Investing the Right Amount in a Diamond Engagement Ring

Have you come to a point in your life when you are ready to settle down and are planning to ask the woman of your dreams to spend the rest of her life with you? Then perhaps, your mind is probably full of questions about engagement rings, wedding rings, honeymoons, and all the other concerns that engaged couples have to contend with. First things first: your primary, self-assigned undertaking would be to settle the matter of an engagement ring, and with this comes the question of how much you should invest in this important item.

The Two Month’s Salary Rule

If you've read up on this topic, you will probably have heard experts say you should budget two month's salary for an engagement ring. Some even say that due to the rising prices of precious metals and diamonds, you should now set aside three month’s salary for such a purchase. Along with these statements, you might have read that in time, the money you have invested in this ring will be worth it because the value of this piece of jewelry will appreciate.

How viable is this old rule? Here's the truth: very few people will have 2 to 3 month's salary lying around in cold cash today. Studies say the average 30-year-old American only saves about $400 per year, and owes more than a total of $5000. Moreover, one out of every five homes has to reckon with this thing called college loans. All these data certainly call for a review of the old 2-month's salary rule.

The Truth about Engagement Rings and Wedding Rings as Investments

Although the tradition of giving an engagement ring has been around for ages, many of the details surrounding this piece of jewelry have changed over the years. There are certain things you need to consider before you actually get down to the business of choosing a ring.

First of all, it is important to remember that an investment is supposed to be an item or an asset acquired for the purpose of creating wealth, providing income, or generating profit when sold at a higher price because of an increment in value over time. One question that couples have to answer honestly is if this holds true for the engagement ring, which serves as their first symbol of commitment. Chances are, they just want something that will be more valuable in the future; they do not intend to sell it for gain.

Most of the so-called experts who give the advice about spending more than 16% to 25% of your annual income on an engagement ring are not bankers or financial consultants. Instead, many of them are wedding consultants or people who are directly or indirectly connected to the jewelry business. One of the questions you need to ask when weighing this advice is how much of it comes from financial savvy and how much is a product of skillful marketing from diamond distributors.

The financial situation of most soon-to-be-engaged couples is drastically different from how things were thirty years ago. Apart from student loans, young people today have to contend with a tighter job market where wages have not kept up with the rising cost of living. The global recession has made it imperative for people to adjust spending habits.

You will often hear advice telling you to look at an expensive ring as an investment that will appreciate in value with the years. While it is true that a $5000 dollar diamond ring could very well appreciate by 55% in 10 years, it is also true that this is one piece of personal property people part with only under the direst circumstances. Viewed as a precious item with a sentimental significance surpassing its actual market value, the engagement ring is not a liquid investment. Like a wedding ring, it is considered a very personal item, and it is rarely, if ever, converted into cash until at least a generation has passed.

Engagement rings and diamond rings are sometimes a challenge to resell because trends and fashions in jewellery change. People’s tastes are impacted by these changes, and what is stylish today may be plain outdated in a few years. Furthermore, it takes a while before a ring can lay claim to additional value as a vintage ring or an antique.

Deciding on a Budget

All these insights about engagement rings can contribute to a more practical decision on how much to spend on an engagement ring. This decision can be made with open eyes and the knowledge that this piece of jewelry is not at all the typical investment that will yield profit for the people who bought it. Here’s how that decision can be made with both love and good sense.

Decide how much you can really afford. Just get down to brass tacks and figure out how much savings you have, how much you owe, how much money each month you need for regular living expenses, and how much you can set aside every month for a custom made engagement ring. Come up with a figure you can live with and work around this figure. If you are close enough to a person to ask her to marry you, chances are the depth of your pocket (or lack thereof) won’t be a surprise to her. Once your budget set, shop around for the best ring you can have at the price you can really afford.

Try discussing the cost of the ring with your loved one.Once you and your loved one say, “I do”, in substance everything that is yours becomes hers as well – everything – including what you owe for that engagement ring. While most women want a sparkler, not many would relish the thought of having a rock on their finger if it meant going into debt, wiping out a fiancé’s savings, and creating financial problems that would impact on their finances as a couple. Most people have been taught that talking about the cost of gifts you receive is rude, but in this case, such a discussion could make a big difference in how healthy your finances will be as a couple. Just learn how to discuss this important concern with love, tact, and honesty. What you learn from making this decision will help you when you move on to other things, such as buying your first house.

Be wary about going debt. Many people below thirty (or even older) still have college loans and other debts to think about. These debts won’t go away until they are paid for. Banking on increased earnings in the future is risky, as many have learned in the past decade when they bought real estate with the assumption that they would have better take home pay each year. If you must buy a ring on credit, carefully project how long you will give yourself to pay it off, and when you make your calculations, consider all the other payments you need to make. If you can make a zero interest purchase on credit, that would be a real treat! Try to see if you can pay for the ring within a year at minimal interest, or look for a store that will give you the ring you want on easy terms. Just remember that the less debt you saddle your marriage with, the better it will be for everyone.

Do your homework and learn all about diamonds and diamond rings. Knowing enough about diamonds and diamond rings will help you choose a ring that is worth every penny you spend on it. Learn about the four Cs of diamonds, develop a feel for what the experts mean, and arm yourself with enough knowledge so you can bargain.

How to Get the Best Ring for your Money

If you know what your budget is, stick to your guns and don’t let anyone tell you how much you should spend for engagement ring. You and your fiancée must decide this matter. There are ways, though, for you to get the best ring possible with your budget.

Find out what style your loved one prefers and begin to look around for a ring you think she might be happy with. The key to finding a good buy is to be thorough and patient in your search.

If possible, plan and set aside some money for this ring months before you pop the big question. Having a substantial amount with which to make a sizeable down payment will make it possible for you to expand your choices. With the right amount up front, you don’t have to exclude the possibility of getting a princess cut diamond engagement ring, or a custom made engagement ring, or any other type your fiancé will be happy with.

When you find the ring you think she will want to wear for the rest of her life, ask the store’s policy on lay-away plans and house credit. Look for the best deal that can cover your purchase.

You can certainly get a ring that would be considered a wise investment in the sense that it will become more valuable as the years go by. Even if you don’t intend to see that ring anywhere else other than your fiancée’s finger, it will always be heartwarming to know that you have given her a ring that means so much more because of the time and effort you put into getting the best for her.