HOW MUCH TO SPEND ON AN ENGAGEMENT RING?

It’s a conversation that permeates many a millennial’s conversations; how much should I spend on an engagement ring? Spending money on something important is daunting. It doesn’t just apply to engagements, think a friend’s 40th birthday present or your child’s first car. It’s a conundrum you’ll face throughout life.

Four weeks of careful planning ended on Friday with an impromptu sunrise walk in Tring Park, where I proposed, and Hannah said yes. Whilst consciously feeling calm about the whole situation, looking back the reality has been restless nights thinking about money, diamonds, ring designs and the right words to say … Sunday was the first time I slept soundly for a while.

I write this blog to outline the rules for buying an engagement ring or any other big gift. At the end I’ll reveal how much I spent on an engagement ring.

Rule 1: It’s not all about you

When buying something for someone else, it’s not about you. The person you’re buying for should be at the front of your mind throughout the buying process.

You must think about your partner’s preferences. I do not care for wearing precious metals, jewels, and design. Hannah does.

I wanted Hannah to wear the ring regularly and therefore it had to meet her style requirements. I sought her opinion on rings in shop windows and even got her to try some in a small jeweller on a casual lunchtime walk. This helped me get an understanding of what she liked and didn’t.

Rule 2: It’s a bit about you

What you buy should also encapsulate what’s important to you, a bit. Number one I wanted Hannah to be happy. Number two I wanted to be happy.

After watching ‘Nothing lasts forever’ on Netflix, it was clear I could meet Hannah’s needs for style with a lab grown diamond. And I was tempted. This was the cause of at least 4 restless nights.

However, one of the things that was important to me, was that the ring retained some value and could be passed onto future generations if we have children. I felt a natural diamond would be more likely to retain its value over the long-term, so I went for that option.

Don’t get me wrong, investing in a diversified portfolio of equities will probably provide better investment returns over the long-term but I couldn’t work out how to translate that to a proposal …

Rule 3: Crunch the numbers

The amount of your income should NOT determine the amount you spend on an engagement ring! The popular ‘spend three times monthly income’ is a total myth.

The amount you spend on an engagement ring is personal to you. Here are a few factors that I feel are more relevant than your earned income to how much you should spend:

  • Monthly savings amount. If you’re budgeting correctly, you should be putting away some cash savings each month. By letting this build up for 3-6 months shows that you’ve thought about the proposal and it’s within your current budget without making too many changes to your lifestyle.
  • Personal balance sheet. Do you know your financial net worth? Calculate the value of your appreciating assets minus your debts and you’ll know your personal balance. If you’re spending over 10% of your personal balance on a shiny thing, that may not be sensible. I kept my expenditure under 5%. It still felt a lot!
  • What did you spend on your last holiday? Expenditure should be relative. Holidays are important for most people and a good comparison. I’m not sure what the correct factor is, but 1-2 times the spend on your last proper holiday feels like a reasonable place to start for an engagement ring.

Rule 4: Avoid buyers regret

Once you’ve got an idea how much you want to spend, don’t go over it. As a friend of mine recently found, if you know the size of your other half’s ring, don’t get persuaded into buying a smaller one by the jeweller. Once you’ve decided on what you’re getting, go for it.

The engagement ring is not the most important thing about getting engaged. There’s no need to get too stressed about it. Especially not after the event.

Summary

Nothing says “I love you” like a lifetime of crippling debt… said no one ever! When spending on an engagement ring or any other gift, the spend should be within your financial means.

If you’ve read this far, you probably deserve to see the statistics around how much I spent on Hannah’s engagement ring (income numbers are from before I went self-employed). If you’re worried Hannah might work out what I spent, you don’t know how bad Hannah is with numbers!

Benchmark Rating
Monthly net (after tax) income 1.4 times
Monthly savings amount 8 times
Personal balance sheet <5%
Spend on last holiday 1.5 times

 

Remember, the most precious thing you can give your partner is your love, attention, and commitment. What do you think is a sensible amount to spend on an engagement ring? Let me know your thoughts.