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Wedding wisdom: Avoid loans, don’t spend too much money to achieve other financial goals | Personal Finance

A recent research report by Jefferies estimates the market size of the Indian wedding industry at around Rs 10 trillion (around $130 billion). If weddings were a consumption category, they would be the second largest retail consumption category after food and groceries. An estimated 8 to 10 million weddings take place in India every year. According to the report, the average wedding costs more than three times the average annual household income. Given the money needed for the event, financial planners say it is important to plan for it.

Start early, set goals

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Planning for this goal should begin early. Families should decide how lavish their wedding should be and set a target amount accordingly.

“Usually, parents have a reference point based on a wedding they have attended. We gather details about the type of wedding they envisage – the venue, the number of guests, the amount to be spent on jewellery and clothes, and on the honeymoon. These factors help us decide the budget,” says Renu Maheshwari, a Sebi registered investment advisor (RIA), co-founder and principal advisor, Finscholarz Wealth Managers.

Vishal Dhawan, financial planner at Plan Ahead Wealth Advisors, says, “Asking whether the wedding will take place locally or at another venue helps families think more carefully and make realistic estimates. They should also consider the amount of gold they want to gift and whether it is already available or needs to be acquired over time.” He shares that the estimated cost of a wedding ranges between Rs 2.5 million and Rs 2 million.

Once the cost of the event is finalized, planners adjust it for inflation. Financial planners typically consider two categories of inflation when planning a wedding: gold and general wedding costs. “For gold, we look at the long-term historical data to estimate how the price is likely to increase. For other wedding costs, we use the consumer price index plus 2-2.5 percent. For luxury weddings, we usually consider a higher rate of inflation,” says Maheshwari.

Dhawan says he normally expects inflation to be around 6 percent.

Once the target amount is set, planners work backwards to determine how much needs to be invested annually to reach the goal.

Investing in gold

In South India, parents gift their children a significant amount of gold, which is the biggest expense in a wedding. “Once you have decided on the amount of gold you want to gift, invest in Sovereign Gold Bonds (SGBs) every year and accumulate the required amount over time,” says Deepesh Raghaw, Sebi RIA.

Dhawan says regular, disciplined buying reduces price risk – the risk that the price of gold could be high just before the wedding date.

Some planners recommend SGBs over gold exchange-traded funds (ETFs) or gold mutual funds. “SGBs offer interest, have no expense ratio and are not taxable at maturity. You also don’t have to pay goods and services tax (GST). Hence, they offer better returns than gold ETFs,” says Raghaw.

SGBs can be purchased through banks or in dematized form through the brokerage amount. Use SGBs if you can hold them for eight years or opt for gold ETFs. Avoid buying jewellery in the saving phase as the current styles may go out of fashion by the time of the wedding.

Building a non-gold portfolio

For non-gold expenses, invest in a mix of equities and fixed income, with the proportion depending on the time horizon. “If the target is between one and five years away, invest more in fixed income and less in equities. If the target is 5-10 years away, focus the portfolio on equities. And if the target is more than 10 years away, focus heavily on equities. Invest through the systematic investment plan (SIP) route to benefit from dollar cost averaging,” says Dhawan.

For fixed income investments, use a combination of fixed deposits and bond funds. “For people in higher tax brackets, bond funds are beneficial as they avoid regular withholding tax deductions. People in lower tax brackets don’t have to worry about withholding tax deductions as they can claim it back as a refund,” says Dhawan.

Start shifting money from volatile assets into fixed-income securities five years before the wedding.

Mistakes to avoid

Weddings are associated with social prestige. The two families, as well as the bride and groom, may have different expectations about how lavish the wedding should be. This dynamic can lead to overspending. “Excessive spending on weddings usually impacts the parents’ retirement savings,” says Raghaw.

Start by creating a financial plan or revising the existing one. “Understand how wedding expenses fit into your overall financial situation. Evaluate how different spending levels will impact other goals like retirement, travel or housing. Have these conversations early to set spending limits,” advises Dhawan.

Emotional overspending on material gifts to the couple, such as a house or a car, can also impact other financial goals. Remember that weddings aren’t the only big expenses: Future occasions, such as the birth of grandchildren or anniversaries, require money too.

In recent times, young people have started taking personal and other loans to finance lavish weddings. “Avoid loans as they often lead to debt. Think of a wedding as a financial goal that you are free to choose – spend money on it only if you have the money,” says Maheshwari.

What is covered by wedding insurance

Cancellation or postponement of the wedding

Property damage (including wedding venue, gifts) caused by fire, earthquake, etc.; burglary is also covered

Personal accident insurance for key persons

Liability insurance for injuries to guests at the wedding venue

What is excluded

Cancellation of the event due to government shutdowns, terrorist activities, kidnappings

Gradual wear (no sudden damage)

Negligence or “intentional malice”

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