Have you ever heard that an engagement ring is supposed to cost 2-3 months salary? That number seems crazy to me, and I’d like to give you a better rule of thumb. Congrats on your impending engagement by the way!

Now if you are the analytical type, you may ask if this 2-3 month’s salary is gross or net income and I would answer: does it even matter?! Either way, we are talking about a $12,800 ring for a dude making 100k (that is 2 months net at an effective tax rate of 23%). I think that is ridiculous. So where did this number even come from?

Talk about a marketing campaign

From what I can tell, it appears marketers can learn a lot from De Beers. “A Diamond Is Forever” was a De Beers campaign in the 1930s. “Two months’ salary”, De Beers in the 1980s. Somehow this stuck. Asking the jeweler how much ring you should purchase is like asking the car salesmen how expensive of a car you should purchase.  It could be better to get an opinion on such matters from someone who isn’t paid a direct commission on the transaction!

A ring should cost you something. Maybe not 2 months’ salary but you are telling her you’d like to love her as Christ loves the Church.  Purchasing a beautiful ring for your prospective finance communicates a few things.  

First, it says “You are incredibly important to me, important enough for me to intentionally save money to buy you a great gift.” I remember one of my closest friends in college had been saving up for his then-girlfriend’s ring for 18 months. I think that’s pretty beautiful. 

Second, buying a ring she can be proud to wear displays your financial responsibility both to her and to her family. You are showing her that you know how to build margin into your lifestyle. This is a great thing. Think about how this will help you save for your future goals: a downpayment for your first home, your kids’ college, a big trip, retirement, etc. You saving communicates that you are going to be a good teammate in these endeavors.

Engagement Ring Cost Rule of Thumb

 So what’s reasonable? Now this is just one man’s opinion, but here is my take on the situation. Your marginal tax bracket divided by 5 times your gross income. So if you make $60,000/year, you are in the 25% tax bracket. 25%/5 equals 5% of your gross income, multiply this by your income for a grand income of $3,000. Here is a handy chart to see how this scales:

Gross Income	Marginal Tax Bracket	Engagement Ring in %	Engagement Ring in $
$30,000	15%	3%	$900
$60,000	25%	5%	$3,000
$100,000	28%	5.6%	$5,600
$200,000	33%	6.6%	$13,200

 

The beauty of this rule of thumb is how it scales with income. It can be difficult to save a large amount of money on a tight budget, but it gets a bit easier as your income goes up since many of your fixed expenses are the same no matter how much you make. So now that you have it- a better rule of thumb of how much to spend on the engagement ring.

Now it is time to learn about the 4 C’s (if you don’t already know what I am talking about you can start with this article). Tell me what you think- how much is appropriate to spend on an engagement ring.

–The Christian Money Guy