How to Set an Engagement Ring Budget
Once you've decided that your partner is "the one," the next step is to make plans and preparations for the proposal. Though this is an undoubtedly exciting time in your life, it might also be one that's fraught with a little bit of fear. After all, you're likely getting ready to spend more money on one single item (that sparkly engagement ring) than you've ever done before and are trying to figure out just how you'll pay for it without losing your sanity or your entire savings account. These tips for creating an engagement ring budget can help on both fronts.
Open a savings account.
If you don't have a savings account already, there's no time like the present to open one! This will help you save as much as you can before you start shopping. Byron Ellis, a certified financial planner with United Capital Financial Advisers, suggests setting aside a budgeted monthly amount into a savings account as early as you know you'll be proposing to your significant other. "This will do two things for you: build up cash to lower what you have to pay with new debt and get you in the habit of making payments in the event that you do have to finance any part of the ring," he says.
Forget the rules about how much to spend.
You may have heard the old saying that a man proposing should spend two or three month's salary on a ring. Lucky for you this is no longer the norm. "We've seen a big shift with millennial buyers and the rise of gen X buyers remarrying, so the two- or three-months salary thing is no longer something we recommend following," says wedding band designer Tracy Matthews. Instead, she recommends creating a budget that you feel comfortable with, and ideally one that won't put you into financial hardship.
"Depending on the type of engagement ring you'd like to buy, there are thousands of variables from stone type, setting type, and materials," Matthews explains. "Millennial buyers are often ditching traditional diamond engagement rings for alternative bridal styles, but there is still a lot to learn." If you are planning on going the traditional route, she urges the importance of educating yourself on the 4Cs (cut, color, clarity, and carats). Otherwise, be sure to do your research on alternative stone types and pricing.
Set your price range.
Once you have a good feel for the type of ring that you want to buy, it's time to determine the lowest and highest price that you think you might have to pay. This, Ellis explains, will give you the information needed to start planning. "Hopefully your taste falls into an affordable range, but don't fall into the trap of spending more than you can afford," he adds.
Consider payment plans with caution.
Many jewelers will offer financing options, which may seem like a smart choice at first glance. "Obviously, work your hardest to have the cash ready to go after saving for as long as you need to," says Jessica Aliotti, financial advisor for Northwestern Mutual. "If you need to look into financing options, there may be an opportunity to take out a zero percent interest loan, but if that option is not available, try to keep the interest rate under 7 percent and choose a plan that pays off the ring within 12 months."