Have You Traded Away Your Retirement on Bridesmaid Dresses?

It's great to keep up with female friendships, but if you're the type of girl who makes the list for everyone's bridal party, it can seriously cost you. According to market watch, attending a bachelorette party costs an average of $850. That whopping number doesn't even take into account how much you're expected to spend to throw a shower… and who could forget the dress?

There is no national average for the amount of money spent being a bridesmaid. Over at Buzzfeed, they used the number $1,500. Given the average of $850 spent on just the bachelorette party, this number checks out. If anything, it underestimates the money you can rack up on everything wedding-related when you stand up with a friend. $1,500 is a lot of money to spend, especially on a life-event that isn't yours, but when you examine the other ways that you could be spending that money, saying "yes" to being a bridesmaid could be costing you even more than that.

Calculating the future value

Without a crystal ball, it is impossible to know the precise amount of money that investments will yield in the future. Still, there is a tool to help us estimate what that sum might be. That tool is called the future value calculator. You can enter the amount of money you have now, the interest/growth rate, and how long you want to keep your money invested. It will then calculate an estimate of the total sum you can expect down the road.

We can use this tool to calculate what might happen to that money if you were to invest it rather than spend it as a bridesmaid. We'll use 5% interest in order to calculate the future value, as that is a reasonable return to expect. If you invest $1,500 at 30, by the time you are 65, that would turn into $8,274. If you're in three weddings (for the sake of simplicity, we'll put them all in one summer), that would come to a grand total of $24,822.

If your friends get married younger, that total is even higher. If you were to invest $1,500 at the age of 25 with 5% interest, by the time you are 65, that would accumulate to $10,560 per wedding.

Where to put that money

It can be difficult to figure out the best place to invest that money, especially in your twenties and early thirties. Here, your youth can be an asset because of compound interest. The more time you have that money tucked away, the larger the sum will become due to compound interest.

If you're going to maximize savings, you want to take advantage of free money. That means if your employer offers a 401k or retirement plan matching, you should be taking advantage of it. You won't find a faster way to grow your money. If you put $1,500 into a retirement account and your employer matches $0.25 on the dollar, that money automatically becomes, $1,875. That's $375 of free money just for saying, "Sure, I'll save for retirement." If that sum is then invested at age 30 (with 5% interest), it will turn into $10,343. If you invest it at age 25, it will turn into $13,200 by the time you're 65. That means that the $375 of free money can turn into an extra $2,069 to $2,640 depending on how early you invest it.

Now, there is some wiggle room with these numbers because it doesn't account for tax. Your 401k and IRA savings can be made pre-tax, which means that if you're taxed at a rate of 25%, you could actually put away $2,000 instead of the $1,500 you'd be spending as a bridesmaid. You would then owe tax on the sum when you withdraw it.

There are certain IRAs where you can have your tax withheld at the time that you invest it. If you anticipate being in a higher tax bracket in 30 years, this may be the way to go.

The moral of the story is: find out what your employer's match policy is and take advantage of it. If you're maxing out the policy, you may end up making back the money you'd spend on the one bridal party you couldn't refuse.

Your friends are investing in their future as they get married. You may find that the best choice to invest in your own future is to set some money aside and wish them well as a guest, rather than as part of the bridal party.