Top 3 Rules for Engagement Ring Spending

Take 'em or leave 'em -- but here they are:

The popular 'rules' for how to save for the ring of her dreams

1. The 'Month's Salary' Rule

The most popular 'rule' that you've probably already heard is the ' three months' salary rule'.  This rule dictates that you should spend an amount equal to the gross income you see across three months' of work.  This rule actually has origins in a marketing campaign by diamond marketers to increase sales after World War II.  This rule actually began as a 'one months' salary goal, but quickly grew into the modern 'three months' rule we know today.  For many, this is an achievable goal and they appreciate the financial weight of such a commitment for such a meaningful piece meant to last a lifetime.  However, others find this rule unrealistic, particularly because it ignores modern debt load, which can be significant for today's young people who are often fresh out of school and often have soaring educational debt.  Many in this age group are also simultaneously saddling themselves with additional debt in various forms (such as home and vehicle purchases). If this goal is attractive to you, and she's worth it -- we recommend saving across as many months as it takes to reach your goal budget as opposed to financing.  If you simply must get engaged quickly and feel the need to seek financing, do so smartly by shopping around and knowing the impact of interest rates.    

2. The Engagement Ring Calculator

Everyone loves a calculator that breaks down the financial stuff that otherwise hurts our brains, am I right?   Like everything else financial -- engagement ring calculators are out there.  Engagement ring calculators attempt to help you decide how much to spend based on information gathered about your individual income, lifestyle and debt-to-asset ratio.
These calculators can be helpful with budgeting, and we're a fan of smart spending -- so use one if you'd like to get a 'ballpark' for what you can comfortably spend -- but perhaps do a few and average the results.  Since the factors will all vary, and you never know if you're using a legitimate one -- doing several will help you see if any results are way out of left field.  Ideally, all of the results should land relatively close to each other.  

3.  The Logical Approach (A Budget-Conscious Value Assessment)

A realistic approach that we like is to develop a ballpark budget based on your unique financial situation, and then develop a decision-making path that reflects your (and her) personal values. It helps to rank your priorities or her expectations:  Is the most important factor that you have a high-quality diamond? Does it need to be an earth mined diamond, or would she be happy with a lab grown diamond that's a bit more economical (or another stone alltogether)? Is size a priority, and if so, are you willing to sacrifice a bit on quality in order to go larger in carat weight?  Does she prefer a simple band or solitaire ring, or will you be spending more money on a complicated or diamond encrusted band? Is it important that your ring be unique and require specialized custom fabrication or personal details, or are you ok with a ring that thousands of other people have?  Will she appreciate a thoughtful ring with personal touches that speaks to her individuality more than a large blingy diamond?  The answers to these questions will help you solidify your ring buying goals and 'backtrack' your budget,  helping determine what kind and size of stone you'll be looking to purchase as well as what you can achieve within your overall budget.  Additionally, they may notify you to any unrealistic expectations you might have, and could cause you to reevaluate your initial budget if you find there are large discrepancies between what you (or she) wants and what your budget allows.