You’ve found the one and now you want to find the perfect engagement ring to pop the question with. But how much should you spend on your engagement ring?
You may have heard people talk about the “rules” you need to follow when setting your engagement ring budget. People often say that you need to spend the equivalent of two or three months’ salary on your engagement ring. But, truthfully, you don’t need to spend any specific amount on your engagement ring. You should simply spend the amount that works for you and your unique financial situation.
To determine your budget, you should take a serious and objective look at your finances. Then, you need to think about engagement ring cost potentials and your financial priorities. To help you do just that, here’s our four-step guide to engagement ring budgeting.
1. Total Your Income and Expenses
The first thing you should do when budgeting for any major purchase, including an engagement ring, is taking an objective look at your income and expenses.
Start by totaling up your monthly income. If you’re surprising your partner with the ring, just tally up your own income. If you want to purchase the ring as a couple, add up your combined income. If your income varies from month to month, figure out an average amount.
Then, total up your usual monthly expenses. This includes things like:
- Rent or Mortgage Payment
- Utilities Payments (Power, Trash, Water)
- Cell Phone Payment
- Credit Card Payments
- Car Payments
- Student Loan Payments
- Insurance Payments
- Grocery Expenses
- Personal Grooming Expenses
- Any Regular Savings Contributions
If you need to do any estimating with your monthly expenses, it’s best to estimate on the high side.
Now, subtract your monthly expenses from your monthly income. The dollar amount you get is extra money that you can choose to spend on things you want. The money you spend on your engagement ring should be a portion of this money. We’ll talk about how large the portion should be in step 3.
2. Understand Engagement Ring Pricing
Before you decide on the exact dollar amount you want to spend, it’s wise to gain a general understanding of how much engagement rings can cost. Let’s discuss the average cost of an engagement ring and go over what affects engagement ring price.
Average Engagement Ring Cost
The average cost of an engagement ring in 2021 is around $5,500. Remember that this is just an average. Around 50% of people spend much less than that, while around 15% spend far more than that.
Center Stone Cost
If you’ve never bought an engagement ring before, you may not know that the ring’s center stone and setting (the metal band part of the ring) are usually sold separately. Some engagement rings come pre-set with a center stone, but most do not. So, when you buy an engagement ring, you’re typically buying two things: a center stone and a setting.
An engagement ring’s center stone is usually much more costly than its setting. High quality, high carat weight gemstones are expensive. And the better quality and the higher the carat weight, the higher the price tag for the gemstone.
This is especially true for diamond engagement rings. Diamonds are extremely expensive and can jump up in price dramatically as you go up in quality or diamond size. The GIA’s 4Cs of diamonds—diamond cut, diamond color, diamond clarity, and diamond carat weight—have an enormous impact on an individual diamond’s price. If you’re shopping for a diamond engagement ring, you need to find a balance between these qualities that work for your desired aesthetic and budget. Here are some jewelers tips to keep in mind about the 4Cs: diamond cut is extremely important, diamond clarity is something you can be flexible with, diamond color is a matter of personal preference, and diamond carat size is a matter of budget.
Another thing to keep in mind about center diamond price is that it varies depending on diamond shape. Round cut diamonds, the most popular choice, are around 30% more expensive per carat than fancy shaped diamonds, which is a category that encompasses every diamond shape other than round.
Of course, you don’t have to choose a diamond for your center stone. Gemstone engagement rings can be much more affordable than diamond rings, especially when they feature budget-friendly gems like moissanite and morganite. Another budget-friendly engagement ring option is a diamond cluster ring, which features a group of smaller diamonds at its center instead of one larger diamond.
Ring Setting Cost
While an engagement ring setting will usually cost less than the ring’s center stone, settings can still be pricey depending on their materials. There are two main elements to think about when it comes to ring setting price: precious metal and gemstone accents.
The four most common precious metals used for engagement rings are white gold, yellow gold, rose gold, and platinum. All of these gold alloys are in the same price range since they all contain the same amount of pure gold. Platinum is more significantly expensive than gold, but it’s also hypoallergenic and very durable.
Some engagement ring settings, solitaire settings, don’t have any gemstone accents on the ring’s band. Simple solitaire bands are the most affordable engagement ring setting style. Other settings may feature small diamonds, small colored gemstones, larger diamonds, or larger gemstones. Settings with higher carat gemstones are going to be more expensive than ones with lower carat gemstones or no gemstones at all.
There are some miscellaneous costs to keep in mind when you budget for your engagement ring. The largest for many people is sales tax, which can be significant due to the high cost of an engagement ring purchase. If you’re buying an engagement ring online and the retailer doesn’t have a physical presence in your state, you may not need to pay sales tax. Likewise, you may not have to pay sales tax if your area doesn’t have one and you’re shopping locally.
Another potential cost to keep in mind is jewelry insurance. Jewelry stores often offer lifetime warranties for engagement rings, but this isn’t the same thing as insurance. If you want insurance, you’ll almost always have to buy it separately. Keep this cost in mind as you set your budget.
A third thing to consider is your wedding rings. Do you want to include the cost of your wedding bands in your engagement ring budget? Or do you want to consider that as a part of your wedding budget?
3. Consider Your Financial Priorities
At this point, you know how much extra money you have per month and you understand the price range possibilities for engagement rings. Now you need to think about your financial priorities.
How much would your perfect engagement ring cost? Is that workable within your budget? Would spending the amount you want on your engagement ring affect other financial priorities in your life? Do you want to save money on your ring so you can put it towards your wedding, traveling, going to nice restaurants every month, or a house down payment? Or are you perhaps excited about spending big on a high carat diamond because having a glamorous ring is very important to you or your partner?
There are no right or wrong answers to these questions, but it is important to ask yourself them. Once you know what you want to prioritize, deciding your final engagement ring budget should come naturally.
4. Decide Your Payment Method
One final thing to consider is how you’ll be paying. There are three common ways to pay when engagement ring shopping:
- In Cash
- Financing (Monthly Payments)
- With a Credit Card
What payment method works best for you, your budget, and your proposal timeline? If you’d like to pay for your ring in full with cash, do you have enough cash on hand or will you need to save up for a while? If you want to finance your engagement ring, what type of financing plans are available to you? Make sure you fully understand and are happy with the terms of any financing plan you enter into.
Finally, while paying with a credit card is an option that people use, consider whether or not that is a good choice for your financial future. The interest on credit cards can add up to an enormous sum over time. Keep that in mind if you’re thinking of throwing an engagement ring purchase on a high-interest credit card. Remember that you don’t need to spend more on an expensive ring just to adhere to societal pressure or a made-up salary rule of thumb. There are many beautiful, affordable engagement rings. And if you’re dreaming of an extravagant ring but you can’t fit it in your budget now, know that you can always upgrade your ring later.