Three ways to put your unexpected savings to good use
With lockdown weddings, couples reported significantly lower expenses resulting in unexpected savings for them. Here are some of the ways these savings can be put to good use
The pandemic effect
As Covid-19 upended wedding plans across the country, couples either rescheduled their nuptials or carried forth with renewed purpose. For the latter, this led to some unexpected savings. Delving into this trend, Prashant Shah, certified financial planner and director, Integrated Wealth Management Pvt Ltd, explains, “Wedding expenses during the pandemic have been comparatively low and will continue to remain so—at least till the first half of 2021. One of the primary reasons for this is the downsized guest list caused by travel restrictions and cap on guest count. Naturally, this has impacted the location and catering costs.”
The savings scheme
While there is no yardstick to measure average wedding spends, Shah says, “Before the lockdown, a typical Indian wedding might have cost anywhere between Rs 4-5 lakhs and Rs 1 crore or more. If the average expense was in the range of Rs 20-25 lakhs, during the lockdown, this would have been limited to Rs 5-7 lakh.”
Anmi Elizabeth and Benny Jose were scheduled to tie the knot on May 3, 2020. However, the lockdown changed all that. Besides setting a new date and foregoing many of the elaborate arrangements, they trimmed down their guest list from 3,000 to 50 people only. As a result, they saved nearly Rs 30 lakhs. Elizabeth shares, “Besides setting aside some part of it for future travel, our major investment will be towards funding our start-up business.”
Financial experts recommend investing this money to fulfil short-term and/or long-term goals. Saurabh Mittal, certified financial planner and founding director, Circle Wealth Advisors Pvt Ltd, shares, “This is actually an opportunity in disguise. If diligently invested, this money can be used for various goals, depending on the couple’s goals and risk profile. If couples plan their finances, they can derive maximum benefit out of these savings.” For those who want to strategically plan their investments, Shah classifies the investments into three buckets, as listed below:
Ten to 20 per cent of the savings can go towards short-term investments of less than three years. The surplus can be parked in short-term FDs or ultra short-term funds for the couple’s first anniversary celebrations or any other goal.
Medium-term investments of more than three years and less than seven years will require 20 to 50 per cent of the savings. For instance, the down payment of a home loan or a car loan or initial start-up capital. Couples can also invest in short-term debt or balanced mutual funds, depending on their requirements.
These are long-term investments of seven years and above and will require more than 50 per cent of the savings. Couples should utilise these savings in building their nest egg (or retirement corpus) as they can benefit from the power of compounding. They should consider investing in diversified equity mutual funds or direct equities. They can also contribute towards the NPS
(National Pension Scheme – Tier 1). If someone is risk-averse, s/he may consider investing the maximum limit of Rs 1.5 lakh in their PPF account.
Take note, to-be weds
If you’re planning to tie the knot in the near future, the need for financial discipline is of utmost priority. Mittal recommends, “Both individuals must understand each other’s approach to finances, especially in times like these. As individuals, we hold strong beliefs and emotions towards money, and discussing the same early on helps in the long run. Also, couples must get their insurance policies and paperwork in order as soon as possible after the wedding.”
Overall, couples must be prepared to make wise choices while planning their nuptials during this period. Every decision can contribute towards yielding some great savings that can help couples achieve their goals, while having a memorable celebration.
The Smart Investment Guide
i. Prepare a contingency fund that covers your monthly expenses for at least six months to a year, in case of any unforeseen circumstances such as job loss, salary reduction or slowdown in business
ii. Do not block your investments in joint life insurance policies or other similar products
iii. Consider a term insurance plan based on your incomes, expenses, and future goals
iv. Do not rush to change the nominee/s in your old investments. The bride can consider investing in her maiden name (and may change it later, if required) in her initial investments.
(Inputs by Prashant Shah, certified financial planner and director, Integrated Wealth Management Pvt Ltd)
Lead Photo: TGO Wedding Films