The Myth of the $18,000 Wedding

I think it's time people started getting their priorities straight.






The Myth of the $18,000 Wedding
by Laura Rowley
Wednesday, February 24, 2010
The Wall Street Journal had an interesting piece recently looking at what brides and bridegrooms would save if they invested the money spent on their weddings, rather than blowing it on a one-day affair.

The author suggests that couples who lay out the median cost of a wedding -- nearly $18,000 in 2009 -- are actually missing out on $90,000 to $200,000 in wealth accumulation over a lifetime. (He notes the average bride is 26 years old, so the money would have roughly 40 years to grow.)

Considering the lost opportunity cost of a lavish wedding is excellent advice -- except the basis of the calculation is based only on a subset of all the weddings each year. The almost $18,000 "average" comes from TheKnot.com, a bridal Web site. According to spokesperson Melissa Bauer, the survey company Decipher polled 21,000 U.S. couples who married in 2009. All of them had registered, or "opted in," to one of a network of wedding-related sites operated by TheKnot. In other words, the sample is biased toward people who plan big weddings.
After all, in 2007, 40,000 people were married by the New York City clerk's office --where a ceremony costs just $35. (The Manhattan location underwent a $12 million renovation last year, apparently hoping to attract frugal-minded couples -- or those in a particular hurry.) I doubt many of these folks went searching for a marching band processional (an idea on TheKnot's blog) or the perfect bridal party thank-you gifts.

Author Rebecca Mead exposed a similar data problem in her 2007 book "One Perfect Day: The Selling of the American Wedding," where she cites a $28,000 average figure from a survey conducted by Conde Nast Bridal Group magazines.

"If a bride has been told, repeatedly, that it costs nearly $28,000 to have a wedding, then she starts to think that spending $28,000 on a wedding is just one of those things a person has to do, like writing a rent check every month." Mead writes.
Research has found that Mead's instincts are correct -- our spending choices are greatly influenced by purported norms because the brain attaches itself to "anchors" when making decisions. Consider an experiment conducted by Dan Ariely, professor of behavioral economics at Massachusetts Institute of Technology and author of "Predictably Irrational." He asked participants to write down the last two digits of their Social Security numbers. Then he had them bid on a number of items, including a cordless keyboard and mouse, a bottle of wine and a box of chocolates.

The bizarre results: Students who had Social Security numbers that ended in high digits -- from 80 to 99 -- bid from 216 to 346 percent higher than students whose Social Security numbers ended in the lowest numbers (1 to 20).

Consumers' willingness to pay can be easily manipulated because we often don't have a good handle on our preferences or a rational baseline for the decisions. Economic theory suggests that forces of supply and demand are independent, and it's the enthusiasm to pay a particular premium that determines market prices. But consumers are often at a loss on how to assign value, so as Ariely demonstrates, it's just the opposite: Market prices themselves influence consumers' willingness to pay.

Combine anchoring with clever marketing and you've got an expensive right of passage in the making. Mead, for instance, investigates a number of wedding "traditions" created by the bridal industry, including the engagement ring, invented by diamond producer De Beers in the 1930s and 1940s. (Mead also hilariously unearths the origin of a popular Apache wedding prayer, which turns out to have been penned by a Hollywood screenwriter for a western in 1950.)

Now throw in the community aspect of Web sites, and the battle to steer clear of the $18,000 wedding is nearly lost. Commiserating online with other brides-to-be on floral arrangements, DJs and videographers hardly inspires independent thinking (and budgeting). We take our consumption cues from our peers and often embellish them, writes Ron Wilcox, author of "Whatever Happened to Thrift: Why Americans Don't Save and What to Do About It."

People "tend to concentrate on idealized consumption," Wilcox explains. "We take as anchor points what people around us consume. We remember things we like and don't like and then construct an idea of what is appropriate to consume. What the memory constructs is more extravagant."

Understanding the power of mental anchors is especially important for couples embarking on their financial life together, because spending decisions tend to compound over a series of subsequent choices.

"You can't say, 'Well, I'll just try it once and see how it is,'" Ariely explains. "We have to realize that the first decision we make actually matters a lot. And the second thing is to look back into our habits and say, 'How did we get into this situation that we have this many cars or this size house? Do we really value things in the way we pay for them, or was it a random starting point?'" (In other words, did it all start with an $18,000 wedding?)

As Mead told me: "There's a lot of stuff people spend money on at weddings that isn't about the core of a wedding, which is getting family and friends together and celebrating."

Perhaps along the commitment to "honor and cherish" we should add a new vow: "Before spending five figures -- on a lavish party, luxury vehicle or anything else -- I promise to ponder whether the purchase aligns with our deepest values and enhances or compromises our financial well-being. And I promise to look critically at my anchors."