My "small wedding" is offending my fiance's family.

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We are planning a small wedding in August. Including my fiance and I we are expecting about 25 people (just our parents, grandparents, siblings, and a few close friends). My fiance comes from a big family that clearly expects big weddings. My parents offered to either pay for the wedding or give us the money they would've spent on the wedding so we are trying to do a combination of both. My fiance and I are in complete agreement as far as having a small wedding. I tried to politely explain the situation and that we could really use the money to my fiance's extended family but they still seem upset. I guess I'm just looking for reassurance from others that I'm doing the right thing. I'm not trying to hurt feelings but I dont feel we should have to sacrifice our happiness on our wedding day just because his family expected to be invited.