November 23, 2008

How much should you spend on an engagement ring?

A conversation in the comments for the post Who Gets the Ring when an Engagement is Called Off? over at Free Money Finance raised the question from a commenter asking: How much should you spend on an engagement ring? I thought that was a good question. 

I think the most important thing is to spend an amount that is within your means. Look at your income and your savings and decide on an amount to spend that won't put you in debt or stretch your budget. If you can't pay for the ring out of pocket with cash then consider saving up for a while so that you can buy it without a loan.

The rule of thumb that I've heard is that you should spend 2 months of salary for an engagement ring. Making the value proportional to your income seems like a pretty good way to decide how much to spend, but why 2 months and not 1 month? While searching on this question I found that Get Rich Slowly wrote about the topic last year: Ask the Readers: How Much Should I Spend on an Engagement Ring? JD voiced the same opinion I have that the 2 month rule is probably an invention of the marketing and sales staff of the diamond industry. Don't let this "rule" push you into spending more than you can actually afford or make you think that you have to spend 2 months salary (or more) just to meet expectations.

14k Yellow Gold Princess-Cut Solitaire Engagement Ring (.05 ct, I-J Color, I1-I2 Clarity), Size 7How much do people actually spend? This site that says that the average cost of an engagement ring in the U.S. is $3,500 to $4,000, while this Slate article says the average is $3,200 and this CNN article from 2005 said it was $2,600. So the average is somewhere between $2,600 and $4,000.

Do people spend 2 months? The average age of marriage in the U.S. is 26. Median income for people 18-24 is a little under $31,000. If you take 2 month rule for $30,000 income would result in a $5,000 cost for the ring. Yet people on average are spending $2,500 to $4,000. So it appears that people spend closer to 1 to 1.5 months salary on engagement rings on average.

What is the average carat? When I was buying my wifes ring the salesperson told us that the average diamond sold is 1 carat. But this article says that the national average is 0.38 carat. You can buy a 1 carat weight diamond engagement ring starting at $2,600 on to $2,800 on Bluenile has 0.4 carat rings for as little as $800 and on Amazon I found a .5 carat ring for $300. Keep in mind these are the cheaper rings I could find and they the diamonds have lower quality.

But again, don't let the amount that other people spend dictate how much you spend. You should figure your budget for the ring based on your financial situation.

Should you buy a big carat or a high quality stone? Figure the budget then buy the kind of ring and diamond that the future bride would value the most. Different women will value different things. So find out if the metal of the ring, the size of the diamond, color or clarity is most important and then look for a ring that gets you the most bang for the buck. So for example if the woman isn't as concerned about imperfections that are not visible to the naked eye then you could look for a diamond with some inclusions and get a larger or whiter diamond less money than if you bought a diamond with little inclusions.

14k White Gold Round Solitaire Diamond Engagement Ring (1/2 ct, H-I Color, SI2-I1 Clarity), Size 7The couple should discuss the topic in advance. This might be an awkward topic for some people. You aren't married YET. But it is a fairly important topic and I think discussing it before the purchase is the best idea. The man doesn't want to buy his future bride a ring that she doesn't like. Its not in the best interest of the couple to spend more than they can really afford. If you can't talk about finances or a topic like this with your girlfriend or boyfriend then I think this is something you need to work on if you plan to get married.

When it comes down to it, buying a ring is a personal choice. Some people will spend more or less on a ring than others. But my advice is that you should make sure you spend an amount that is within your budget and avoid going into debt to buy an engagement ring.

Photo by Somma
[edit May 27 2010 : had to fix a couple broken links]

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