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Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.
Today’s question is about engagement rings; specifically, how much you should spend to buy one.
This is a question I should know the answer to by now: I’ve bought three over the years.
Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.
You also can learn how to send in a question of your own below.
For more information, check out “Why Your Next Diamond Should Be From a Lab” and “5 Sneaky Jeweler Tricks of the Trade.” You can also go to the search at the top of this page, put in the word “jewelry” and find plenty of information on just about everything relating to this topic.
Got a question of your own to ask? Scroll down past the transcript.
Don’t want to watch? Here’s what I said in the video
Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.
Today’s question comes to us from Jonathan:
“I’m getting engaged soon, and my dad told me the rule of thumb is to spend three months’ salary on an engagement ring. My friends are telling me this is dumb. Who’s right?”
I’ve got three things for you, Jonathan:
Thing No. 1: Your friends are right
Your dad’s wrong. The myth suggesting we spend three months’ salary on an engagement ring came from the company controlling diamond pricing, De Beers.
This company is a cartel, meaning it controls so much of the worldwide diamond supply that it can virtually dictate the price of diamonds. De Beers came up with this “three months’ salary” concept years ago. And it’s just stupid.
In my opinion, any company that tries to emotionally shame you into spending three months’ salary on an overpriced product deserves a special place in hell. If you ever hear anyone repeat this ridiculous “rule of thumb,” I want you to tell them what I just told you. In a loud voice.
Thing No. 2: How much should you spend on a ring?
The answer to this question is simple: Spend what you can afford.
Hopefully, you’re going to start reading about diamonds before you start shopping for them. When you do, you’ll learn about “four C’s” of diamond buying:
But let me give you some advice from someone who’s been down this road a few times: Get a flawed stone. Obviously, not one with big, visible flaws. But it’s better to have a bigger stone with minor flaws than a smaller, more perfect stone.
Why do I say that? Because when your bride-to-be flashes that rock — something she’ll begin doing within 30 seconds of receiving it, and will continue doing for months thereafter — every person she shows it to will ask the same thing: “How big is it?” Nobody, on the other hand, will ask, “Is it flawless?”
Thus, bigger is probably better. But never, ever buy anything more than you can afford. Set a budget and stick to it. If she loves you, she’ll love whatever ring you give her.
I’ve done stories with a lot of jewelers over the years. One gave me some great advice I’ll pass along to you. He said, “Don’t get too wrapped up in the four C’s. Look at the diamond. Just look at it. Look at multiple diamonds next to each other. Then, pick the one that looks the best.”
Thing No. 3: Forget mined diamonds
While I still like buying my wife the occasional diamond, I stopped buying traditional, mined diamonds years ago. Now all I buy is lab-grown diamonds. Diamonds grown in a lab will save you at least 30 percent over the cost of a diamond from the earth.
They’re both real diamonds. Lab-grown aren’t cubic zirconium or anything like that; they’re totally real. And other than price, they have other advantages.
You’ve heard of blood diamonds, right? They’re diamonds that are mined with what’s essentially slave labor. While blood diamonds aren’t supposed to be on the market, some still are. And a lot of people are suffering as a result of diamonds being mined this way. When you buy lab-grown, you don’t have to worry about that. Finally, it’s easier to get colored diamonds when they’re lab-grown.
My wife loves purple. A couple of years ago, I bought her a lab-grown purple diamond. My jeweler told me a mined diamond of the same color would have cost at least 10 times the price.
So do yourself a favor and check into lab-grown diamonds.
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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.
I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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