I have already decided what invitations I'm going to use for my wedding. And how many people from my side I'm inviting. The problem arised when I asked my FMIL for a list of address for my fiancee's side of the family. She went throught the list for me and told me what people she is 99% sure won't come to the wedding since they didn't attend his sister's and live too far away. But the FMIL insists that they all still receive an invitation. I talked to my own mom, who is paying for this, and told her there is no way that I can send an expensive invitation to people that won't come plus the postage. My mom agrees with me but I don't know if that is bad etiquette and I should send one to everyone on the list or how should I break it to the FMIL that not everyone is receiving and invite but I will send an announcement after the wedding.
What's the difference in postage between sending an invitation and announcement? Are you risking trouble with your new MIL over $10 or so?
Having said that, there is no such thing as inviting people you believe will not come. You need to plan and budget as if each and every invitee will show up. Lots of people over-invite under the theory that X% will not show up, then end up in trouble when more accept than they originally planned.
What will you do if the max capacity of the room is 100 people, and 103 show up? Put the last three people in the restroom?
Here is my suggestion to you. (I get the impression your mom is paying for the wedding and reception.) Have a talk with your mom (or with yourseif if you are paying), and get an absolute upper limit of numbers of bodies that can be invited, assuming each and every one attends.
Then, look again at FMIL's list and see how many can be accomodated. Let's say she has 50 people on her list, and you can only afford 25.
Go back to FMIL and tell her what I told you. You and Mom are budgeting as if each and every person will attend, and that you have space and money for only 25 of these 50. Ask her to check off the 25 that are of higher priority than the others.
In that way, you have a compromise. She gets some on her list invited, the rest get announcements and you don't live in fear of overbooking.
Aunt is right, but with one little caution. The "bad news" should be relayed to your FMIL by your FH, her son. The best advice is that you deal with your side, and he deals with his. If your Mom is paying for the wedding, then she sets the budget, and it is she who decides how many "bodies" your FMIL can invite. Of course, this division needs to be fair, no matter who is paying, for the sake of family harmony. If FMIL is afraid that people will be offended if not invited, then she can send these people a lovely note about your engagement and the fact that the wedding will be small and intimate. You can send an announcement later, but this probably will not save much money.