In a rather uncharacteristic twist, I recently decided to spend about $4,000 on a custom engagement ring. How does someone who is obsessed with saving money end up spending almost two months of my living expenses on a shiny rock? Was this my least frugal purchase ever, or an acceptable indulgence?
I thought it could be valuable to write an article to justify my rationale, and maybe provide a helpful framework for other people who are approaching this milestone. I’ll try to rank these reasons in order of importance, starting with…
#1: We can easily afford it.
The most important factor of all, as you should never buy something you can’t afford. I am earning just under $100k from my job. But the bigger financial factor weighing in here for me is my net worth was nearing $250k at the time I made the decision. A $4k ring then, represented 1.6% of my assets. In terms of how quickly I am saving money, it would set me back about 5 weeks to replace that amount of my net worth.
The wedding industry would have you think in terms of X months of gross salary. I prefer to look at large, discretionary expenses in terms of cash flow. For example if you make $5k in gross income per month but only save $500 per month, claiming to spend 1 month’s salary on a ring isn’t setting you back one month financially — it’s setting you back 10 months. All of your gross income is never available to spend. It’s only what’s left over after keeping yourself housed and fed that was ever available to save or to spend on discretionary items.
Another angle I was looking at it from was that if we’re committing to getting married and combining finances, at this point it’s not just spending my money, but what will very shortly be our money. Having listened to years and years of blather from me about personal finance and investing, my girlfriend has a net worth which is rapidly approaching my own. From the perspective of our collective assets, the $4k ring represents less than 1% of our combined net worth.
So here’s the Frugal Flannel rule of engagement ring shopping, if she really wants a fancy ring. No more than 1–2% of your combined assets as a couple, or no more than one month of total savings between the two of you. I added the latter one in for younger couples who may have high incomes, but haven’t had time to build assets yet. You won’t be hearing these rules from the ring salesperson. If you’re both on board with spending less, more power to you. It’s a depreciating asset that will lose 50% or more of its value instantly.
#2: We wanted to be 100% sure it was ethically sourced.
After doing some research about conflict-free and ethically sourced gemstones, numerous pieces of evidence indicated that these terms may just be a form of marketing and little more than a lie. I saw sellers using terms such as “from a family-owned mine” to justify why their sapphires from some Tanzanian mine were ethical. Words like that may sound appealing at first glance but truly mean nothing. How do we know the working conditions in the mine? How do we know if they are employing child labor? How can we trust anything that we are told from salespeople in an industry historically rife with corruption, monopolies, and conflicts of interest, when none of the information seems personally verifiable?
At the end of the day, I concluded that there were only two ways to guarantee a gemstone was ethically sourced:
- It was made in a lab.
- It was mined in a developed country, with a history of acceptably strong labor and safety laws being enforced on the local mining industry.
My girlfriend ended up wanting a sapphire, and the lab sapphires just weren’t as impressive when it came to matching the shade that she wanted. We settled on a natural Montana sapphire to ensure that she got what she wanted and that it was from a region with strong regulations and a traceable supply chain.
#3: After putting up with several years of scrimping early on, she deserves something a bit nicer.
For several years after college we lived a pretty bare bones lifestyle in order to pay down debt and start building up a base of investments. Six years out from college, we’re at the point where we’re nearly debt-free, our salaries have doubled, and we both have a healthy amount of assets that are starting to show early evidence of compound growth. Our financial situation right now is mostly due to that early work and sacrificing to live below our means. Cashing in some of that delayed gratification for something that she really wants and will wear every day, I think is reasonable and a well-deserved thanks for the early financial sacrifices.
#4: We’re not going to do a big wedding.
We are both on the same page that we’re not interested in the massive cost or fanfare of a traditional wedding. Because we’ve agreed that we won’t have some crazy cost for a wedding ceremony shortly down the road, I’m happy to spend a bit more on the ring.
The final verdict
So, my least frugal purchase ever, or an acceptable indulgence? Both, I think. I could have spent a fraction of what I did, and the ring would have served the same purpose. It seems like with jewelry, there’s huge diminishing returns for every extra bit you spend.
On the other hand, purchases like these have intangible emotional components, and part of committing to a relationship is recognizing that your partner likely has different areas that they value spending in, and you need to come to an agreement in these areas where you differ, but in a manner which still helps to meet your collective financial goals.