You can trash the “2 months’ salary rule” for budgeting for a diamond engagement ring. Read this to learn how much you should REALLY spend on an engagement ring.
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A system for deciding how much to spend on an engagement ring
Ready to pop the big question this year? No doubt one of the first questions that pop into your head about popping the question is:
“How much should I spend on the engagement ring?”
This question seems complex, but I’ll walk you through a framework for coming to the right decision for you.
Three things this simple system for budgeting involves:
- Her expectations and needs.
- Your expectations and needs.
- Your finances.
This system for deciding how much to spend on an engagement ring involves balancing all three of those factors.
Lesson Objective: You will know the basic steps to follow to figure out exactly how much you should spend on an engagement ring
Balancing her needs, your needs, and your finances
Your goal is to find a balance among those three things: her expectations and needs, your needs, and your finances.
Just as every diamond is unique, so is every person.
And every person’s financial situation.
I’ll show you how to find the solution to the “how to budget” puzzle — a solution that fits your situation perfectly.
Let’s begin.
First, throw out the old “2 months’ salary” rule
If you have no trouble putting aside societal rules that don’t make sense, then feel free to skip this section.
But if you have a nagging doubt, if you wonder “Is it ok to forget about the 2 months’ salary rule?”, then stick with me here.
I’ll show you how you can drop that unfair, arbitrary expectation.
Reason #1 why you can skip the 2 months’ salary rule: It was invented by a marketer.
This doesn’t make it automatically bad.
Mother’s Day was invented by marketers, but it’s awesome and needed to be done. We still buy Mother’s Day gifts. Ultimately every cultural obligation was invented by a “marketer” of one kind or another.
But this 2 months’ salary rule is different.
- It doesn’t exactly fit.
- It’s a huge generalization.
- It seems more than a little arbitrary.
- It seems to place more importance on money spent than on the thought and consideration behind the proposal and engagement ring.
Reason #2 why you can skip the 2 months’ salary rule: Your situation is unique.
Maybe you can spend a lot more than 2 months’ salary. (Likely not, but some of you reading this can and will.)
Maybe you’re not even paid by salary.
Maybe you live off of investments, and the income is up and down all the time, and not a stable rate that you could calculate “2 months’ worth” of.
Maybe you can’t spend more than two weeks’ of salary, because you have obligations to children. Or you have obligations to an aged parent. Or you’re in graduate school.
Maybe recent financial disruptions have changed everything for you.
You can still buy an engagement ring.
Reason #3 why you can skip the 2 months’ salary rule: Following rules blindly isn’t responsible or effective.
Responsibility means using reason and emotional intelligence to choose the right course of action.
But when you blindly follow a rule, you’ve given your power away to someone else. They are deciding. That doesn’t make a person feel very good.
Choosing to spend 2 months of your salary, just because you read that “it’s a rule” doesn’t even make your girl feel very good.
So it’s not responsible, and it’s not effective.
What is effective? I’ll show you in this article.
It starts with consider your lady’s expectations and needs
When you’re deciding on a budget, it makes sense to start with your lady’s expectations and needs.
Why do you start there? Because she’s the one you love. She’s the one who will wear this engagement ring for the rest of her life. And there’s one more reason: it’s the one factor out of the three over which you have the least control.
- Her expectations and needs — you can’t change and shouldn’t want to try
- Your expectations and needs — you have some choice, but ultimately you are who you are
- Your financial situation — not easy to change but it’s the most changeable of the three factors
You can change your own expectations and needs. You can change your finances. But you can’t (and since you’re wise you won’t try to) change your girl’s expectations and needs. She is who she is, and you love her for that.
So we begin there.
What are her expectations and needs?
What are her expectations and needs?
It’s a wonderful opportunity for you, as a man, to meet so many of her expectations, to fulfill needs, to make dreams come true, with just one piece of jewelry.
But first you have to know how she thinks about an engagement ring.
You can find out by knowing her, and by talking with her. Or with her friends. Or her family.
But whatever more personal expectations you discover, more than likely some of the following will apply.
- The engagement ring you’re budgeting for is a symbol of your love.
- It’s a symbol of your commitment to her.
- It’s a demonstration of your ability as a man to be disciplined, to save, to meet a financial goal. (This is all about family.)
- It’s a demonstration of your emotional ability to sacrifice. Did you spend well on this symbol, or did you continue to fund a golf hobby, or save for a new car, etc.)
Not to get too serious or moralize. But marriage is serious financial and personal undertaking. It requires certain strengths. These are any future wife’s natural and reasonable expectations.
(You also have similar natural and reasonable expectations of her, of course.)
Look, if she didn’t have such expectations, that would be a red flag.
There are a few more emotional expectations and needs you can meet:
- She also expects and needs to be proud of her engagement ring, around her family and friends.
- She expects to be proud of you when she looks at it. (And she’ll look at her hand an infinite number of times over the next few decades.)
- She needs an engagement ring that goes with her style of dress.
- She needs an engagement ring that fits with her lifestyle. A woman doesn’t want to remove it for everyday activities.
What are some expectations she doesn’t have?
We’ve looked at reasonable, usual, natural expectations and needs that she probably has.
Now what about some expectations that she doesn’t have?
Most people are reasonable and fair. Very likely these do not apply as you’re budgeting for an engagement ring:
- She doesn’t expect you to hurt yourself financially. So don’t do that.
- She doesn’t expect you to go into serious debt for it. So don’t do that either.
At least, if she’s a good marriage candidate, she doesn’t expect these things.
She knows you. She knows your situation. She cares more about the proposal than the expense. She cares more about your skill in thoughtfully choosing a ring than about how much it cost.
What are your expectations and needs?
Only you can see what your specific expectations and needs are. Maybe they include the following, though:
- You need to be financially responsible.
- You need to avoid taking on too much debt when you buy an engagement ring.
- You need to select an engagement ring well (and you can).
- You need to demonstrate that you have those qualities she needs.
- You expect and need to avoid sabotaging your future — for example, you shouldn’t prioritize a large budget for an engagement ring over finishing law school, etc.
We’ve covered these two so far:
- Her expectations and needs
- Your expectations and needs
Now let’s look at your financial situation. It’s the third and final factor which must be balanced as you set a budget for an engagement ring.
Of course there’s no set answers. But there is a sensible way to budget for anything, including an engagement ring.
Your financial situation and an engagement ring
There are five factors of your financial situation which will affect your budget for this purchase.
- Your income — This means what you are making right now, in take home pay, per month.
- Your expenses — This means all expenses, including housing, car, all bills, all debts that you’re paying, student loans, etc. All of it.
- Your savings — How much have you saved up in a non retirement account? (Retirement should absolutely never be used for an engagement ring.) You should also not tap into your emergencies fund.
- Your debt — This should be seen as real money that you will need to come up with sooner or later. Count it against your savings.
- Your potential income — This is the most promising and most flexible of all. How can you make more money at your current job? What side hustles could you use at nights or on weekends to make the money for an engagement ring? Or to pay off in the next year or so the amount you might borrow today for the engagement ring?
Here’s how you decide on a specific amount
Here’s how you decide on a specific amount to spend on a diamond engagement ring.
You take into account all of these factors. Write all of the numbers from the last section on a piece of paper. Or on a screen.
This keeps these all-important numbers in front of you. And it frees your mind for concentrating on answering the following questions.
Can you pay cash for it?
If yes, problem solved. If no, go to the next question.
How much monthly disposable income can you free up?
For example, say you have $100 in extra income left at the end of every month. That’s $100 you can spend on either a) saving for an engagement ring or b) paying off the debt of an engagement ring.
(If you ultimately consider borrowing the money to buy the engagement ring, make sure that you get a good interest rate. Use this loan repayment calculator to make sure you know exactly what it will ultimately cost you.)
Can you cancel your cable subscription? That’s another $80 or so, possibly more.
Write this figure down as MONTHLY cash you can use to save up for an engagement ring.
What can you sell in order to raise more cash for the engagement ring?
Maybe an old computer? An old guitar you don’t use? Go through all your stuff and make a list. Then make a worst-case estimate of how much you’ll get for it, and how fast you can sell it. Then cut 20% off of that. (It’s easy to overestimate how much you’ll get for your things, even when you imagine it will be the worst case scenario.)
Write this figure down as potential cash you can use for the engagement ring.
How much extra money can you make at work, or at a side hustle?
Estimate that. Then make a plan and take action. Do the side hustle for a month. How much are you making? Don’t project forward some rosy estimate. Use the amount of money you’re actually making at the side hustle.
Write this figure down as MONTHLY cash you can use toward the engagement ring budget.
Now you have some actual facts and figures down. There’s no science to this, but that’s as close as you will get. And it’s pretty accurate.
Based on your financial situation, ask these two questions
Using the figures you wrote down, you can estimate how much you should reasonably spend on an engagement ring.
- How much could you reasonably expect to pay in cash?
- How much debt should you reasonably take on to make up the difference (if any)?
So how much should you expect to spend on an engagement ring?
- Most people in the United States expect to spend between $1,500 and $5,000 on an engagement ring, according to surveys from The Knot, publisher of an All-in-One Wedding Planning App.
- The actual average cost for an engagement ring? That’s right at $6,500, according to surveys from The Knot.
Ultimately, you decide what you will spend. But those are people’s expectations going in, and that is actual average cost of an engagement ring once all is said and done.
The #1 way to stretch your budget on an engagement ring
The number one way to stretch your budget on an engagement ring is no surprise.
Or maybe it is a surprise, to some.
It’s to shop online.
Here’s why your budget goes further online.
- Retailers such as James Allen, Blue Nile or Brilliance are every bit as trustworthy as any local jewelry store.
- Online jewelers offer prices that are up to 50% less than local brick and mortar stores.
- You can see dozens of diamonds without waiting on a salesperson to take each one out of the cabinet.
- You can compare prices across retailers instantly.
- You can compare prices of various Clarity, Color, Cut, and Carat weight instantly. You can see how much going down one grade of Clarity would really cost.
- You can see high quality images of diamonds and rings, at powerful magnification.
- The costs of online retailers are lower. They don’t have fancy showrooms to maintain, or fancy rent. They can pass those lower prices on to you.
Congratulations. You’ve come up with your budget for an engagement ring.
If you’ve followed along in this lesson, you’ve actually budgeted for your purchase of an engagement ring.
Write that budget figure down. Commit to it. Feel good about it.
A budget is useless without committing to it. So I’m glad that you are committing to it.
Maybe you just read along for the first time. Of course. I get that.
So save the link. Send it off in an email to yourself. When you have the time tonight or this weekend, go through it again and actually do the fast and simple exercises.
When you’ve budgeted for an engagement ring, you can know how much you should spend. You can know how much you can afford to spend. You’ll know that you’re free of that arbitrary 2 months’ salary rule.
How much do you spend on an engagement ring? Now you know.
Want to see just how awesome an engagement ring you can get on that budget you just decided on?
Go window shopping instantly. Three stores for you:
