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The Way To Plan A Wedding Amid Demonetisation... - Outside View by PersonalFN

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The Way To Plan A Wedding Amid Demonetisation...
Nov 16, 2016

We are in the month of November and the wedding season is just round the corner. In India, the wedding is one of the most important events of life and calls for a stupendous family celebration. Apart from the fact that weddings are full of fun and happiness, it's the time for big family reunions.

At weddings, a decade ago, traditional events were taken care by family members. All the events were personally overlooked by one of the family members. He would give away invitations; select the marriage hall and the caterers; make reservations for the guests, ...the list was endless...

However, things have begun to change. Wedding Planners are now hired to design and choreograph a wedding. Destination weddings, theme weddings and rituals pan out over a week now. The changing lifestyle, rise in income structure, nuclear families, and changing wedding trends, etc. have led to this new outlook.

Some interesting findings...

According to Business Insider, the wedding industry is over Rs 1,00,000 crore and is growing at 25% to 30% annually. The estimated cost of an Indian wedding, with no expenses spared, could be between Rs 5 lakh to Rs 5 crore. An Indian spends one-fifth of the wealth accumulated in a lifetime on wedding ceremonies.

Tata Capital in a research pointed out spending on one's wedding more often than not exceeds the initial budget by at least 30%. The wedding loan market in Mumbai alone is estimated to be around Rs 500 crore to Rs 700 crore according to Mr SKV Srinivasan, Executive Director, Retail, IDBI Bank

With such staggering statistics, it makes financial sense to start planning for it at the earliest.

Banks and NBFCs have started doling out wedding loans. They are nothing but 'personal loans' disguised to lure gullible borrowers.

According to Tata Capital's calculator, a wedding loan of Rs 15.10 lakh at 15% p.a. for tenure of 6 years (i.e. 72 months) would amount to an EMI of Rs 31,929 (approx.).

The effect of demonetisation on wedding season

But the current demonetization of old high denomination currency notes will affect the wedding season too. Most individuals, especially the middle class, who have withdrawn/borrowed large amounts of money, are now finding it difficult to use them.

As reported by Economic Times, bride-to-be Mansi Sharma's family (name changed) has had to grapple with banks that were either closed or too crowded and limited transactions at ATMs. The spare cash at home doesn't account for much. Her relatives are anxious as well.

"As it is, a wedding comes with its own set of headaches, and now, we have this unnecessary trouble," said Sharma's cousin, Priyanka Shivan, referring to the crisis spurred by the Government's sudden decision to demonetise Rs 500 and Rs 1,000 currency notes.

Wedding planner, Ms Vandana Mohan said expenditure on weddings scheduled early next year could lessen, given the limited cash in the hands of people.

Celebrity chef, Mr Ajay Chopra, who runs Zion Hospitality Services, said the move will impact spending on catering and functions at weddings.

"The mode of payment in Indian weddings is cash for 60-70% of the expenditure. From the tempo guy to vegetable vendors - and even chefs are paid in cash at times. I have been offered cash in weddings," Chopra said. "This will directly impact our business and will lower spending. It will impact the thought process of people currently booking. People will not spend Rs 6,000-8,000 per plate."

But is demonetisation turning a blessing in disguise?

Well, people are finding their way out.

Some doling out cheques, or doing electronic fund transfers for wedding expenses amid the demonetisation; while others are offering to pay by cash for wedding expenses to get rid of black money. Wedding planners, caterers, decorators, who're hard-pressed and want to do a good turnover, are accepting old high denomination notes although they are no longer a legal. This is despite the fact that Ministry of Finance through a press release dated November 13, 2016 directed hospitals, caterers, tent houses, etc. to accept payments through alternative modes (i.e. cheque/demand drafts and online transfers).

The approach to follow...

You see, it is imperative for us to realise that although marriages are the happiest moments of our lives, the cost associated with it can create a sour memory, if not dealt with care. Some are of the belief that if they do not spend liberally on their child's wedding, it will become difficult for them to face the society.

You need to understand that if you land up knee deep in debt with one of your children's wedding then you are not only bidding a goodbye to most of your financial goals, but also depriving your other children of vital needs such as education and healthcare.

Some things that are a necessities or comforts for others could also be luxuries for you. It is for you to decide what are your "need to have" things and what things can be "easily avoided". Once you have determined this, cutting down on extravagant costs will not be a difficult task.

Also, having a practical approach to all wedding related expenditure will enable you and your family to live a stress free financial life. For instance, if means are limited, you don't need to hire very expensive caterers, give expensive gifts to all your guests, or have wedding planners organise your wedding. There are several ways to make wedding of your children the most treasured memories for the whole family. Choosing an affordable venue, limiting your guests to ones who really matter to you, and having lesser but good quality of food options are a few ways of planning for a budget wedding.

Although your child's wedding is of great emotional value to you, and in that sense no amount can be termed as too much, it is imperative to be prudent while spending huge sums of money. It is always wise to spend only to the extent to which you can afford to, without compromising on other priorities. The demonetisation may have put you off-track, but it is important to brace the situation and find a best way forward.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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