtown Boston, the first thing our tour director did was lead us to the top floor of the library where we enjoyed spectacular views of the city. She pointed out the other nearby schools, the world-famous museums, and even the Citgo sign above Fenway Park. From there, our group proceeded to visit the different studios, lecture halls, and dorms on campus. Our guide that day was a painting major and perhaps it was this background that allowed her to use her words to so perfectly paint for us the college experience. In our minds, we could see perfectly what school would be like at Mass Art. In a way, the students in our group were transported to the future where they could see what the next four years of their lives would be like.

There is a lesson in all of this. When it comes to achieving financial goals like funding a child’s college education or retiring at age 65, picturing the life of your dreams can be a wonderful motivator. Whatever your aspirations for the future, the only way to achieve the vision of how you’ll spend the years ahead is to commit to a plan that can take you there.

Dreaming and Discovery

How you envision the rest of your life might involve traveling the world or pursuing a career you postponed to raise a family. Maybe you picture spending more time with your family or volunteering at local charities. The point is, everyone’s dreams for the future are unique and there is no one-size fits all financial plan. Taking the time to imagine and articulate your hopes and fears is probably the most important first step. Often times a professional financial advisor can help facilitate this conversation, but some folks are able to do this well on their own. The key is to discover and visualize your ultimate financial goals. Here’s why: If you want something badly enough you’ll make small sacrifices now in order to acquire what you really want later.

I have a client who graduated from college with many thousands of dollars in student loans. This debt created a huge burden that resulted in a lot of financial difficulties during the early years of her marriage. For this client, funding her children’s education was hugely important. She didn’t want her kids to struggle the way she had. This tangible desire to create a college fund made it easier for her to pass up expensive vacations and the like because these would have prevented her from reaching her goal.

 

Roadmaps and Directions

Of course, a vision without action is just a dream. Once you know your financial destination, the next step is to create a roadmap that will take you there.

Bruce Springsteen once sang, “Take a right at the light, keep going straight until night, and then boy, you’re on your own.” While this makes for great rock lyrics, it is lousy financial advice. Instead, it is best to have precise turn-by-turn directions that will help you navigate the twists and turns of life. Create specific and measurable goals and understand which ones can be accomplished in less than a year, which ones will take three to five years to achieve, and which ones are truly long-term in nature. As you accomplish the short term goals, you’ll build momentum to carry on toward achieving longer term objectives.

Just as there are many routes that will take you to the same destination, there are many financial tools, investments and tax strategies that will help you work toward your life’s dreams. If you don’t have the time, interest or inclination to research this on your own, a financial advisor can provide meaningful guidance at this stage.

Over the course of your lifetime, your goals and circumstances may change. There may be detours along the way. Flexibility and planning for contingencies is critical here because just when you make plans, life gets in the way. Events small or large can change everything. Getting laid off or changing jobs can result in the loss of anticipated retirement benefits. Losing your health could force an early retirement. Caring for aging parents may have never been on your radar. The best financial plans are the ones that can adapt for the unexpected, anticipate change and adjust over time.

Enjoy the Journey

My children are growing up and before I know it, they’ll all be off to college. Yes, time marches on. It seemed like just yesterday when I was in college. I once had a professor who said, “It is good to have an end to journey toward; but it is the journey that matters, in the end.”

As a dad, I wouldn’t change anything; not even those long days at the Otis Street fields when my back was sore, my hands were cold and my shoes were covered in dust and dirt. One of the greatest benefits to taking the time to envision and plan your future is that it gives you the ability to live in the present and focus your time and attention on those things that matter most.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.



This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/word-pictures-imaging-your-financial-aid-future