Engagement Ring Financing: How Much Ring Can You Afford?
Thinking about financing your engagement ring? It can be a smart move in some cases. Learn about your financing options and things to watch out for.
How to Afford an Engagement Ring
An engagement ring is often the first major purchase of your new life together. It's a large financial decision that shouldn't be taken lightly.
The first step in affording an engagement ring is to set a budget. This is a very personal choice and shouldn't be influenced by things like the "2 months rule" or the national average. Spending 2 months' salary on the ring is quite unrealistic for most modern couples. We say that a more realistic approach is to balance her expectations and your financial ability.
Still, you may find that you need some help. Financing a ring is not necessarily a bad idea. For one, you won't have to wait to propose to the girl of your dreams. And it could give you a more manageable payment strategy.
But you have to be very smart about it. Read on.
Our suggestions, in order, are:
Calculate How Much You Can Afford
First, be honest with yourself and think about what you can afford. This includes:
- Your income: How much do you make a month?
- Your expenses: This includes necessities such as rent, bills, and food. But also any loans are you currently paying, such as student loans and car payments.
- Your savings: Yes, wanting to marry someone means some sacrifice on your part. If you cut out the extraneous purchases for yourself, how much can you realistically save each month?
- Your future goals: Are you saving up for a house? Don't delay that goal by buying a ring that you can't afford.
Ideally, you shouldn't go into debt or sacrifice future life goals for the engagement ring. The best is to save until you can afford to pay the whole thing with cash. But we understand that many couples may not be able to do that.
So let's go over some financing options next.
Financing an Engagement Ring
Here are some options for financing an engagement ring:
- Get a loan from family or friends. Many engagement ring buyers first turn to family and friends for financial help. A family loan can be especially helpful if you have bad credit and would likely get a high interest rate through a bank or jewelry store.
Be careful though, as money issues with family can be dicey. So it's best to make the agreement as official as possible. Agree to repayment terms, and actually make a written and signed contract.
- Finance through the jewelry store. Most jewelry stores offer in-store financing options. Some even have 0% interest at the beginning if customers are willing to open a store credit card.
If you go this route, be sure to get all the information from the beginning. If you don't finish repaying by a certain date, the interest rate could go very high - often more than 25%. Opening a new credit card could also affect your credit score. Especially if the credit limit isn't much higher than the total cost of the ring, as it lowers your debt usage ratio.
- Open up a new credit card with 0% APR promotion. This is our favorite option. In fact, it's smart to do this even if you do have the cash. Many credit cards offer a long 0% APR promotional period. Just make sure you have a plan to pay off the ring before that period ends, or you'll be hit with a high interest rate.
And on top of that, many credit cards will also give you rewards for the purchase. Since an engagement ring is such a huge purchase, it's nice to get a bit of cash back. However, you will generally need good credit to qualify for these rewards cards.
- Take out a personal loan. This is another option if you want to avoid credit cards. You'll have to pay interest on a loan, but the monthly payment is fixed. This means the terms and rate of your loan can't change if you don't pay it off during the promotional time.
This option may not be great for someone with bad credit. The worse your credit is, the higher the interest rate you will pay. In that case, you may be better off with a low interest credit card.
It is also becoming increasingly common for the couple to split the cost of the ring. This helps lessen the financial burden on just one person. Or you can consider starting with a less expensive, simple ring. You can always upgrade it later in marriage when you're more financially stable.
The most important is that you're on the same page. Have a candid talk about finances and expectations. You want to start your new life together on the right foot.
No matter what engagement ring financing option you choose, be sure to do your research and read all the fine print before you sign. Otherwise that sparkly diamond could become a major financial headache.
What If You Have Bad Credit?
The good news is that having bad credit shouldn't get in the way of purchasing an engagement ring. But it might make the process a little longer.
Many jewelers offer special financing plans for customers with bad credit. But those plans often involve a higher interest rate and less repayment flexibility. Other jewelers offer layaway programs with a 20%-30% down payment that allows you to start making payments before you pick up the ring.
If you have bad credit or no credit, some jewelry stores or financers allow someone with good credit (such as a parent) to co-sign on the loan. But this also puts the burden on the co-signer if you aren't able to make the payments.
Avoid Overspending on an Engagement Ring
Blowing two or three months' salary on an engagement ring is a romantic gesture, but is it really necessary? We always advocate for not spending more than necessary. If you need any more convincing, here are 10 interesting, research-backed reasons why a cheaper ring may be the way to go.
- You may be less likely to split up. You may get a "yes" when you dazzle your bride-to-be with expensive bling. But it doesn't seal the deal on a happy marriage. In fact, shelling out big bucks for a ring could actually be the kiss of death for your union.
Researchers at Emory University surveyed more than 3,000 people who have walked down the aisle to see how the size of the ring affected the odds of getting divorced. They found that men who spent $2,000 - $4,000 on an engagement ring were 1.3 times more likely to get divorced than grooms who spent $500 - $2,000.
If you've got your heart set on a happily-ever-after, spending less on a ring may be the way to go.
- You don't need to spend more to say "I love you". A lot of men think they need to drop thousands on an engagement ring to demonstrate their love. But in fact, most women agree that a more expensive ring isn't proof of their future spouse's love.
Just 23% of women believe that the more a man spends, the deeper his feelings are, according to a study commissioned by Taylor & Co. The rest recognized that you can't put a price tag on true love.
- You're better off investing your money elsewhere. When you buy a diamond ring, you're also making an investment of sorts. You're investing in the other person (and, as we've said, a more expensive ring doesn't necessarily translate to a happier marriage). But don't think that the ring itself will provide a financial return.
An investigative report from the Wall Street Journal tracked the price and value of diamonds over a three-decade period. The report found that it's true that diamond prices have been on a steady rise. But stones lose as much as 50% of their purchasing power over time because of inflation.
Sinking your extra cash into other investments may yield the bigger payoff in the long run.
- Diamonds aren't really forever. Yes, diamonds are one of Mother Nature's hardest materials. But that doesn't mean that expensive stone is going to stand the test of time. In fact, scientists have proven that diamonds begin to break down once they've been exposed to high levels of UV light. The change may not be noticeable, but your splurge does depreciate in value over time.
- Your bride-to-be may care more about being asked than the cost. It's true that some women expect nothing less than a fancy schmancy engagement ring. But most women don't put much financial pressure on their men. According to a study from DDB Worldwide, 73% of women said they'd prefer that their sweetheart propose with a cheaper ring (or no ring at all) and wait until they can afford something more expensive.
Seems like most women value the act of commitment more than the idea of an expensive ring!
- A more expensive ring can push you over budget. Getting married is an expensive affair, and the engagement ring is just part of it. According to The Knot, the average wedding came with a total price tag of $31,213 in 2014. And that's not including the honeymoon! That same study showed that a whopping 45% of couples overshot their wedding budget.
If the wedding itself or the honeymoon is more important to you, save your money for that. Spend less on the ring so you have more for what you want.Did you know? Just like with engagement rings, the Emory study found that couples who have cheaper weddings have happier marriages. Couples who spent over $20,000 on the wedding were 3.5 times more likely to get divorced than couples who spent $5,000 - $10,000. And the best success rate were couples who spent less than $1,000. This could be because a less expensive wedding means less financial burdens in the marriage. Or that couples on the same page about spending less are more compatible.
- A bigger price tag doesn't equal a better ring. Diamonds are by far the most popular choice for engagement rings. They're also among the most expensive. A diamond can cost anywhere from a few hundred to tens of thousands of dollars. But there's often a big gap between the stone's price tag and its actual value.
A study from the University of Manchester looked at the diamond mining industry in Africa and how stones are priced once they hit the open market. The researchers found that once the diamonds are snatched up by jewelers, they're often sold at a serious markup. The lesson? You don't always get what you pay for.
- Your future spouse might prefer a home to a ring. First comes love, then comes marriage, then comes... a house for many couples. Many newlyweds are in a position to make the leap into home ownership. But often the biggest obstacle is coming up with the down payment. It's especially tough if you've spent all your savings on a big wedding.
Surprisingly, many brides say they would take a cheaper ring if it meant buying a home would be easier. A survey from ERA Real Estate found that nearly 50% of women would rather spend the money on a down payment instead.
- A romantic proposal is more memorable than a lavish ring. While the ring is certainly a key part of a marriage proposal, it may not be the most important part. According to David's Bridal, 56% of women say they'd take a fairytale proposal over a picture-perfect engagement ring any day.
Did you know? The proposal itself is one of a girl's most dreamed-about moments of her life. Women love telling their proposal story over and over. About 70% of women will remember exactly what was said during the proposal. And 50% expect the man to get down on one bended knee. The proposal doesn't have to be expensive, but a thoughtfully planned one tells her that you care about her. 20% of women end up being sorely disappointed by their proposal - don't let her become that part of the statistic.
- You don't even need an engagement ring to get married. It's the norm to propose marriage with a diamond engagement ring. But this tradition isn't as time-honored as you think. The truth is that this "tradition" is due to smart marketing.
It goes back to the 1940s, when De Beers came out with its "A Diamond Is Forever" campaign. De Beers, which controlled the bulk of the diamond trade at the time, created the idea that you need to propose with a diamond ring. Perhaps we should be listening to The Beatles instead, when they said: "All you need is love."
The Bottom Line
Splurging on an expensive engagement ring won't divorce-proof your marriage. According to the research we found, it could actually hurt your relationship in the long run.
If you're committed to going big or going home when it comes to your engagement, consider shopping with an online retailer like Blue Nile or James Allen. You'd get a much bigger selection than at stores. And a much better price as well. Both retailers offer financing options, but again, be careful and do the math to see if you can pay it off on time.
Whatever you decide to do, the sound of a resounding "yes" will be worth much more than an expensive ring. It'll be priceless.