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How Much to Spend on Engagement Ring

Simple and sensible answer is: As much as you can afford. Think of the ongoing expenses as well, for example: I have once seen a customer that stretched far to buy an engagement ring, which was nearly half his annual salary. The ring cost about $15,000 and he earned about 40K per year. When he picked it up he started to worry and ask a lot of questions as reality hit him that if the ring got lost, stolen or if the diamond fell out how can he afford to replace it again?
So for his peace of mind he decided to insure it comprehensively which cost about a $1000 for 12 months cover. He will have to pay that every year for peace of mind or stop paying that and keep worrying.
Perhaps he would have been better off spending half that, about $7500 or less again, say $5000. That way he won’t worry, even if he didn’t insure the ring. On the other hand I had a customer that spent over $100,000 on an engagement ring and he didn’t care about any insurance; and he didn't even look more than once at the engagement ring before he closed the box and put it into his pocket, but he was on a 1 million + salary.

Limited Budget, but Expensive Taste

My Tip: Don't go out of your financial comfort zone or you may regret it later. For those of you with a limited budget but have a partner with expensive taste then there are ways to compromise, where you can get bling for a fraction of the price. You can play it smart... as remember the late Princess Diana's engagement ring (currently worn by Kate Middleton) looks classy and is very eye catching, yet the same style can be made for around $10,000 - $15,000, by a good jewellery designer with similiar quality and size of diamonds and sapphire. To get bling on a lower budget keep away from diamond solitaire designs, as a very large diamond (say a 3 carat round brilliant) could cost around $50,000 for a decent quality. You can get a 1 carat diamond, surround it with smaller diamonds, say another 10 small diamonds around it totalling 0.50ct; and have another 10 small diamonds set in the shoulder of the shank, (5 each side) totalling another 0.50ct. That will make a total of 2 carats, but this ring will look just as substantial and more eye catching than the plain solitaire ring with a 3 carat diamond. This compromise could be made with decent quality diamonds for around $10,000, which is around a fifth of the price of a 3 carat solitaire, but with comparable beauty.

Why the 2 months salary guideline is commonly used

Buying an engagement ring can be a difficult choice for many people as there are also many levels of engagement rings to buy like there are many different levels of income by consumers. The famous De Beers slogan: “two months salary that lasts forever” was once as: “one month salary that lasts forever” but was changed to “two” in the late 1990’s due to greater affordability by consumers and an aim to increase the amount of the average sales by jewellers and diamond wholesalers. This clever slogan motivated people to pay more for an engagement ring but in reality all it did (and was expected to do) is make buyers spend twice as much for an engagement ring and not necessarily use the entire two months salary towards buying it. Some still spend less than their two months salary and others spend more.

Is it two months gross or a nett salary?

It doesn't matter, as remember the guideline only gives people the idea on how much to spend. If a person can afford the ring comfortably based on two months gross salary then that's the right amount to spend. If they can only afford the engagement ring based on a two month nett salary then that's also OK. It's all about giving someone an idea of what they should spend, but at the end of the day it's always about what someone can comfortably afford and what makes the couple happy. Some look at the engagement ring as purely sentimental and don't care how it looks, so they will be happy with even a $500 ring - even though they may be on a high salary. Nothing wrong with that!

Times have changed

The GFC - and now living expenses have gone through the roof. Salaries for some people may have increased, but for most of these people it wasn't increased as much as how living expenses have, therefore this may be accounted for before purchasing an engagement ring.

In better economic times - if you are on a salary of $120,000 per year ($10,000 per month) then as a guide it would be appropriate to spend anywhere between $10,000 - $20,000 on an engagement ring. In this day and age the $120,000 salary no longer has the same value, due to much higher living expenses. It's realistic to say that spending 25% less is more appropriate, so spending between $7,500 - $15,000 is more suitable for a 120K salary.

Another question is whether it's just his salary or combined with her salary as well, since many couples share finances together - even before they are officially engaged or married. So for example - if both of their salaries combined is 180K per year (gross or nett) then it does make sense to comfortably spend up to $22,000 for an engagement ring.

The "two months salary" guideline... Does it still apply for the Rich?

When an engagement ring reaches a high amount, like say $50,000 then it can satisfy almost everyone, so many very high income earners just spend on what they like without worrying too much on what they should really spend.

If your partner is a multi-millionaire CEO or business-man (takes home 3 million a year = $250,000 per month) then it doesn't mean he is not genuine by spending a lot less than $250,000 on an engagement ring. He may spend that or even $1m on the ring, but I have seen wealthy people which spent less than their weeks nett earnings on an engagement ring. A woman may be walking in the city with her multi-millionaire partner and then go past a jewellers' window and see a diamond ring that she adores in the window which cost $50,000. She hints and he then returns later to the store and buys it for her (as a surprise) to propose. She didn't care what the ring cost, as she loved the 50K engagement ring and he didn't care what it cost as long as he got here something she loved. In my opinion this is buying the ring for the right reason.