How to Save for Your Dream Wedding and Your Dream Home
Love is in the air, as are your dreams of life after your upcoming wedding. You’ve likely pictured your future a thousand times over. Maybe you and your soon-to-be spouse hope to purchase a condo in the city, a bungalow in a first-ring suburb, or a big home in the country with lots of bedrooms for children.
Whatever your dream may be, remember, it is a dream. You might need to temper your expectations with financial realities. And that’s OK. Being realistic doesn’t make your dream any less exciting. It makes it more attainable.
In the back of your mind, you already know that having a wedding and purchasing a home are among the most expensive things a couple can do. It’s easy to get in over your head financially. Prepare for your financial future with advice that will help you make wise decisions.
Setting a Budget for Your Dreams
You’re going to need more than good credit to hold a wedding and purchase a home; you’re also going to need savings. But how much? The answer begins with understanding costs and setting a budget.
Let’s start with the wedding. In 2021, the average cost of a wedding was about $30,000. That’s excluding the honeymoon, by the way. The other thing you should know, nearly 50% of couples spent more than they originally budgeted for their wedding.
The takeaway? Be honest with yourself about what you expect to pull off. Don’t say you’ll have 50 guests when you know the total will be closer to 75. If anything, overestimate and try to come in under budget.
Now let’s look at purchasing a home. The average home price in the United States soared in 2021 to $389,400, with prices expected to continue to rise in 2022. We’ll assume a 3.6%, 30-year fixed mortgage rate and a 10% down payment and typical primary mortgage insurance.
In this scenario, an average monthly payment is $2,106. OK, take a deep breath before we combine the two.
For an average couple holding an average wedding and purchasing an average home, you’re looking at a $420,000 commitment. That’s not your all-in cost, by the way. That’s without a honeymoon. Of the $420,000, you are also expected to have nearly $40,000 in cash for that 10% down payment on the house.
Sound scary? Maybe impossible? It’s not. Millions of couples do this every year. You and your spouse can, too. We’ll show you how.
How Much Money Should I Save for My Wedding?
There are several tips we can offer for saving for a wedding. But our best advice is to begin by scaling the size and extravagance of the wedding. After you do that, you should think about ways to save up to pay for it.
Be practical with your choices, and don’t try to outspend your means. A wedding should launch your life, not put you in a financial hole that takes years to pay off. The price of a wedding often starts with size. Look at ways to limit your guest list. Create categories of must-haves.
We recommend you start your list with your immediate family. Then add your should-have invite list, like other close relatives and close friends. Then create a nice-to-have invite list, such as coworkers, neighbors or distant relatives.
You can also consider making the invite list for adults only. Often, this can cut your guest list down significantly. There are many tips about saving on a wedding on sites such as The Knot and others where you can find ideas that work for you.
Using these ideas and techniques will help you create a plan for your wedding and a budget. Let’s say your budget is $20,000, and you intend to get married in 12 months. Now what?
When we do the math, we find you’d need to save roughly $1,666 a month to cover the cost in full by your wedding date. If you can swing that, great. But don’t forget you’d also need to be saving for a down payment on your home (we’ll get to that in the next section). Oh, and you’ll probably want a honeymoon at some point, too.
If you can’t save that much ahead of time, look for a no-interest credit card. Don’t sign up for them yet; instead, wait until you need a card to make a payment. The no-interest rate usually is only for a select period, typically 12 months from approval for the card. So don’t apply for it until you plan to use it. This essentially gives you an additional year to pay off your wedding without incurring interest rate charges.
It’s also common for parents and other family members to help cover the cost of a wedding. Talk to them right away and see if they intend to help and how much they will contribute. If they could provide $5,000 toward your $20,000 wedding, the amount you need to save each month is cut by more than $400.
When it comes to your savings strategy, we advise setting up a separate account for your wedding expenses only. By having money in a separate account, it’s less likely you’d spend it or “borrow against it” until your next payday. Only make withdrawals from this account to make wedding-related payments.
Your wedding-only account can be a simple checking account or perhaps a money market account or certificate of deposit (CD) that earns a better rate of return. But examine the details of these accounts. They often have limits regarding when or how often you can make withdrawals. You’ll want to avoid having your money tied up when you need to make wedding payments.
You may also want to connect your wedding account to digital payment services like Venmo, PayPal or Apple Pay to make paying vendors easier. If you do this, do not use an existing digital payment account. That would likely defeat the idea of having a separate wedding account. Here, too, you should set up a wedding payment-only account on your preferred digital payment platform.
How to Save to Buy a Home
How much money should I save to buy a home? In the earlier example, we mentioned the average price of a home in 2021 was $389,400. We also noted the projected payments were based on having put 10% down (or $38,940).
Now we need to add this amount to our wedding budget scenario.
To pay for a $20,000 wedding in one year, you’d need to save $1,666 a month. To save for a $38,940 down payment on a home, you’d need to save an additional $3,245 each month. That puts your monthly goal savings total at $4,911. That’s an ambitious goal and likely, unrealistic. So what can you do? A lot, actually.
Let’s begin with the down payment on a first home. Yes, saving to buy a home is a great idea — if you can afford it. If you can’t, there are several loan programs available to first-time homebuyers. These require little or no down payment at all. If you qualify, and a lot of people do, it’s a real game-changer for your dreams.
But know this: cash is needed to buy a house even when using a no down payment first-time homebuyer loan program. We’re not talking about home goods like furniture and shower curtains; we mean cash-in-hand at the closing. This money goes toward loan program fees, closing costs or other things required by the contract.
How much you need to save depends on which first-time homebuyer loan program you use. Working with a personal loan officer, you can find the most affordable way to purchase a new home and get a detailed picture of how much you’ll need to save. But rest assured, the amount is typically very manageable.
You Can Turn Your Dreams of a Wedding and First Home Into a Reality
Your life is about to get hectic, wonderful, exciting, fantastic, and so much more. We don’t want it to become stressful or nerve-wracking because it doesn’t have to be. When you follow sound advice, make informed choices and keep realistic expectations, the year ahead can become one of your best. And never forget that there is no need to rush.
Sure, the marriage date might be set, but you don’t have to buy a home by a specific date. Let the purchase happen when it’s right for you and your spouse. Ideally, you’ll have a lifetime together to accomplish it all and so much more. For now, focus on the first step, find and begin working with a personal loan officer. They can lead you through your choices, offer programs you’ve likely never heard of and tips to make it possible to have your dream wedding and your dream home. Want to get started right away? Complete our Quick Start Form and let a Summit team member guide you through every step of the process.
Categories: Home Buying