There’s a good chance you’ll be showered with gifts on your wedding day. Perhaps you’ll get a crystal vase. Or a pasta maker. Or his-and-hers (or his-and-his, or hers-and-hers) monogrammed bathrobes. Or maybe you’ll get a whole lotta cash.
Don’t blow it all in one place — at least not without some serious planning. Here’s how to put that money to good use and not suck at spending your wedding cash.
PAY OFF DEBT
Your married life is a new start for you — together. So together you should come up with a plan to eliminate as much of your high-interest credit card balances and other debt as you can.
Start by reading this post about how to not suck when you merge your money after marriage.
Take its advice to sit down and have a very frank discussion with your honey about any and all debt you both have.
Next, talk about what resources you have — including your wedding cash — to pay it off, and decide if you want to pay it off as a team, or if the one who chalked up the debt will be responsible for the bills.
Before you say the person who spent the money should pay it down, consider this: If you want to buy a house together, both of your finances will be examined for a mortgage (unless you plan to do it solo). Also, having the debt linger will mean there’s less available cash for other things.
And importantly, if you decide to pay it off over time, it will slow down your ability to save for other goals and you’ll pay more interest, making the cost of keeping that balance very costly indeed.
For example, a $2,000 credit card bill at 16% will cost $2,659 in interest and take 16 years to pay off if you only make minimum payments. Taking $2,000 in wedding cash (on which you’d probably earn minimal interest in the bank) and paying off the debt gives you a near-instant return of the $2,659 you would have paid in interest. Not a bad deal at all.
START AN EMERGENCY FUND
We hope your marriage is all wine and roses and stuff like that, but chances are, there will come a time when you have a financial emergency.
So if you’ve paid off all your collective debt and there’s money left over, consider stashing it in an emergency fund.
This would be an account in both your names that you don’t touch unless there’s a real money emergency, such as a job loss, a leaky roof or other major must-do repair. Use a money market or savings account for this. While they don’t pay much interest, your cash will be safe and liquid should you need to tap some funds.
So how much should you have set aside? Financial advisors suggest you keep between three and six months worth of expenses in your emergency fund. If your job isn’t very stable, consider upping the amount you keep on the side — just in case.
CREATE A LONG-TERM SAVINGS PLAN
Sit with your spouse and decide what your goals are. Do you want to buy a first home? Start a fund for annual vacations? Save for retirement?
These are all terrific ways to use, or save, some of your wedding cash.
But remember, the type of account in which you keep the money should depend on what the money will eventually be used for. If it’s retirement, then invest away in an IRA or other long-term and tax-advantaged plan, but if the money is for a home down-payment or other shorter-term expense, stay away from the stock market and choose a money market fund or other liquid account instead.
INVEST IN A FINANCIAL ADVISOR AND ESTATE PLANNING ATTORNEY
When you’re starting out and financially merging two households, you’re going to have to deal with new expenses, new income and two potentially very different money minds.
Consider having a financial advisor give your situation the once-over, and help you set up a plan for long-term financial success. I’m partial to fee-based certified financial planners (CFP) who charge you for advice rather than sell you products. (Those who charge commissions instead of fees may be tempted to push products that are profitable for the advisor and not so much for you, the investor.)
You can find a CFP in your area industry organizations such as the Financial Planning Association and National Association of Personal Financial Advisors.
You should also consider meeting with an estate planning attorney. This kind of pro can help you create a will, health care proxies and other essential documents.
Search for a qualified pro though organizations such as The American Academy of Estate Planning Attorneys, The National Association of Estate Planners & Councils, The American College of Trust and Estate Counsel or your local bar association.
HAVE A LITTLE FUN
When your guests wrote a check or added cash to your wedding card, it’s pretty safe to say they wanted you to use the money for something more exciting than paying the interest charges on your credit card debt.
So don’t go hog wild, but everyone should be able to enjoy spending a little money here and there. We all work too hard to earn what we have, and we should get to splurge a little, especially for an occasion as special as your nuptials.
Plus, as we all know, all work and no play makes Jack a dull boy.
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