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Engagement Ring Buying Guide Chapter 1: Setting A Budget

engagement ring buying guide setting a budget

The first thing you need to ask yourself when you’re prepared to buy an engagement ring is not about the shape of the diamond or the setting of the ring – it’s about money. How much money do you want to spend on an engagement ring?  

The idea of setting a budget is such an important first step of buying an engagement ring because if you go into the process without any concept of the cost of things, you’re going to be in for a bad time. You’ll start building out a perfect ring, find exactly the elements you want, and then when you get to checkout it may end up costing way more than you can afford, forcing you to go back and chip away at the dream ring you designed. No one wants to do that.  

This is why Chapter 1 of our Engagement Ring Buying Guide starts with setting a budget. Once you have that budget in mind, you’ll realize you are able to still build a dream ring within your financial constraints, and when you get to checkout, you’re to the moon with joy. That’s how the buying experience should be. 

The Myths of Engagement Ring Budgets 

Before we get into the best ways to go about setting a budget for your rings, let’s talk about some common myths and misconceptions people have about how much an engagement ring should cost. The most common is the three-month salary myth.  

Most people at some point in their lives have heard some variation of this myth. If you’re buying an engagement ring, expect to spend 3 months’ salary, or 25% of your annual gross salary. While this rule might be suitable for some people, it is absolutely not a catch-all that should be used to determine everybody’s budget.  


Let’s put some context around that. If you make $50,000 a year, should you really spend $12,500 on an engagement ring? We are not financial advisors, but that might be quite a chunk of change for a 25-year-old who is paying $1,800 in monthly rent and has $40,000 in student loan debt still to their name. However, what about a 35-year-old making $100,000, no debt, with considerable amounts of investments and wealth to their name – is $25,000 the right amount for them? Maybe.  

That’s why the three-month rule is a myth. Fiction. A lie. In fact, if this example shows us anything it’s that people getting married are often in very different places in their lives, so one all-encompassing rule to determine how to set your budget simply doesn’t make sense.  

Setting Your Priorities 

So, the three-month rule is a myth, and it’s good we cleared that up, but we still don’t have an answer. How do we set a budget? We start by deciding what our priorities are – in life and in a ring. 

The first thing you should do when setting your priorities is to ask yourself, “What does my partner want, and what do they expect?” Who are you giving this ring to?  

Does the person you’re giving this ring to have a dream engagement ring? Do they expect a diamond that is at least one carat? Would they rather save money for your future together than spend more on a ring?  

Answering some of these questions will really let you understand what your partner’s priorities are, and then you can see if they match your priorities. If they do – great! If not? Maybe sit down and have a conversation about it. An engagement ring is a big purchase, and you don’t want to miss the mark because your priorities aren’t aligned. 

Remember – budget setting is a very personal experience, and your priorities aren’t going to be the same as your best friend from middle school or your cousin from Boston. It’s perfectly fine for your budget to be twice as much or half as much as someone else in your life, as long as your budget aligns with your life priorities. 

Now, what are your priorities in a ring? Is it size? Shape? Setting? Some elements of an engagement ring will produce a bigger variation in cost than others.  

If the most important thing to you is getting a pear-shaped diamond, then you don’t necessarily need to worry about stretching your budget because there are expensive pear-shaped rings and cheap pear-shaped rings. If the most important part is carat weight, that’s a different story. If you know you don’t want to settle for anything under 1.5 carats, you need to go into the budget setting process understanding that there’s a floor to what you will spend. For example, the current least expensive 1.5 carat earth diamond in Ritani’s inventory is an Asscher cut which costs just over $2,300.  

Assessing Your Financial Situation 

So, you’ve assessed what’s important to you – in life and in a ring – which means you are starting to get an idea of what you want, but before you go into any detail in your search for the perfect engagement ring, you need to finish up setting your budget. This is the part of the buying guide where you have to be honest with yourself and ask the question: how much money do you have?  

Not in your pocket or even in your bank account right this second but take a look at your life and see where you are financially. This is where you start: How much money do you take home each month? Let’s write that number down and put a pin in it. 

How much money do you spend each month on fixed costs? These are things like rent or mortgage payments, utility bills, car payments, transportation, daycare, etc. – things you know you will pay each month and know (generally speaking) how much you will owe. 

Now, ask yourself how much debt you’re carrying. Credit card debt? Student loan debt? (Mortgage debt should go into your fixed cost calculation since you’re building equity with those payments). How much do you owe monthly for those bills, and how long will they take you to pay off?  

Finally, take the number you’re taking home each month, then subtract you monthly expenses and monthly debt payments. After getting rid of all of your fixed costs, how much money do you have left over each month? This is your maximum excess income. 

Take Home Income – (Fixed Expenses + Debt Payments) = Maximum Excess Monthly Income 

Excess income doesn’t necessarily mean money you can do whatever you want with, which is why we’re calling it the Maximum Excess Monthly Income at this point. You’ll still need to buy groceries, you may still want to go out to dinner or see a movie, and these things will cost you, but you can budget these items. Spend a bit less than on Friday night drinks so you can save more for your ring. When you’re considering your excess income for the purposes of budgeting, you need to ask yourself how much of that Maximum Excess Monthly Income you are willing to save on a monthly basis and not spend on something extra you might want – it won’t be all of it unless you’re in a situation where you don’t need to buy food. This number is your Excess Monthly Income. 

Now that you have an idea of the excess income you can put toward a major expense, let’s go back to that bank account – do you have any money saved? Do you have money that you’ve put away specifically for this purpose? Great!  

So, How Do You Set Your Budget? 

Now that you’ve listed your priorities and sorted your finances, you are ready to determine your number and set your budget.  

credit card and computer

How much have you saved for a ring? That’s your baseline. You’ve already determined you’re willing to spend that much money, and you’re comfortable with that number. How much longer are you willing to wait to make the purchase? Take that number of months X your Excess Monthly Income and that’s your cap. Now you have a budget range that will work for you, without the stress of buying something outside of your price range.   

Here’s an example: Say you have $4,000 already saved that you’re comfortable putting toward a ring. You want to propose in the next six months but want to have the ring in hand in three months’ time. You have $600 Excess Monthly Income you would be able to put toward saving more during this time. That makes your budget $4,000 to ($4,000 + (3 x $600)), or $4,000 to $5,800.  

Can You Finance A Ring? 

Financing is not for everybody, but you can absolutely finance a ring with Ritani that will allow you to split the cost of the ring over an extended period of time. This also takes the burden off of saving up front if you’re ready to propose now and want your engagement ring ASAP.  

That being said, you must be careful financing to make sure you don’t build up more debt than you can handle. So how do you know how much you would be able to finance? It’s the same formula, except instead of adding in how long you’re willing to wait, you consider how long you’re willing to make payments on a monthly basis. These are payments that will become fixed costs in your life, so make sure you are comfortable with the amount you choose. 

Amount Saved + (Months to Finance * Excess Monthly Income) = Financing Budget 

Let’s say you have nothing saved but are able to put $800 per month in Excess Monthly Income toward the purchase of your engagement ring. With Ritani, you get interest free financing if you pay in full within 12 months, so this is the maximum amount of time you’re willing to finance the cost. Your budget starts to come together: 

$0 + (12 * $800) = $9,600 

$9,600 becomes the maximum of your budget, and as long as you find a ring under that cost you know you will be able to pay down the purchase in exactly as much time as your account for. 

Conclusion 

Buying an engagement ring can be a daunting process, which is why setting a budget is so important. Once you have the budget you are comfortable with based on what’s important to you and how much money you are willing to put toward a ring, a weight gets lifted off your shoulders and the rest of the hunt becomes so much more fun. The money part is out of the way, and now it’s just about finding the perfect ring for the person you love.  

If you have questions about setting your budget or financing a ring, don’t hesitate to reach out to our top-notch customer service team. They can walk you through the process and make sure you have all of the information you need.