One of my good friends is getting married, and he asked me, “Sam, what on earth am I supposed to get her for an engagement ring?” What a question, that’s not easily answered. Generally, the right answer is “whatever she wants“! However, as we all know, sometimes ladies are harder to read than a children’s book in large print!
Before we begin, if any of you single guys out there want to attract the ladies, bust out the turquoise diamond ring guide book from Tiffany’s in any public space. The white book from Cartier will also do. I take the bus to work everyday, and I remember as soon as I took out the book from my bag, every single lady on the bus looked over. Just think, one of the great pick up lines to a staring woman could be, “Excuse me, but my friend asked me for his advice on this particular design (point to book), what do you think?” Clearly, if you use this line, you should not be proposing!
In the spirit of personal finance, let’s discuss some tips for buying an engagement ring.
TIPS FOR BUYING A RING
1) Decide between a name brand such as Tiffany’s, or a no name brand for 30-50% less. Only two things really determine this decision: What she wants, and whether you can afford it. Most people will tell you that buying a name brand ring is a waste of money, because diamonds are a commodity, and all come from the same mines controlled by DeBeers. Some women are aggressively against spending the premium. But, if your woman wants that Tiffany’s Legacy diamond ring, and you get her something else, she may secretly be disappointed. Finding out this basic viewpoint is tantamount!
Pros for buying name brand: Brand value resonates strongly with a lot of women and guarantees a minimum quality control involved. Tiffany’s, for example explicitly states they will only buy diamonds of exceptional clarity and near colorless or better. Furthermore, you have worldwide customer support, and a fun reason to always go to a Tiffany’s store.
Cons for buying brand name: 50-100% more expensive and people may think you’re wasteful for spending the extra money since we all know diamonds are a commodity, artificially priced due to a restriction in supply. Remember, the premium you spend could be used for other things, such as a nice honeymoon, the wedding, or good old fashion savings. Take a look at sites such as BlueNile.com, which has great tools in your search for the right rock at the right price.
There’s no right choice or wrong choice to this decision, just what your woman wants! It’s also worth highlighting “The Diamond-Water Paradox.” The paradox is that although water is essential to life, water is vastly less valuable than diamonds, which is non-essential to life. Some women might object!
2) The Four Cs: Cut, Clarity, Color, Carat!
Cut refers to the facet proportions on the surface of the diamond. The precise positioning of these facets determines the beauty of the stone. A proper cut with the right table, crown, pavilion depth, girdle, and symmetry will maximize the fire and brilliance of the diamond. The most common and desirable cut tends to be the “Ideal Brilliant Cut.”. You have to be most careful here, b/c independent dealers can really shortchange you with imperfect cuts, thereby selling you a diamond for more than what it’s really worth. CAUTION!
Clarity is essentially how clear the diamond is. Every diamond has blemishes of some sort, be it black carbon, inclusions, or chips. It’s ok to have these blemishes, but preferably not viewable to the naked eye. Who knows, you might get a massive discount if you can point out some small black carbon right inside a prong where nobody can see. The ratings from best to worst are: FL (Flawless) IF (Internally Flawless), VVS1-VVS2 (Very, Very Slightly Included), and VS1-VS2 (Very Slightly Included), SI1 (Slightly Included 1) and SI2 (Slightly Included 2). The best bang for your buck is VS1 and VVS2. Prices rise exponentially the higher you go.
Color goes from Colorless (D, E, F), Near Colorless (G, H, I, J), and Faint Yellow (K, L, M). The closer to colorless, the better. Forget about D and even E. Go for F, G, or H, as prices also rise exponentially in this department as well. You can’t tell the difference until you get to I. Get your diamond and cone a white piece of paper around it to see its true colorness. You’ll be surprised how pristine H color is.
Carat is the most recognizable aspect and commented on aspect of the ring. We’re talking as small as 0.18 carats to as large as 3+ carats in normal stores. One carat equals 0.2 grams. You can get your fiancé a 3 carat that’s cheaper than a 1 carat because of the lack of clarity, cut, and color. However, most women mention to me they’d rather have quality over carat size. One of the key things to note is that at every half-carat and 1 carat level, the price jump is huge. In other words, a 0.99 carat ring will sell for at least 10% less than a 1 carat, even if a 1 carat diamond is only 1% larger i.e. negligible. The same goes for 1.49 vs. 1.5, and 1.99 vs. 2.0 carat etc.
3) Understand what your girlfriend’s friends are wearing. If they all have 2 carat diamond rings with VVS1 clarity, and E color, well, it’s going to be tough not getting at least 1 carat with similar qualities. If her friends all have 0.5-carat rings, then getting much more than 1 carat may be poor form. Also, from the guy’s perspective, you don’t want to get your fiancé something so nice, that it makes your buddies look bad.
4) Use referrals. If you aren’t going to the established brand name stores, the absolute best and easiest way to go is through a friend’s referral. Obviously, your friend and his wife must be happy with what they have. People have been getting married forever, and dealers rely on referrals. If the referral is out of state, all the better b/c he can design or copy a ring, and ship it to you, thereby saving sales tax. Remember to always have the ring GIA certified as well.
5) Price. We must not ignore the cost of the ring. Women love to discuss what a man “should” spend on the engagement ring. Some believe the amount spent should be 3 months gross salary. Another woman, who comes from an extremely wealthy family, mentioned a ring should be flawless, and contain 0.1 carat for each year of age at the time of proposal. In other words, if she’s 28, then a 2.8 carat flawless and near colorless diamond ring for $80,000+ is what he should buy! Yeah right!
To put things in perspective, studies have shown that the average size and cost for a diamond ring is 0.4 carats and costs around $3,500. In big cities such as New York, Chicago and Los Angeles, the average carat size is closer to 1.6 and $25,000! The formula I propose all men and women to adhere to is that a man should spend as much as the present value of his automobile! If you’re driving a $100,000 Porsche 911 Cabriolet, well then off to Harry Winston you go for that 2.5 carat pink diamond! If you’re driving a 10 year old Honda Civic, then perhaps a $3,000, 0.3 carat, SI1, I color will do. How can your woman expect you to spend much more than what you’ve spent on your car? However, to not spend as much on the ring as you do your car shows that you are selfish and may love your car more than you love her! Women tell me this, so I have to agree. :)
6) Survey your colleagues. During my search, I surveyed every single woman on my floor about what they’d like so I could be in tune with what women want today. I thought they’d be more understanding, telling me to go with my gut, but instead, they were all very opinionated and all knew exactly what they wanted. “I want a minimum of 1.5 carats with D, E, or F in an eternity ring setting,” one female colleague insisted. Pretty intimidating, I must admit, but useful.
7) Investigate more. To get a basic idea of what my wife wanted, I would casually ask her what she thought of so and so’s ring, which would hopefully lead up to her revealing what she’d prefer. Everybody loves a nice surprise, but it is nearly impossible not to reveal a little intention, even if you ask her girlfriend to secretly ask on your behalf. Girls always talk, especially about engagement rings! This point goes back to point #1. We guys need to get her at least the basic cut and design of what she wants.
8} Finally, as soon as you buy it, insure it! Every single insurance agency has property insurance, and personal insurance policies for rings, watches, and other expensive things. Insurance isn’t that cheap. It’ll cost probably $30-40 bucks a year for every $1,000 you spend on the ring.
In conclusion, the ultimate way to save thousands on an engagement ring is to choose this combination: Buy a non brand name ring, 0.99 carats (or whatever carat just 0.1 below the half/full carat level), H color, VS1 clarity with no inclusions or carbon from an out of state dealer.
I have to imagine this combination is good enough for 80% of the women out there! You can’t really go wrong hovering around 1 carat, because that will straddle right in with the 0.5-to-1.5 population. Ladies, pls tell me if I’m wrong. Tiffany’s had their Novo style in this combination for $15,000 last year. My dealer could have got the same specs and design for $6,500 after tax. Who couldn’t use an extra $8,500? That $8,500 will be worth over $12,000 after 5 years in a 4% CD.
THE OTHER SIDE
One of my closest friends told me something interesting. He said, “Sam, we men should buy whatever we can get away with!” This may sound trite, but if a woman is happy with 0.8 carats to 1.3carats, then wouldn’t it behoove the guy to purchase the lower end of the range since she is happy with the range? Clearly, surprising on the upside is preferred. The more secure a man is with his girlfriend saying “yes”, the more he may think this way. The opposite may be true, for younger relationships.
I don’t claim to have the right answers, and at the end of the day, if your woman truly loves you, she’ll be happy with whatever you thoughtfully decide…. most of the time! If finances are tough, I would simply have an open conversation with her on how much you can spend and go from there. In this economic climate, I would even take a step back and simply give each other gold or silver bands and “upgrade” when things improve. Why do we have to go for diamonds anyway? Why not go for ruby’s or aqua marines? Unfortunately, there seems to be so much pressure from society for one to spend lavishly on engagement rings. I’m not buying into the extravagance, and neither should you if you’re serious about building your savings.
Readers, what are your experiences with regards to engagement rings?
Ladies, deep down, do guys really have to spend 3 months of their salary and get you exactly what you want or else?
Guys, any more tips on getting the best deals possible out there?
Is the whole engagement ring concept one big marketing gimmick to get us poor guys to spend all our savings?
Important note for women: If your man doesn’t make that much, absolutely know that he wants to give you the world. Most of the time, he just doesn’t have enough money. All he can do is research the heck out of the topic, and come as close to what he thinks you’d like within his means. If you still aren’t satisfied with what he gets, don’t say so, whatever you do! Instead, suggest that he spent too much money, and try and exchange for something cheaper (but really something different and more suitable to your liking, which may be cheaper). You can trick us this way. Engagement ring shopping is truly a segment guys want to do their best in, so effort must count even if we fail!
Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”
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