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There are times when it is difficult to budget for big-ticket expenses from one's salary. However, there are ways to fund these expenses. The obvious conservative choice is to liquidate some of the savings; the obvious aggressive choice is to borrow money, which can be repaid later. There is also a middle path that uses existing assets to raise money. The one Pankaj chooses will depend on his attitude to saving, investing and borrowing, as well as how big or small the amount he needs compared to his income and wealth.

His first task is to list the expenses. The direct expenses of the wedding and other expenses, such as travel, gifts, buying durables for the house and the like. The amount that he intends to spend should be compared with his income and his wealth. If it is more than twice his annual income and more than his accumulated wealth, Pankaj may be spending too much. His income could increase, but his ability to save may drop. Even assuming a 25% saving, if he spends an amount equal to his annual income, it would take four years to recoup. If he spends a portion of his accumulated wealth, he needs to rebuild it over time, even as he saves less.

Therefore, Pankaj should ensure he does not liquidate more than 25% of his savings and must not commit more than 25% of his future income to service a loan. This might keep him in a stable position to meet the expenses and rebuild his wealth. The moderate mid-path for Pankaj would be to take a loan against the investments he has accumulated.

This will get him a secured loan at a lower rate and keep him incentivised to payback and rebuild his wealth. How much should he spend will always be determined in terms of his income and wealth, and not in terms of what he should do to build his social status. Pankaj can make sensible choices if his decision is grounded in his realities.

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