So you’re getting married

While it no longer represents the big change in life that it used to, it marks a point in your life you’ll want to remember forever. The average Kiwi wedding costs $35,000 which is a lot of money. Even if you don’t want a horse-drawn carriage and 1500 of your closest friends and family, weddings can be expensive. Money can’t buy you love, but it’s definitely needed to buy a wedding!

There are two ways of thinking about your wedding. One is that it’s a once-in-a-lifetime event, and therefore no expense should be spared as you only get to do this once! The other way of thinking about this is that it’s one day in 365 others that year, and that it doesn’t need to be an expensive day. Both attitudes are right and how you view it will determine how much you will spend.

Think about how much money you want to spend, and what else that money could be used for. A house deposit? Travel? Children? What is important to you? Whatever your dream wedding is, money is going to influence the choices you make and the end result.

Who pays for your wedding?

When doing your wedding planning, the primary concern is the budget, and how you will pay for it. You and your other half? Your parents? Your savings? Or a personal wedding loan?

Who funds the wedding depends on the families involved. Traditionally, the parents of the bride and groom paid for the wedding, but as people marry later with more financial security, those rules no longer apply. If the parents want to pay, that’s great. If not, the couple will foot the bill itself.

As with everything, money for a wedding can be a delicate subject. For the wedding party, who pays for dresses and suits? What about shoes or jewellery? It’s different for each circumstance but, while there is no expectation that the bride and groom will pay for every expense for their wedding party, it shouldn’t be expected that the bridesmaid will have to pay for a dress she will likely never wear again.

If you are going to pay for the wedding, how can you afford it? Do you have savings? Are you intending to get a loan to cover the costs? Are you already in debt? Is this wedding going to be a case of ‘til debt do us part?’

Using savings to pay for the wedding is the most financially prudent plan. Most weddings are planned 12-18 months out, and with a determined mindset, saving enough for your wedding is possible.

Set a wedding budget

Sit down with your partner and make some decisions about what you can afford. What do you want? What isn’t important? Each of you pick the top three priorities for you, and the bottom three.

Devote a larger proportion of funds to what’s important to you. It will quickly become apparent that some things are less important to you both.

Engagement and wedding rings

The current ‘rule’ is that an engagement ring should cost two months’ salary. However, rules are made to be broken and you could buy something that fits your budget, and your life. For instance, many people in physical labour don’t wear rings, as their jobs may involve electricity or there may be risk of physical harm due to wearing a ring.

You may find that large rings with a prominent setting may catch on clothes or other objects a lot. Claws holding stones can be damaged in this manner so if you are an active person or have a physical job, you may want to think about how sensible a bulky ring is.

How to have a champagne wedding on a beer budget

While you can’t turn water in wine, there are loads of great ways to save money without looking cheap.

Have your reception at a restaurant

Rather than hiring a venue and paying for caterers, a restaurant will be quite happy to rent itself to you for the evening. You’ll know the food will be great, the décor perfect, and without a huge hire fee!

No one remembers the favours

Wedding favours are unnecessary and often left behind anyway. Think long and hard about what actually makes a difference to the day. People might remember the food and the dress, but will they remember the flower centrepieces? Unlikely. Invest in the things that matter to you, and that people will remember.

Keep the booze bill cheap

Use the Dom Perignon for the toasts (and the top table!) but have a less expensive wine for the remainder of the night. Face it – you can’t tell Dom from Lindauer after a couple of glasses anyway. Also, have table service rather than wine on the tables, people drink less and it’s a lot cheaper!

Cake tastes good, regardless

Have a small cake iced and decorated for the cake-cutting ceremony. Have a sheet cake in the kitchen ready for your guests. They will never know the difference!

Choose in-season flowers

Your florist will help you with this, but peonies aren’t going to happen in winter. Choose seasonal blooms (or greens) for a cheaper bouquet.

Don’t invite cousin Dwayne (who you haven’t seen in 15 years)

The guest list is the most expensive factor in your wedding. While Mum and Dad may insist you have to invite great-aunt Mildred, Uncle John, and your 18 nieces, tell them how much a wedding costs per head and then ask if it’s still important. This does start becoming a political issue and if your parents are paying, you may have little to no choice.

Also, consider having a child-free wedding. This decreases the guest list and also means the parents can have a night off to enjoy themselves.

Sneaky extras that cost money you didn’t expect

Always set aside some extra cash when wedding planning because there will be things that cost extra, whether it’s wedding-specific underwear or a massage the night before to calm the jitters. There are sneaky costs that can add up really quickly.

Taxes

There is tax and customs fees/import duties on goods that you import. You will be charged 15% GST on purchases over $60. On a $500 dress from the United States, you’ll have to pay GST and duty that adds up to $250! Suddenly that $500 bargain dress costs $750 and isn’t such a great bargain any more.

Staff

If you have a reception with food, you’ll likely need to pay for staff. If you go into overtime or past closing time, you’ll end up paying a lot more for their presence. Have a plan for how many people you need and what happens if the party starts extending beyond planned timeframes. Photographers may charge extra time if you request them beyond their pre-agreed timeframes too.

DIY doesn’t always save money

Doing it yourself might seem like a good way to save money, but it’s not always that simple. Craft items can be expensive and sometimes what starts out as a simple project can quickly snowball into something you didn’t intend. Using the professionals may end up a lot cheaper and you are guaranteed a good result. Attempt DIY when you have some skills and no tight time deadlines.

All-in-one vs piece-by-piece venues

When planning your budget, an all-in-one inclusive venue may present you a price that makes your parents beautiful backyard seem like a very good idea. When you price up the backyard option though you may find it works out to be a lot of money, and extra stress. Hiring a marquee, tables and chairs, table settings, glassware, caterers, wait/serving staff and a sound system all add up very quickly.

Destination weddings

Travelling to a tropical destination to get married is a wonderful way of having your family and friends in full relaxation mode while they attend your wedding. It also makes your honeymoon destination simple!

Pros of a destination wedding

If you have a family situation that is difficult, having a destination wedding will make life simpler. Not having to invite every Aunty and Uncle will make your guest list considerably smaller!

A destination wedding is also simple. There will be a package with everything included. From hair and makeup to photographers and food, everything will be arranged for you – all you have to do is show up!

Cons of a destination wedding

Organising things by distance can be frustrating. Also, there may be extra legal requirements and red tape to comply with the destination country, as well as your resident country’s laws.

Travel overseas will mean that some people will simply not be able to attend. Work and family commitments and increased costs of attendance may mean that you don’t have everyone there that you might like.

While your honeymoon destination is stepping outside your front door, consider the romance of having your entire family and your friends there too. Your alone time may be at a minimum.

Honeymoon

For those people who don’t want a destination wedding, you need to consider the honeymoon. Do you want to travel overseas and go through Europe like you’ve always talked about? Or maybe you’d love a road trip around the South Island, exploring a little closer to home.

With wedding expenses already stacking up, how do you intend to pay for the honeymoon? You can get a personal loan, or consider a travel fund that people can donate to in lieu of buying a wedding gift. These are increasingly popular and a good option for couples that have everything they need already.

Even though you can travel cheaply, consider spending more to get nice accommodation for the first few nights. You’ll be tired from the wedding and will want to spend time in the room – don’t risk being cheap and getting a room that smells like pickled onions for your first few nights as husband and wife!

Next steps: buying or renovating your first home together

Getting into debt together is a big step. It might be tempting to think you’re buying and owning a home together, but the depressing truth is that the bank owns it. You may find that you are just renting it from then.

Planning to buy a home is the biggest and most important financial step you can make.

How much can you afford to spend on your home?

You need to make sure you can afford the deposit on your new home, and that you can afford the repayments.

How much of a deposit do you have saved? Generally, you’ll need 20% of the home’s value as a deposit. You can either use your savings, or if this is your first home, you can use your KiwiSaver.

Find the right lender for your needs. If your financial situation is good, then often you can bargain with your lender, especially if you have a good deposit and use their services for banking. Ask about interest rates, fees for establishing the loan or penalties for paying off early.

You want to be organised when you approach your lender. Have a budget and all the information you need written down. This includes information on savings, your income streams, your expenses, and any debts. They will also check your credit score.

The Bright-Line test

In NZ, if you buy a property for any purpose other than living in it and sell it within five years, it may be liable for tax payments on the capital gain. If you plan to buy, renovate, and sell then you should assess if this extra tax payment will make your project less profitable.

Renovations and home improvements

Are you intending to make some home improvements? If you are renovating in order to make the home more liveable for you and your family, then the expense is not dependent on the gain you’ll get in the sale price. However, if you are planning to renovate purely to increase your house price to sell, you need to decide what is worth doing – and what is not.

Easy, cheap fixes include a coat of neutral paint throughout the house to tidy up and modernise. The street appeal can be increased with gardening, refreshing your door and letterbox. Larger improvement such as bathrooms and kitchens are worth it but will take a bigger time and money investment from you. Modern utility areas are a very attractive prospect for potential buyers.

Do you need a personal loan or a debt consolidation loan?

Why get a personal loan?

There are a range of reasons you may need extra funds. Are you planning your honeymoon? Starting your home renovations? Thinking about starting a family or buying a family car? Have you got an amazing business idea, or education opportunity, but just need some funds? These are reasons you might genuinely need a personal loan or car finance.

What about a debt consolidation loan?

If you have a number of different debts, particularly if they have a high interest rate, then you should look into a debt consolidation loan. It rolls all your debts together in one manageable sum, so you have one payment, one interest rate, and only one debt. The interest rate may be lower than most credit cards, so you pay less in interest.

How to successfully obtain a loan

Approach your bank or lender with all required information. Have copies of asset information, debt information, payslips, records of expenses and credit card statements. You’ll also need proof of ID, proof of address and three months of bank statements (if you’re not using your bank for the loan). Set up a budget beforehand and use a loan calculator to understand how much you can afford to borrow and how much it will cost you.

Be organised – this shows your lender you are serious about taking control of your financial future.

The end goal of any lender is to ensure that you have the ability and likelihood of paying back the loan in accordance with it’s terms. You need to convince them of this.

When should you use your credit card?

For any expense that will take longer than a month to pay off, seriously consider delaying the expense and saving the money, or getting a personal loan. Interest on credit cards can be extremely high and you’ll end up paying a lot more, sometimes to unsustainable levels.

"Interest on credit cards can be extremely high and you’ll end up paying a lot more, sometimes to unsustainable levels."

If you decide to apply for a loan, shop around. There are many lenders, all with different terms and conditions. In particular, look for establishment fees, the interest rate, and any penalties for paying off the loan faster than the agreed term. If you have a mortgage it may be cheaper to top up your mortgage than get a personal loan.

What is Your Credit Score?

A credit score is a number between 1-1000 that represents your financial stability and indicates that you will be able to pay back a loan. A poor score will dramatically affect your ability to obtain a loan. Before it gets to a stage where a lender is checking your credit score, you need to do your homework. Your score is calculated by looking at all unpaid bills, fines, and any bankruptcy/ court judgements.

Contact each of the three providers in NZ. Equifax, Dun and Bradstreet, and Centrix. On their websites, you can request a free copy of your credit score that is lodged with them. You will need to supply proof of address and valid NZ ID in order to do this.

Once you have the report, check it thoroughly. If there are any inconsistencies or erroneous information, contact the credit report supplier and get it removed. If there are debts there that are genuine, work to get them paid off. Also, avoid doing multiple credit checks as it looks like you’ve been applying for money from a lot of places, which is undesirable.

You can improve your credit score. This will take time, but paying off any old debts shows a willingness to repair your credit score. Also paying all your existing debts/utility bills/loans and credit cards on time helps to show that you can manage your money well. In the time that you are fixing your credit rating, you can also save more for your wedding! Download our eBook ‘10 Ways to a Better Credit Rate’ to find out more about improving your credit score.

Planning a family? Read this first

If you want to start a family, then be warned: babies might be small but they are expensive! While the Mum-to-be is having fun being pregnant (fun = no wine or blue cheese and not being able to see your toes) and you’re choosing names and painting the nursery, take some time to figure out your finances.

1. Assess your current financial situation

You hopefully did a budget before the wedding, so you should easily be able to assess if your budget can take an extra $1000 a month of expenses. What happens when you remove one income, or knock one parent back to part time work? How does that look?

2. Check out Paid Parental Leave

You will get up to 22 weeks of paid parental leave if you have worked at least ten hours a week for 26 weeks from the last year. It’s paid out at a rate based on your current earnings to a maximum of $538.55 a week. This amount has KiwiSaver, student loan repayments, and taxes taken from it.

After those 22 weeks of leave, you can return to work or continue staying at home. The Best Start Tax Credit is $60 a week, and Working For Families assistance may be available for those with a reduced income.

If you decide to return to work, if you plan to place your baby at day care, budget on $7 an hour. At around $300 a week, is this financially viable for you?

3. Budget for your baby

The average first year for a baby costs $15,000. See the list below for average costs to understand how something so small can cost so much! You can cut down on these by opting for hand-me-down baby apparel or buying second hand. Remember, you might be doing this on one income

4. Health and Life insurance

Do you have health or life insurance? More and more people are opting for private health care, will your child have health insurance too? You will also need to adjust your last wills to reflect the baby as the beneficiary, and to record future plans for your child in the event you are no longer in a position to provide care.

5. Create your future budget

Take your existing budget and make the additions or subtractions as discussed above. Is this realistic? Does it include savings and retirement savings? In the first year, a baby costs about $15,000, and a child costs about $12,000 each year after that. Education, extra-curricular hobbies and sports, school uniforms and extra childcare… children are not cheap. Is this a figure you can sustain? A budget shouldn’t be punitive, it should allow occasional treats and splurges, otherwise you’ll never stick to it. If you can, try to live on this budget for a month… make changes as required.

Saving for a rainy day

Throughout all of this – weddings, house buying and having a baby, you need to have a savings account. It’s there for that rainy-day expenses you can’t plan for or expect – a broken down car, a substantial house repair, a change in employment circumstances. Financial experts recommend two-to-six months of wages should be saved for emergencies.

If you don’t have a savings account, open one and put a small amount of money in there. Contribute regularly and don’t withdraw funds unless you absolutely have to. You’ll be surprised how fast savings grow if you make little deposits often.

Retirement and KiwiSaver

It might be tempting to take a contributions holiday from your KiwiSaver or retirement scheme. However even in the face of increased costs, the 3% you contribute to KiwiSaver isn’t going to make a big difference to your current life, but it will have a huge impact on your future.

Even only the minimum 3% ensures that you receive the Government contribution (free money!) and employer contributions. The interest on your funds will continue to compound and by the time you reach retirement age, you’ll have a significant nest egg.

However, since you’re already assessing your finances, this is a great time to organise your KiwiSaver and optimise your funds.

Check your existing KiwiSaver funds

Log into your provider and check out the following things:

1. Is your fund making money?

If it is, is it making enough? If it’s not, why not? KiwiSaver schemes have three investment profiles. High risk comes with greater potential rewards – or losses. Low risk is the steadyas-she-goes account. If you’re nearing retirement, you should stick with the low risk profile. The medium risk profile is moderate in every way. No big gambles, but no big wins either.

2. What are your KiwiSaver fees?

Check what fees you’re being charged. Your fund manager is entitled payment for their services but you don’t want to be charged excessive fees. If you feel like your fees are too high, compare to other providers… it might be time to switch.

3. How ethical are your investments?

Of the nine default providers, four of them currently invest in landmines, tobacco, and guns. If ethical investing is important to you, find out who your funds are supporting. If you don’t mind where your funds are invested, then you’ll be pleased to note that these unethical funds usually have lower returns than ethical investments.

4. Are you saving enough?

If you sustain your current savings rate, how much will you have at age 65? Check out the calculator that most funds provide and see the different an extra 4% makes to your end results. Are you going to stick with your current rate?

5. Are you getting your government contribution?

The NZ Government makes a $524 contribution each year if you save $1042.86. This is the fastest money you’ll ever make! Are you getting employer contributions? Should you be?

Your future depends on your actions now.

Sensible finances are the new black

There are some long term finance habits that you should develop. Done consistently even through expensive stages in your life, they will help you stay in the black.

Budgets are not a punishment

Assessing your finances allows you to understand where your money goes and plan a little better. Check regularly and construct budgets that let you live a little!

Save

Two savings accounts, one for retirement (such as KiwiSaver) that you never access, and a ‘rainy day’ fund to help you plan for the unexpected. Aim to have two to six months’ worth of funds in your savings – save little, and often.

Avoid debt like the plague.

It’s easy to slide into, especially with credit cards. If you get into debt, get out of it as fast as you possibly can. Short term personal loans may be what you should be looking for. You’re paying interest on that money – money that would be better in your bank account!

It’s a trap.

That is, high interest loans. Credit cards can have high interest rates so if you get stuck with a credit card bill that seems unmanageable, act sooner rather than later. Transfer the debt somehow to a lower rate loan and concentrate on paying it off!