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How Much Are You Going to Spend on an Engagement Ring?

When I was 22 years old and in law school, I had amassed the then astonishing sum of $10,000, earned in a variety of jobs from babysitter to waitress and then the more lucrative position as summer associate at a New York City law firm. My grandmother (Grandma Sylvia) told me she was thinking about selling her 2-plus carat, stunning cut and clarity diamond ring, as her fingers were now aged and crooked, and she was not wearing it any longer.  She had owned lots of jewelry and had bought and sold pieces throughout her life and I had always admired the beautiful stones that dazzled on her fingers, arms and neck.

Before she took the ring to market, she offered it me, for the discounted price of $10,000 (retail $12,000).  I was in law school and was dating a guy, but was nowhere near or even thinking about getting engaged.  Yet here I was being offered the opportunity to purchase this exquisite ring for a steal!  I jumped at it, and agreed without a second thought.

Years later when I met my now ex-husband, he got me and the diamond.  Can you imagine?  And since we almost immediately (and foolishly) shared all of the money, he didn’t pay one cent and I joyfully became engaged in and then happily wore my hard-earned ring for more than two decades (never disclosing the true history to the many who oohed and aahed over it).

Back to now.  In meeting with my favorite group – Young Professionals – and after explaining the virtues of saving, the demons of credit card debt, and a few credit report tips, I asked the room if anyone had questions.  One brave young lawyer said he was thinking about becoming engaged and asked how I would feel about his purchasing a $15,000 engagement ring.  Before commenting, and knowing nothing of his finances, I asked for opinions around the room.  The conversation was fully charged with loud and rambunctious opinions about how much one should spend on an engagement ring.  Two or three months’ of take-home salary was the “calculation” model a few in the group pointed to. Another lawyer said he had spent six months’ salary on his wife’s ring (and now thinks it should have been a lease option, as the marriage is ending).  Another commented that we should separate the responses by those who are still or never were married, from the answers of the jaded divorced.

When the conversation turned back to me, I suggested a different solution.  How about if you bought her a ring, not a diamond, but another really beautiful ring, and took the remaining $13,000 or $14,000 and jointly invested it in your future lives together?  That was met with horror and shock by most of the group, with refrains of “you don’t know my girlfriend” and “there is an expectation for a ring” and “that is no way to start a marriage.”  Of course this brings me back to my favorite refrain: “Don’t Be The Average American.”

If your goal is financial fitness, here’s the question you should be asking yourself.  Is it really benefiting your future together to have your fiancé (and then wife) walking around with $15,000 on her finger?  Why?  If you took that money and invested it in your future lives together – and watched it grow – wouldn’t that really be the clever way to start building your new family?  Diamond now or more secure financial future?

You can only earn so much money in the hours you physically labor and toil.  The real key to building wealth is the money you make in your sleep.  You can’t be earning any future benefits from goods purchased and consumed.  Perhaps a diamond will keep its value better than other consumer purchases, but historically speaking, it is never going to compound in value.

As the group regaled each other with engagement and money stories, I had the audacity to suggest buying a cubic zirconia, with full disclosure to the fiancé.  Who is going to know if it is a “real” diamond?  Is anyone going to actually question you about it?  Who are you trying to impress?  And why?

Grandma Sylvia’s ring now sits in the dark safe, earning nothing and meaning nothing.  Had I invested that $10,000 in 1988, now 28 years later, at a conservative 6 percent compounding (tax-free) interest rate, I would now have more than $51,000.  If it earned interest at 10 percent, I would have $144,000!  Did I enjoy wearing my grandma’s ring?  Yes, I did.  Would I rather have that money in the bank now?  Yeah, I would!

Can you think about this before you insist that you know your fiancé must have a diamond ring? Can you talk to each other logically about your personal goals for the future and how you will realistically, using math and compound interest calculators, achieve those goals?  Can you see that wearing a diamond ring is not going to produce increased value or furnish you the ultimate happiness that security and planning together for a lifetime of success will provide?

Before you spend two or three or more months’ worth of your hard-earned salary on something that the Joneses have, or you think the Joneses want you to have, please consider your options and talk to your future spouse.  Once she has the facts, she may surprise you.

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About Michelle Gershfeld

I’m a debt settlement and bankruptcy attorney who negotiates resolutions between clients and their creditors. I am also a real estate attorney involved in both sides of purchasing and selling distressed real property. I am passionate about teaching people about money and helping individuals of all ages achieve financial independence and success in a "no…

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