How Much Should You Spend On An Engagement Ring?

Coca Cola popularized Santa Claus. Rudolph was created at Montgomery Ward. De Beers made diamonds part of the engagement process. None of these are the “ancient traditions” retailers would have you believe they are. Prior to the 1930’s, they didn’t even exist. Santa was scary, reindeer were in the forest, and no one bought a diamond to propose marriage. 

The Depression years were tough on everyone. De Beers, the world’s largest diamond cartel, controlled 60% of the market. Profits were down significantly. They needed a great idea. Enter the “engagement promotion.” They pushed out advertising that featured a woman with a diamond ring and the simple message, “Is she worth a month’s salary to you?” 

The De Beers campaign wasn’t an overnight success, but it did boost sales. Diamonds eventually became synonymous with marriage proposals. In the 1980’s, the messaging evolved. “How can you make two months salary last forever?” Ask any diamond retailer today what you should spend on an engagement ring. That’s the answer you’ll receive.

Diamond Engagement Ring

Analyzing The Two Month Rule

The United States average cost of a diamond engagement ring is $5900. Let’s start there. If you’re spending two month’s salary, that suggests that you’re making a little over $35,000 per year. No one who makes $35K can afford to drop six thousand on a ring. The only way to do that is on credit. Do you really want to enter into marriage by taking on more debt?

The national average comes from a Jewelry and Engagement Study conducted by The Knot, a prominent online wedding planner. That study also reveals that a third of Americans are spending $1000 to $3000 on the ring, with 10% spending less than $1000. That’s more reasonable for folks who are below the US median income mark, which is $44,500. 

Justin Bieber spent $500,000 on an engagement ring for Hailey Baldwin. Kim Kardashian’s twenty-carat engagement ring was valued at $4 million when it was (allegedly) stolen in 2016. If you have that kind of money, the two-month rule does not apply. Spend whatever you want. Normal people need to be more frugal. Let’s take a look at some general guidelines.   

Man with Diamond Ring About to Propose

Budgeting For A Diamond Engagement Ring

If your happiness as a couple is dependent upon a high-priced engagement ring, you might want to reconsider your proposal. Marriage is a partnership in all things, including finances. Take some time and figure out what you can afford before you pop the question. Start by making a list of all your basic expenses. Include the following:

  • Rent / Mortgage Payments
  • Savings and Investment Deposits
  • Groceries and Other Daily Food Expenses
  • Car Payments and Insurance
  • Clothing and Shopping Expenses
  • Pet and Child Care Expenses
  • Credit Card and Loan Payments

Some financial situations are more complex than others, so you may need to add more categories. Be thorough. An engagement ring is an investment, not an essential expense. Treat it that way. Your budget should be the sum of your essential expenses. Whatever is left over is known as disposable personal income (DPI). That’s where your ring money should come from.

If your DPI isn’t high enough to buy the ring outright, you may want to consider purchasing it on credit. Taking on new debt isn’t normally recommended right before getting married, but she’ll understand if you make the right engagement ring choice. That’s a critical step in this process. You must know your partner. What does she really want? That’s bigger than any price tag. 

Womans Hand with Diamond Ring

The Four C’s Of Diamond Grading

In 1947, the advertising firm NW Ayer and Son came up with a new ad concept for De Beers titled “A Diamond is Forever.” It was brilliant. The diamond engagement ring, once a luxury purchased only by the upper-class echelons of society, became a household item. By the end of the 20th Century over eighty percent of engagement rings contained diamonds.

After the “Forever” campaign, De Beers experienced a jump in diamond sales, requiring a new and more accurate pricing model. They worked with the Gemological Institute of America (GIA) to create a grading system to rate their diamonds. That system, called the “4 C’s,” was adopted in 1953. You should be familiar with it before you start ring shopping. The four C’s are:

  • Color: The color of a diamond is rated from D (colorless) to Z (Yellowish or brown). The clearer the diamond, the higher the value. Gemologists also look at whether a stone will emit visible light when subjected to ultraviolet light. 
  • Clarity: The highest rating in this category is FL (Flawless) and the lowest I3 (Flaws Included and visible to the naked eye). What you typically want in this category is something in the VS range (slightly visible). That’s where there are internal flaws that are not visible to the naked eye. You’ll find the best deals in the VS ratings.
  • Cut: The cut of a diamond is what makes it shine when light hits it. An excellent (E) cut will stand out when your girl walks into the room. Poor (P) cuts appear dark and reflect light poorly. Once again, the price tag will be affected by quality in this area. 
  • Carat Weight: This is the most common “C” that buyers pay attention to when they buy a diamond engagement ring, particularly in America. Bigger is better, right? Not necessarily. Smaller flawless diamonds are worth more than larger stones with imperfections. Keep that in mind when you shop for your engagement ring. 
Silver Diamond Ring in Rose

The quality of your stone can be enhanced by the setting it is placed in. Color and clarity are personal preferences, so you don’t necessarily have to spend big to get the ring your lady wants. A solitaire setting can make a lower-priced diamond appear more expensive. A marquise setting will hide visible internal flaws. Be sure to ask about both options.

Final Considerations: Spending On An Engagement Ring

Another cost-cutting route is to shop for antique diamond rings at estate sales or thrift shops. You can also find these online, but I wouldn’t recommend it. Diamonds are forever. You don’t want to get stuck with a fake one by buying sight unseen. Live shopping for an engagement ring is part of the process. Do your homework and put some effort into it. She’s worth it. 

Once you’re engaged there’s a few other costs that may come up, such as a wedding ring. When you get to that point, you may be interested in our guide on how much to spend on a wedding ring. For now, go get that engagement ring and start planning your proposal!

Kevin Flynn

Kevin D. Flynn is a former financial professional with over ten years of experience in the financial industry. He has consulted for financial advisors, online sales reps, and fintech startups. Kevin holds a degree in accounting and finance and continues to expand his knowledge by attending classes and seminars. He commits several hours a day to market research so he can stay on top of the latest news and trends in the financial industry. Kevin's experience in the industry has fueled his successful writing career, which he now focuses on full-time. He currently resides in Leominster, Massachusetts with his wife Evelyn, two cats, and nine wonderful grandchildren.

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