Life is marked by significant milestones deserving of celebration. Whether it is the blissful moment of committing to the person you are going to spend the rest of your life with, or the party thrown for your toddler who suddenly is turning sixteen years old, your wallet may feel the pressure of party-planning.
According to Ashley Weeks, a Wealth Strategist at TD Wealth®, such celebrations do not have to come at the cost of your savings account. Read below for his tips on how to financially plan for your once-in-a-lifetime celebration without breaking the bank.
Break Free of Emotional Entanglement
Maybe this is the moment you have been waiting for, or a milestone you cannot believe has arrived. Emotions are high, and there is a clear buzz of excitement you feel sweeping not just through you, but your family and friends.
When creating a financial plan for your event, clear and consistent communication between all stakeholders is crucial. Setting expectations up front and researching costs may help to avoid disputes that arise between you, your family, or your vendors during the planning process. While you are celebrating an emotional milestone, the financial planning must be logical and factual to meet your financial needs.
Set a Budget…and Stick to It
With vendors and family members whispering into your ear, “This is your special day… don’t you want only the best for your special day?” it can be easy to get carried away with the budget. “Budget creep” tends to seep into event planning- make sure to stick to what you had originally planned.
Hiring a professional event planner to negotiate fees with vendors, handle logistics, and provide an approximate estimate of what the costs are, may save you money in the long run. Even buying an hour or two of a professional event planner’s time to get a scope of the costs may help you determine what the important versus superfluous costs are to you and your family. As you go through the planning process, it is important to remain committed to your budget. If one element of the event is going to cost more, pull money from somewhere else. While this can be challenging, setting those expectations early on may help you avoid going over-budget.
One Event Versus Lifetime Goals
If you are balancing paying for an event with long-term financial goals, it may be beneficial to maintain an emergency account. On a “rainy day”, you can pull money from there with the understanding you will replenish it in the future. Having this kind of account can prevent a lot of financial destruction in the event of an emergency or unexpected event. Keep up with your regular retirement plan contributions and try to remain balanced. Avoiding debt, especially high interest consumer debt, is crucial to ensuring your event does not intervene with your long-term goals.
Tax and Insurance Implications
If you are tempted to pull money from a retirement account, such as a traditional IRA or 401(k), to pay for your event, it is important to be aware of tax consequences. When you pull money from a retirement account, it is treated as ordinary income. This means that it will be included in your taxes, and taxed higher than long-term capital gains or qualified dividends. Additionally, retirement account withdrawals before age 59 and a half may be subject to a 10% penalty. Thus, it is important to weigh the costs of withdrawing from such accounts and plan for the extra taxes you would owe if you were to do so. If a person gives you more than $18,000 in 2024, they may be required to file a gift tax return that eats away at the estate exemption.
Managing Payments
When managing payments, it is important that you stick to your budget. If you are using credit cards to pay your vendors, ensure that you are carefully tracking your payments and not overspending by accident.
Any time you fund a large event, such as a wedding, be aware that you are taking away funds from a portfolio that could be invested for the long term. Compound interest calculators are a great tool to assess what the long-term impact of having those marginal extra dollars invested would be. Be wide-eyed when you plan to avoid budget creep and have an incredible, well-planned celebration.
Holding yourself to the initial budget and prioritizing your specific wants ensures a celebration that will be remembered by you and your loved ones, but not your financial accounts.
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We hope you found this helpful. This article is for informational purposes only and is based on information available as of September 2024 and is subject to change. This content is not intended to be used or acted upon with respect to any client's specific circumstances. For specific advice about your unique circumstances, consider talking with your qualified professionals.
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