3 Months Salary, Really?

3 Months Salary, Really? Here’s The Real Cost of an Engagement Ring

The sheer mention of spending three months salary on an engagement ring will send shivers down the spine of even the most resilient groom. For a man making $40,000 a year, that’s $10,000 for a ring.  If you’re a baller raking in 6 figures, are you really expected to shell out $25,000+?

That’s a price you should balk at and for good reason: The 3 months salary rule is a crock.

The Origin of the 3 Months Myth

Who decided three months salary was the right amount to spend on a diamond ring anyway? It wasn’t any actual grooms to be, that’s for sure.

The 3 months salary rule isn’t a folksy guideline passed down through generations, but the genius creation of the De Beers diamond company. In the 1930s, diamond rings were only a small percentage of engagement rings. Naturally enough De Beers, being a diamond company and all, wanted to make diamonds come across as something valuable and desirable, so they started an intense ad campaign to associate diamonds with engagement. The advertisements suggested one month’s salary as the right amount to spend on an engagement ring (a De Beers diamond ring of course). By the 1980s one month became two, and eventually we arrived at the modern valuation of a diamond engagement ring as three months salary.

Combine this with De Beers’ now immortal ‘diamonds are forever’ tagline, and you have a marketing juggernaut. People were not only convinced that a diamond is a permanent and indispensable part of the engagement process, but that they were worth quite a bit of money.

The Real Cost of The Ring

Knowing that the old rule is a result of a marketing campaign and not an honest tradition should already be enough to make you question how much you should be spending.

If you aren’t convinced yet, consider the future. With a potential five figure wedding coming up, do you really think an engagement ring should be your financial priority (and let’s not forget that other ring you have to buy)? Not to mention that spending a ton on a ring and wedding has actually been linked to a higher chance of divorce. Wait what? Spending above your budget on a ring means you’ll have less money to put towards your wedding and your future, eventually creating more financial stress as you and your wife find yourself pinching pennies to compensate for your overzealous spending.

You might be thinking diamonds are as good a financial investment for the future as any other. On the contrary, diamonds are a poor investment with poor resale value, something that Edward Jay Epstein’s 1982 monster expose found to be true as far as 30 years ago. Putting that money away in a index fund, or another reliable form of savings, is a real investment towards your future. That money could be put towards a mortgage or a down payment for the house you two will inevitably buy.

Here’s the truth: Most people, including your fiancée, are not going to be able to tell the difference between a $5,000 ring and a $9,000 ring if you know how to choose the right diamond. The key to getting a diamond for the perfect price is knowing the 4 C’s of diamond quality: Carat, clarity, cut and color.

Don’t Sweat The Clarity

A diamond’s clarity grade refers to how visible blemishes and other physical imperfections such as inclusions are. While this might sound like it is one of the more important aspects of choosing a diamond, it is actually the least important of the 4 C’s. Some examples of the clarity grades you’ll encounter are IF (Internally Flawless), VVS1 (Very Very Small Inclusions 1) , VVS2 (Very Very Small Inclusions 2), VS1 (Very Small Inclusions 1) and so on.

It takes dropping more than a few grades in clarity before any imperfections are visible to the naked eye. A diamond with a clarity of VSI2 (Very Small Inclusions 2) might have imperfections that are possible to see without a 10x magnifier, but depending on the individual diamond it could still appear perfect to the naked eye. From there, the imperfections become increasingly more difficult to spot without a magnifier as you approach Internally Flawless. Even if you go down in clarity to SI2 (Small Inclusions 2), a carefully picked diamond will have imperfections you can’t spot unmagnified. Unless you are showing your fiancée and your friends the ring through a powerful magnifier, you don’t have anything to worry about. This is why one of the most important things you can do is find a reliable jeweler who can help you pick the right diamond for the price.

Think about it this way: Would you avoid buying a car because the paint job has microscopic scratches? Instead of wasting your money on a clarity grade you don’t need, you can put money towards more important factors such as the cut or color.

Cut Back The Carats

The biggest diamond you can afford isn’t necessarily the best choice. The most important consideration to make with a diamond’s size is how it is going to look on your girlfriend’s hand. Fortunately, the Diamond Database has a handy tool that will allow you to preview a given diamond on a finger with adjustable dimensions, so that you don’t end up with a comically large ring compared to your girlfriend’s hand.

A simple way to save money is by buying diamonds in decimalic carat sizes. If a 1 carat ring seems like the right size, opt for a .98 or a .95 instead. You won’t be able to see the difference, but you will save a few bucks.

A smaller size can also be made to look bigger by choosing a cut with a bigger table size. The table is the surface of the diamond as seen from above, so a smaller sized diamond can look plenty big if it has a wide table.

The Two Key Factors
The cut of a diamond makes the biggest aesthetic difference out of the 4 C’s. It determines how light reflects from the stone (brightness), sparkles across the surface (scintillation) and how it disperses light (fire). The cut quality scale is simpler than the others, with grades simply having names like Good, Very Good and Ideal. Above all else, a quality shimmer is going to give the diamond a look of luxury. Cuts have the added benefit of hiding visible imperfections when done right.

The ring’s color is the last of the 4 C’s and is one of the most important along with cut. Color is gradd on a letter system with D being the best and Z being the worst. At D the diamond is colorless, and as you get to Z it gradually takes on a yellow color. D, E and F grade diamonds are going to cost you a pretty big chunk of change, but G, H, I and even J diamonds can all look perfectly fine to the eye. Matching the cut and color of the diamond with the color of the ring is key to making a diamond’s color look its best.

How Much Can I Expect To Spend?

To get a solid diamond, you don’t need to drop that much. Let’s see how much a diamond will cost with the following characteristics:

  • .8 Carat
  • SI1 Clarity Grade
  • Very Good Cut
  • G Color Grade

Looking at Blue Nile, we can get a diamond like that for $2504. The setting is likely to range from $200 to $1000. Maximum we are looking at about $3500 ring plus tax (and if you’re on a budget, don’t forget to count the tax, in some states this will be several hundred dollars). That is far below a quarter of your salary, and you get a more than stellar ring. You could even dial that clarity or color back to save some cash, and chances are none will be the wiser.

Comfortable with spending more? How about this:

  • .9 Carat
  • VS1 Clarity Grade
  • Ideal Cut
  • F Color Grade

For a diamond like this you are looking to pay $4418, and that’s for a very clean stone. Add the setting and you top out around $5400. To even approach spending three months salary, you are going to have to opt for a D color grade and an IF Clarity Grade diamond, features which we know we don’t need.

You can expect to save some money if you buy online, however, you aren’t going to be able to get a good look at the diamond. If you do decide to buy online, it is recommended that you find a site that has close up high quality photos of the actual diamond you would be getting in your ring.

There’s No Magic Number

As nice as it would be to just go with a vague figure like ‘three months salary’, the reality of buying a ring is a whole lot more complicated. Figure out a realistic amount of money that you can actually afford, and find the right balance of size and clarity based on your girlfriend’s tastes. If saving up money for your ring is screwing with your finances and stressing you out, then here’s a pro tip: you are planning on spending too much.

Your engagement ring is ultimately a romantic gesture. The ring is nice to look at, but that is where its utility ends. You now know that the resale value is far from great, and that spending more money doesn’t always create a visible difference in the diamond.With a wedding around the corner that could cost you thousands, ask yourself this: Is it more important that your fiancee‘s ring looks better under a magnifier or that you can make a down payment on a house with ease? The right answer is obvious.