Buying an engagement ring is a major financial decision. This isn’t just any other ring – you are giving a piece jewelry that the love of your life will wear and own (hopefully) forever. It’s a purchase that shouldn’t be taken lightly. Getting married is a major step in life and it’s best to do it when you already have enough savings and financial ability. But most people come to a point in their life that they want to get married but they are still figuring out finances. Many are still paying off student loans, saving for a house and haven’t reached full earning potential yet. An engagement ring is just one of the many big financial commitments considering marriage, and it’s one drop in the bucket compared to the actual cost of the wedding.
The first step in buying an engagement ring is to set your budget. It’s your personal choice. You must not be influenced by things like “two months rule” or spending two months’ worth of your salary or the national average price spent by men on an engagement ring. Instead of overspending, have a more realistic approach is to balance her expectations and let her know about your financial ability. If you plan to get married with this woman, then she will join your finances. She must know what she is getting into financially.
For something like a diamond, it’s best to pay cash. If you have to finance the ring, then it’s too expensive for you. But sometimes, you may find that you need some help. You’re head-over-heels and so sure about your love, and you can’t wait to save up before proposing to a girl you really want to marry. Financing a ring isn’t always a bad idea. But of course, you have to be smart about it.
There are of course a couple of things you need to consider:
- Your salary/income. This is obviously a factor, but still worth mentioning. You can buy a ring now and pay it in full later, but it must still be in a price range that you can realistically afford considering your income.
- Your expenses. This includes monthly costs like bills, rent, food expenses, student loans, car payments, etc.
- Your savings potential. If you cut out all the extra purchases for yourself, how much can you realistically save for each month? If you can survive without it (like buying new shoes, going to movies, going to the bar, etc.), then you can just put that amount on savings. As much as possible, get a ring with a price you can ideally save up for months, while still being able to spend for your basic needs.
- Your future goals. Consider the things you might be saving for in the future, like a house and your wedding in the near future. Do you want to get married a year or two after the engagement? Do you want to be able to live in your own house on your first year of marriage? Don’t let an expensive ring that you cannot afford cause a delay on your goals.
Here are some tips on how to finance an engagement ring:
1. Use 0% APR credit cards.
Generally, using credit cards are bad for your budget in the long run, but this is the common method of financing an engagement ring. Credit cards are convenient, but they are expensive. They have high interest rates and they let borrowers make small minimum payments that increase the length of time to pay the debt, which in turn increases the interest you’ll pay.
However, the best way to finance using a credit card is to sign up on a long 0% APR promotion. This will allow you to get an introductory 0 percent interest on new purchases for 12 months or longer. This works better if you sign up for a new credit card just right before buying an engagement ring, because cards often give sign-up bonuses if you spend a certain amount (usually $500 or more) within the first three months. Just make sure that you can pay off the ring before the promotional period ends, because otherwise, you will be hit with a high APR.
To qualify for a 0% APR card, you need to have good credit. If this isn’t the case, then you may need to take some time to build up your credit score first.
Some people argue that it is even better to buy an engagement ring using a 0% APR card, even if you have enough cash for it. Many reward cards offer a sign-up bonus, and an expensive purchase like an engagement ring will ensure that you will hit the minimum spending requirement to receive the bonus. In addition to cash bonus, you can also use the points you earned from buying the ring towards your honeymoon. If you are using a travel credit card, this could mean bonus miles. If you have good credit standing, then you can qualify for this. If you’re the type of good spender who never uses credit cards, you may consider getting one because of these cash benefits.
2. Finance through the jewelry store.
Many jewelry stores offer in-store financing options, and some offers can be more appealing than using a credit card. Some can also offer 0% APR for the first 6, 12 or 18 months after purchase, and then offer a lower APR if you choose a longer payment plan. Just make sure that you can really pay the full amount before the end of the promotional period because horrendous interest will be added if you don’t pay off the balance in full.
Store salespeople are usually incentivized to convince and push customers towards these options. These offers can be competitive and attractive for you, but usually, they put very high interest rates after these promotions expire.
Before you sign up on an in-store financing option, read the terms of the offer carefully. Make sure it’s clear to you how long does it last, and what conditions may cause the promotional rate to be revoked. If you miss a payment, will the offer be revoked? What’s the regular interest rate after the period expires? In a worst case scenario, can you still afford to pay off the purchase if something happens and you can’t pay in full before the promotional rate expires? Still, it will always boil down to the “can you afford to pay for it” question.
3. Consider getting a personal loan.
Getting a personal loan can be costlier, but it has benefits. If you don’t want to open another credit card, if you need more than 12-18 months of 0% APR to pay it off, you can consider a personal loan. This is also an option if you don’t qualify for in-store financing or 0%APR credit card due to poor credit score, poor financial history or some other reason.
If you want to consider this option, shop around for a personal loan with a lower interest rate – under 10% is a good choice to start with. Whatever rate you find, make sure that it’s lower than the average APR on a credit card. It’s wise to make the term as short as possible to save money on interest. Three- to five-year personal loans are available to most applicants with some credit history. Also note that interest rates vary widely based on your credit worthiness. If you have a very poor credit store and a personal loan available to you exceeds 20%, stay away and don’t get it.
Remember, getting a personal loan must be your last resort. If you already have a poor financial history, think more than twice before considering this option. You have the choice to simply buy a simpler, cheaper engagement ring that you can afford – if your girlfriend knows your financial capacity, surely she will understand. Overextending the payment period to finance a ring that you will be paying for two, three or more years down the road is not the most financially sound way to start off a new marriage. There will still be a wedding and honeymoon to pay for, after all.
Getting a personal loan for a ring may even cause a strain in your relationship. If your fiancé and soon-to-be wife would know about this (and she must, because you must be transparent about money with each another for the marriage to work), she may feel that it’s not worth it and she might end up unhappy with your purchased bling. This may cause a dilemma for her – she might feel guilty about having a ring that causes you to have extra monthly expenses, and she might feel like she would want to exchange it for a cheaper ring or forego it all together to save you money, but would be hesitant to do so because she might hurt your pride and feelings. Worse, this may cause a fight about money between you two, and you’re not even married yet. Make sure you consider if a ring is really worth getting a loan for before going through this process.
4. Save more by shopping online.
Got a ring of choice from a jewelry store but the price tag is so steep? Try looking for reputable online jewelers that can offer the same design for a lower price. Do you know that you can save as much as 50% by purchasing rings online? They can offer rings cheaper than physical stores due to the way their diamonds are sold and distributed. You will also save money because you don’t have to deal with salespeople working on commission.
There’s an understandable risk of buying online. You may get ripped off and you don’t want to spend significant amount of money on a diamond ring that isn’t really a diamond. Or a 14k gold ring that is actually just gold-plated. To avoid these bogus sellers, make sure you only buy from reputable sellers like James Allen and Blue Nile. These types of business have already built a reputation and will take measures to ensure that their good name won’t be dragged to the ground by a critical review and bad customer experience.
Lots of online jewelers allow you to build your own ring as they offer customized designs. You can select your stones, choose your setting, choose your band, and customize everything about the ring. Sellers like James Allen and Blue Nile even have exceptional imagery in their website that allows you to view the rings up close before purchasing.
Before buying from an online jeweler, make sure that the seller offers shipment insurance. The engagement ring must have a tracking number, insurance and signature requirement to ensure delivery. They must be able to thoroughly educate you about an engagement ring. The specs of the diamond ring, like the carat, setting, shape, color, cut and clarity must be thoroughly specified in the product description. They must also have a good return policy, as some can offer you free return shipping. Also, it pays to check customer reviews and proof of purchases.
The most important thing is that you and your future spouse are on the same page. Before you even propose, make sure that you are in a secure stage in your relationship where you both know you want to end up being married with one another. You also need to have a candid talk about finances and expectations even before the engagement. It will do wonders to help you plan your future together.
Some brides-to-be want to be involved in the ring selection process because let’s face it, men won’t exactly always know your exact taste and preferences. It would be best to have an honest talk about engagement ring with your partner before buying at all. Yes, she will have the hint that you plan to propose, but at least you can still keep the “when are you going to propose” question a mystery. Some brides are even willing to pick up part of the tab if it means being able to get the exact engagement ring that they want. Or, you can consider simply starting with a less costly ring then upgrade it later in your marriage when you are more financially stable.
Don’t get carried away and be practical. Always choose a ring that you can afford and pay cash as much as possible. Do you really want to be in another debt or loan before you get married? Or at least consider a 0% APR financing that you are sure you can pay in full before the promotional APR period expires because you know you can get that amount of money monthly.
Also, shopping online may be the best option, as their prices can’t compete to physical stores. If you have to finance an engagement ring to be able to afford it, then consider checking out online prices first.