What is most important to you: a cool party or diving into a bustling real estate market?
This is the question of the recent Netflix show, Marriage or mortgage, poses to a select few residents of Nashville, Tennessee.
In each episode, a couple must choose: to put a lot of money for a wedding or a down payment?
But does viewing this major decision as a choice between the practical and the romantic overlook other important financial considerations?
We asked some financial advisors how they would guide you in choosing between buying a house, having a wedding, and everything in between.
Here is what they said.
How to make a responsible choice
Deciding how to spend your savings, no matter how much, can be an overwhelming process.
What Brent Weiss, Co-Founder and Chief Evangelist of Facet Wealth, advises clients when faced with an important decision is to step back and reframe the choice with three themes in mind:
What are your values? How does this decision fit into them?
What’s the big picture? Are there other goals you have that you have lost sight of?
Ignore the noise and get back to your values. Disconnect from social networks, forget the FOMO (fear of missing out) and come back to your values.
“One of the first assignments I give new clients is between meeting number one and meeting number two, I ask them to come back and define what success will look like if we stay here in three or five years.”
Usually, this reveals a number of other priorities that couples have overlooked when considering emotionally charged decisions, like buying a house or planning a wedding.
What other financial priorities should you consider?
In reality, neither buying a house nor planning a wedding is necessarily a good investment. Especially when you consider what you could do with tens of thousands of dollars by investing them.
Weiss analyzed the numbers: “Suppose a couple spent $ 30,000 on their wedding. So I was like, “What if they do it for $ 15,000 and take that other $ 15,000 and invest it?” “”
“If you assume a normal rate of return, it’s not just $ 15,000, it’s actually $ 150,000 or $ 200,000 in 20 or 30 years. This is really what the money is really worth.
With that in mind, we asked Weiss and Dan Demian, a financial advisor to Albert and Tom Mingone, an advisor to Equitable Advisors, about other priorities to consider before dropping the dough on a marriage. or a deposit.
An emergency fund
Building an emergency fund is an essential first step.
Mingone says he generally recommends setting aside at least three to six months of living expenses.
And you’ll be better served by putting your money in a high-yield savings account, where it can continue to grow instead of just staying in the bank.
Dealing with debt
“If you have high interest debt like credit cards, you shouldn’t rush into any of these decisions, whether it’s pouring money into a marriage or paying money. money in a down payment, ”says Demian.
Especially when it comes to high interest credit card balances, you should consider a low interest debt consolidation loan to help you eliminate your balances.
And keep in mind that the lump sum you would spend on your wedding or down payment could save you thousands of dollars in long-term interest on other types of debt as well.
“It might be worth taking the extra money you have on hand and reducing some of the student loan debt,” Demian says. “It’ll free up more space in your budget and it’s actually going to help you save more money to achieve your goals later.”
“Once the credit cards are paid off and an emergency fund is established, you can focus more on long-term goals like retirement,” says Mingone.
When you put money into retirement, you get compound interest.
“This means that if you start earlier, your money can grow for a lot longer,” Demian explains.
“Ignoring your retirement account and choosing to go to a party or buy a house when it isn’t necessarily appropriate will really reduce these cumulative effects for you. “
How to have it all
Each of the advisers stressed that he is possible to have it all. But it does take planning, some sacrifice, and serious reflection on your values.
What if you need a little more space in your budget at present To achieve all of your financial goals, you have a few options.
Lower your insurance premiums. When was the last time you looked for a better price for your auto insurance? If it’s been a long time, it can cost you over $ 1,000 more each year. Shop around to make sure you’re paying the best possible rate. And while you’re at it, use the same technique to save hundreds of dollars on health insurance.
Save like a pro. Even if you are putting yourself on a meager budget, you will still need to stock up on supplies every now and then. And when that time comes, use a free browser extension that will scour websites for the best deals and coupons so you never pay too much again.
Turn your money into a wallet. Investing doesn’t require huge sums of money or mastering Wall Street lingo. With just one popular app, you can automatically invest your “spare change” without stretching your tight budget.