Asking for cash wedding gifts? Don't make these money mistakes!

Congratulations! You’ve followed our advice and saved a ton of money on your wedding. Plus, you probably got a bunch of awesome wedding gifts. Personalized wedding gifts are great… maybe you got one or more of these things:

coasters, wine glasses, champagne flutes, wedding party gifts, a toaster, monogrammed sheets, a cheese board, gift set, knife set, (including the knife block) glass set, a juicer (ever popular these days), a serving set, or everybody’s favorite – the robot vacuum! 🤣

The Best Gift for Newlyweds

All those tangible gifts are nice, but do you know what most couples think the best gift is? If you guessed cash, you’re spot on!

As newlyweds, you may need the gifts listed above. However, cash is often in short supply. Wedding gift money is one of the most appreciated gifts for newly married couples, due in large part to its flexibility.

Of course, you’d probably use most, if not all of the gifts listed above. And don’t get me wrong, you’ll enjoy the 1000 thread count pillowcases and use the dinnerware a lot.



Here’s the thing, the wedding presents and keepsakes won’t help with your expenses. They won’t help you save. Wedding gift money is the gift that can keep on giving.

Plus, If you followed our advice here on BSB, you likely had a reasonably affordable wedding. Think of all the money you saved as a cash wedding gift to yourselves! 😉

What to Do with Wedding Gift Money

Now for the million-dollar question… what are you going to do with all that wedding gift money?

I have the answer for you… but first, we need to have an honest conversation. There are several things newlyweds do with wedding gift money that hurt them. We need to talk about the many mistakes I’ve seen newlyweds make with their wedding gift cash.

Mistakes Couples Make with Their Wedding Gift Money

Let's start with the bad news, and then I'll share the right way to use your cash wedding gifts.

Sound good? Ok. Let’s get started!

SPENDING IT ALL

The overwhelming temptation when newlyweds get wedding gift money is to spend it. After all, it’s free money, right? Maybe. But not so fast.

When you planned your wedding, you did it on a budget (that is if you followed my advice 😀). Don't let the budgeting stop after you’re married. It may be even more important than in your wedding planning.

Budgets tell you where your money is going and how much you have left to save and invest.

Yes. Saving and investing are a part of the budget. At least they should be. Mistake #1 when we get extra money, be it from wedding gift money or somewhere else, is to quickly spend it. BIG MISTAKE!

Financial planning 101 says that you should first set up an emergency fund. Guidelines for that fund vary. Best practices say to have anywhere from three to six months of your monthly expenses set aside in this fund. That money should not be at risk. Keep it in a liquid (readily available) savings account that you can immediately access. Pro tip: online banks like Capital One 360 or Ally often pay higher interest rates than local brick and mortar.

Bottom line – don’t spend that all your wedding gift money so fast!

BORROWING (MORE) MONEY

Borrowing and spending go hand in hand. Here’s what I mean. Let’s say you’ve had your eye on a shiny new car (fill in the blank for the make and model). Your wedding gift money isn’t enough to pay cash for the car. However, in your clever mind, you decide you can use some of that money for a downpayment on the car. BAD IDEA!

Once again, you’re spending that money, not saving or investing. A basic rule on spending and investing is this. Invest money into appreciating assets. Autos don’t fit that rule. As soon as you drive that car off the lot, you lose from 15% to as much as 25% or more on the value of the car.

If you tack on finance costs to that picture, it isn’t pretty. Find ways to get a good used car and pay cash for it. Drive it until the wheels fall off. It's best to not waste your hard-earned money (or any of your wedding gift money) on depreciating assets.

AN EXCEPTION FOR BORROWING

Many newlyweds have their hearts set on buying their first home together after the big day. Keeping in mind rule #1 on spending and investing, be sure that the house you're buying is in an area where the expectation is for the house to appreciate (ie, go up in value.)

Most people (especially newlyweds) can’t afford to pay cash for a house. If you and your spouse agree you want to buy a house, do it the savvy way.

What do I mean? Like with cars, don’t look for the largest house in the most trendy neighborhood. Put at least 20% cash toward the downpayment to get the best interest rate and monthly payment. Be conservative when calculating your mortgage payment.

Be Conservative with Your Mortgage

The general rule of thumb on mortgage payments is to keep them below 36% of your net income. As newlyweds, I actually think may be too high. To set yourself up for the best financial situation, look for a house that’s affordable and keeps your mortgage payment below 25% of your income.

Even better would be to delay buying a house for a few years. As newlyweds, take some time to get to save money and work on your finances together. The more you save and invest, the better you’ll feel about buying a house.

The worst mistake you can make as newlyweds is to buy a big house with a large mortgage payment that stretches your budget. Since stress over money is one of the leading causes of divorce, you both need to be on the same page before making big decisions.

Okay. We got the bad news out of the way… whew!

The truth is, everyone’s wants and desires for things are different, and therefore their priorities are different. That's why it's called personal finance, after all! One thing is for sure, looking at wedding gift money as free money to blow on stuff without fully planning will hurt you in the long run.

The Right Way to Use Your Wedding Cash

Now let’s talk about the right things to do with your wedding gift money.

INVESTING WEDDING GIFT MONEY

If you’ve never invested money before, the task may seem daunting. My best advice is to start small and keep it simple. Most people who get stuck overcomplicate investing.

Remember, before you start investing, be sure you have your emergency fund in place. The amount you keep in your emergency fund is personal to you and your spouse and you should decide on that together based on your unique situation. Generally speaking, anywhere between 3-6 months of living expenses is a great amount to have as a backup.

With your fully-funded emergency fund in place, let’s talk about options to invest your cash!

💰 Retirement Plans

No matter your age, one of the best ways to invest your money is in retirement plans. Employer-sponsored plans, IRAs, etc. all fall into that category. If you’re in a U.S company, it’s likely you have access to a 401(k) plan. Most employers match what you contribute up to a certain amount or percentage– aka you may be able to double your investment– score!

For example, let’s say you decide to set aside 10% of your salary into the company plan. Their matching contribution might be 50% of what you contribute up to a maximum of 6% of salary. Or it might be 100% to that level or some lower percentage. Whatever that matching percentage is, your minimum contribution should be at least that matching amount. Why? It’s free money!

If they’re willing to help you with that match, you owe it to yourself to put in at least that percentage. It may seem hard to part with a portion of your paycheck, but you're making an investment in your future that's totally worth it.

There is a lot more to say about these plans that falls outside the scope of this post. Though it isn’t specific to wedding gift money, it’s important as newlyweds to think about this kind of long term planning.

💰 Mutual Funds

Another popular and easy way to invest money is with mutual funds. Mutual funds are investment companies who take your money, along with other investors and invest it on your behalf. Each fund has it’s own objectives and invests in various kinds of securities.

The most simple way to start with mutual funds is with index funds. Index funds are designed to track a market index. The most popular and well known of these indices is the Standard and Poors 500 index. The S&P 500 contains stocks from the largest 500 companies (roughly) in the U.S. stock market. When you invest in an S&P 500 index fund, you own all of the stock in that index in the same percentages they make up in that index.

💰 Index funds

Why invest in index funds? Non-index mutual funds underperform index funds over almost all time periods (1 year, 5 years, 10 years, etc.). The costs of these non-index funds are much higher than index funds. Higher costs (management fees and expenses) cut into the return investors earn on the fund. Keeping costs low is one of the things you can control when investing.

Index funds allow you to keep costs low and take what the market gives you. That’s much higher than investors who try to time the market or pick mutual funds that beat the market. Vanguard funds are a great place to start your index investing. They are among the lowest cost providers out there. They’ve been at index investing longer than most.

Invest your wedding gift money in index funds and hold them for the long term. Markets go up and down often over short periods (referred to as volatility). Staying invested during those short term ups and downs may seem scary, but will serve you well over the long term.



💰 Invest in Real Estate

When we talk about investing in real estate, we’re not talking about buying a home in which you live. We’re talking about real estate as an outside investment.

There are a number of ways to invest in real estate. Residential real estate, real estate investment trusts (REITs), and private equity funds are all good options.

Investing in residential real estate properties takes cash, and typically lots of it. The rules on buying a house also apply when buying rental properties. Unless you are flush with tens of thousands of dollars in cash, you may not want to jump into rental properties as newlyweds.

On the other hand, it’s easy to invest in REITs. REITs are publicly traded on most stock exchanges, U.S. and international. Like mutual funds, REITs pool investors' money and invest it. In this case, it’s invested in various types of real estate. It might be residential housing, commercial properties like office buildings, etc. Each REIT has it’s own investment strategies.

Publically traded REITs, in most cases, will not help you build wealth, necessarily. Publicly traded REITs are required to distribute 95% of the income they receive from properties. Most investors put money in REITs for income.



💰 Private Equity REITs

My choice for investing in real estate at an approachable buy-in is private equity REITs. Specifically, I like crowdfunded real estate funds.

You’ve heard of crowdfunding, right? Think GoFundMe or Kickstarter or IndieGogo. It’s a way for people to raise money from smaller investors for a specific project or cause.

Real estate crowdfunding applies the same concept to raise money from smaller investors, allowing them access to investment properties normally only available to the 1%.

The SEC calls these people accredited investors. That means they have at least $200,000 in income ($300,000 if married filing joint tax returns) or at least $1 million in net worth (not including their residence). These requirements leave out the vast majority of investors.

That’s why crowdfunded real estate makes sense.

Choosing the right fund

My favorite choice in crowdfunded real estate is DiversyFund. DiversyFund allows people like you and me to access commercial real estate normally set aside for the wealthy. How do they do that? Crowdfunding.

You can invest in the DiversyFund Growth REIT for as little as $500. Yep, you heard that right. You can get access to commercial real estate, where the 1% often build their wealth, with DiversyFund.

When I was thinking about investing in real estate, I checked out several of these companies. Fundrise is one of the most popular. Granted, I’m a wedding planner and not an expert. But the more I looked into DiversyFund, the more I liked them.

DiversyFund Investment Strategy

Their investment strategy just made sense to me. The only invest in one type of property – multifamily housing. Specifically, they look for properties that fit these three criteria:

They are cash flow positive – in other words, the rents they receive are higher than the costs of maintaining the properties



They must be in high growth areas – they use some fancy technology (which I really don’t understand) to find their properties. I’m not tech-savvy, but that made sense to me.



Properties need some work – Don’t be alarmed at this. We’re not talking about high-risk foreclosures in bad areas. These properties might need a new roof, new HVAC or a fresh coat of paint. They do all the work themselves. That saves a ton of money

To me, this is a simple strategy that made sense. I don’t have to understand how and why they pick properties. Focusing on one thing and doing it well make sense to me. After all, that’s what The Budget Savvy Bride is all about. We do weddings inexpensively and well.

DiversyFund does commercial real estate well. They aren’t trying to be all things to all people. Neither am I. That’s why I like DiversyFund over the other options I looked at. If you want to learn more about how it works and see if this is right for you, click the button below!

Final Thoughts

Listen, wedding planning might be my field, but being financially savvy about it is my specialty. I help you save money – lots of it – on your wedding.

Admittedly, investing is not something I know a ton about. But as I thought about the couples I advise about savvy wedding planning, it occurred to me I was leaving a gap for newlyweds.

I don’t want to see couples who worked so hard to save money on their weddings, follow up by making avoidable mistakes with their wedding gift money. I hope you find this info helpful, and that my attempt at educating you or introducing you to this concept has been successful.

My best advice? Keep it simple. Build your emergency fund before doing any investing. Start contributing to your retirement plans. Invest your excess cash in a diversified portfolio of mutual funds and real estate. Vanguard is a good option for mutual funds. DiversyFund is a good choice to invest in real estate.

Let me know what you think. Was this helpful? Have you thought about what to do with your wedding gift money?

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