Five tips to buying an engagement ring

You’re in love and ready to buy an engagement ring.

But are you ready to part with three months’ salary as the diamond industry has traditionally suggested? If not, what’s your magic number?

Figuring that out can be a stressful, high-stakes undertaking. Engagement rings come with unique financial and emotional expectations. And in a relationship intended to last a lifetime, it’s the first big test.

“It does set a certain tone about whether a woman’s expectations will be met by her husband or not,” said Julie Albright, a sociologist and marriage and family therapist at the University of Southern California.

Even so, how much to spend rests in striking a balance between dazzling your beloved without tarnishing your future financial goals together.

Here are five tips to help you size up how much to spend on an engagement ring.

1. Consider future financial goals

Whether you have a wheelbarrow full of cash ready to bring to your local jewelry store or not, your future plans as a couple should be part of the calculus for how much you can afford.

Sit down with your partner and go over your short- and long-term financial goals. Beyond wedding expenses, goals could include saving for a down payment on a home, preparing to start a family, as well as retirement planning.

“This is the perfect entry point to see where each person’s money values come from,” said Michael Branham, a certified financial planner in Edina, Minnesota. “How are we going to put that life together and how does buying something like an engagement ring fit into that picture?”

2. Get a fix on expectations

First off, don’t feel compelled to heed to the expectation that a ring cost three months’ salary, the benchmark established by the De Beers diamond cartel.

“That’s actually kind of a myth that people somehow still believe,” said Jamie Miles, editor of wedding planning website TheKnot.com.

“You might have a more subtle bride who wants something more petite and more demure,” Miles said.

A good way to gauge how much you may have to spend is to find out what kind of ring your would-be spouse is expecting. You could try asking friends and family, but these days it’s increasingly common to see couples browse jewelry stores together to remove the guesswork.

Last year, 64 percent of brides were involved in picking out their ring, while nearly a third helped decide the budget, according to a survey by The Knot.

That could be one reason the national average spent on an engagement ring, as well as diamond carat size, or weight, have been rising.

The average spent on an engagement ring grew 3 percent to $5,598 last year from a year earlier, according to TheKnot. That’s still down from 2009’s average of $5,861, however.

The average carat size for the center stone is just over 1 carat. The average total carat size for engagement rings, including any diamonds on the setting, is 2 carats, Miles said.

3. Weigh payment options?

You’ve had a look at the setting and diamonds (or other gemstones) that your beloved covets, and figured out which merchants offer the best price. The next step is to figure out how you will pay for the ring, as that can be a huge factor in how much ring you can afford.

If you can put off the proposal, it’s best to save up money to buy the ring with cash, said Gregg Wind, a certified public accountant in Los Angeles.

Otherwise, how much you can afford becomes a question of how much extra you’ll have to shell out overall if you finance the purchase, and how much you can pay per month while also meeting your other obligations.

Everybody should determine whether the ring payment will fit into their budget, Wind said.

This savings goal calculator from Bankrate.com may help: tinyurl.com/calculatesaving

4. Beware of financing

Major jewelers generally offer financing with the enticement of six months or one year interest-free.

But if the ring isn’t paid off within the promotional period, or if you’re late on a payment, you could end up being retroactively charged 25 percent interest or more on the total price.

“You want to be really careful how big of a hole you dig yourself in the beginning of your relationship trying to pay off a $1,000 or $2,000 or more ring with huge interest charges every month, just because you didn’t have the forethought or wherewithal to save for it over time,” Branham said.

One exception might be if you have a credit card that offers rewards, such as free points toward air travel. But only if you can pay the balance off in full within the first month.

5. Upgrade later

Even if you determine that you can’t afford as nice a ring as you hoped, consider buying something more modest and popping the question anyway. You can always trade up for a nicer ring in a few years when your financial picture is more established.

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