Wedding Ring Debt

The following guest post is from Neal Frankle of Wealth Pilgrim. Wealth Pilgrim is on my short list of daily reads. After reading the post, head over to Neal’s site and sign up to receive his posts.

How would you advise a recent college graduate who wants to get married, is in debt but is able to save money every month?

I received this email from Dean who is in this situation right now:

I have about $24,000 of low interest student loans to pay off, and am building up emergency savings. I know it’s smart to pay the minimum on the loans while they are at a low 3% and invest some extra money, but am I really able to invest for a year knowing that I need a full year to gain long-term gains privileges?

Even as I write this it seems like putting in $300 a month would be a good idea, while putting the rest ($400+?) in savings.

I think I’ll have to pay for a ring in about a year (knock on wood), so I should keep that liquid.

What advice would you give Dean?

Before I get started, I have to come clean on my own bias.

I just hate debt. It’s more than just a financial issue. I just don’t like owing money to anyone and I don’t like it for other people either.

My experience tells me that nobody ever got rich having debt.  More important; I’ve never met anyone who had a lot of debt who was really happy.

Of course, plenty of people made money in real estate.  And they did that by taking out mortgages.  But that is just about the only kind of debt that ever makes sense to me. And as recent events prove – mortgage debt can also be dangerous.

Having owned up to that, here are my thoughts for Dean:

1. You have to take a great deal of pride in having the foresight to even look at this issue.   Many young folks don’t even take the time to consider asking for advice. They do what they think is right without bouncing the ideas off of other people.  Dean is a frequent visitor and commenter on many financial blogs.  That means he’s doing what he can to educate himself and make smart decisions.  Bravo Dean!

2. I also like the idea of building up an emergency savings account.  Just make sure you know how much you need in that account.  From the information you provided, it’s tough for any of us to tell you what that amount needs to be but a good rule of thumb is 6 to 12 months of spending.  But remember than an emergency fund is liquid and it’s invested in the bank.  You won’t get much of a return but you get liquidity and safety.  That’s what you should be looking for when you set up an emergency fund.

3. I don’t like the idea of investing the money you could be using to pay off debts.  If you invest that money, it assumes you can do so and earn more than the 3% that you are paying on your debts.  Bank accounts aren’t paying 3% so you must be investing in the stock market.  While you’ve made a killing on that strategy this year (so far), nobody can guarantee that strategy will work out over your own time frame.   In fact, the interest they charge you on your debts could sky rocket just at the time when your stock market investments tank.  Not a pretty picture.  I’d play it safe and throw everything I had at the debt.

4. I’m not a huge fan of making investment decisions based on tax consequences.  The tax angle is important, but it’s secondary. The most important consideration should be your goals and risk tolerance.  You can’t control where the market is going to be when you need the money.  For that reason, if you invest in the market, you should do so with the idea of keeping your money invested for at least 5 to 10 years.  If you need the money in 12 months and you invest in the stock market, you are speculating and therefore, taking on much greater risk.  This doesn’t turn me on all that much.

5. “The Ring” scares me.  Dean, if you are in debt, I’m going to assume that your fiancé knows about it.  Have you discussed your finances with her?  Is a ring the best use of your money when you are just starting out?  Do you think it’s more important to invest in a ring than it is to invest in yourself?  Have you and your future wife considered the trade-offs between the rock and the freedom (of having less debt)?

Again, I admit that I have a bias against spending a ton of money on jewelry and I might be alone on this. In fact, I only bought a “nice” ring for my wife on our 20th anniversary – when it was well within our budget and at a time when we were fortunate enough to have no debt.

(Had she insisted on having an expensive rock on her finger before we got married, it would have been a huge red flag for me.  It could signal that we had different values and therefore not well suited for each other.)

When considering the choice between a diamond or cubic zirconia, price can play a major factor in that decision.

Comments

  1. I’m very impresses by Dean. While I’m more in the same camp as Neal (I hate debt and think expensive jewerly is not worth it), I think considering Dean’s stage in life and the fact that he is so involved in finances already, he has a great plan in action.

  2. A ring? Seriously? Gah! I have a simple gold band and I also have several “fun” rings I trade out on that finger from time to time. I do have a beautiful heirloom diamond from my grandmother but I never ever wear it. I am always terrified I will lose it. Save your money. Invest in something worthwhile besides a ring!

  3. Share with her the gift of responsible spending and a stable future. Buy a ring you can afford. As above, the kind of person who insists on 24 months salary spent on a ring likely doesn’t share your values.

    In some families, it is somewhat traditional to pass down family rings. This could be a good avenue for you.

  4. I agree with the statement about the ring. When my husband proposed to me fresh out of college, it was with a white gold setting and a single (small) stone. The entire ring probably cost him well under $1000. Two or three years later, after we had paid off our credit cards and some other debts, we went to a well respected diamond exchange in the area and upgraded my ring to a 3 stone setting that I absolutely love and will be happy with for the rest of my life. It did not bother me in the least bit that I started out with a small ring. Your future fiance should be happy enough to marry you – she should be more concerned about your future together. I bet she’ll understand – if so you’ve probably found a keeper! ^_^

  5. If Dean saves $400 a month for the next year, that’s $4800. That’s a nice little cushion for someone who is just starting out. I don’t think an inexpensive ring would be unreasonable, as long as he’s not making a habit of making big purchases while he still has so much debt. And I’m glad to hear that Dean will be paying cash for the ring. Sadly, I know way too many people who simply put it on a credit card.

    If Dean’s girlfriend is open to it, they could consider a moissanite ring. They look almost identical to diamonds and are a good bit cheaper.

  6. He should think hard about what the girl really wants and look for signals from her. My guess is that she wants what the ring represents and that it is the jewelry company that has put the idea in his head (through advertising) that she really wants an expensive ring. He’s not marrying the jewelry company.

    On the other hand, if she really does want the ring (perhaps she has been exposed to some advertising herself over the years), he would be a fool to let her get away over the cost of a ring. The relationship is more important than the ring, but the relationship is also more important than the money that could be saved by not buying the ring.

    Rob

  7. Rob: On the other hand, if she would be willing to leave him over the cost of the ring then is she really the type of person that’s marriage material?

    I married about $10,000 debt, with full knowledge that was going up to $40,000 in school loans before all was said and done. If he had spent too much on the ring I might have dumped HIM for being so irresponsible. He got me a beautiful non-traditional engagement ring for under $300 and my wedding band cost $35 (his I think cost $95). My mom never had a nice ring and she’s been married 35 years…but they were able to retire at age 50 and move in to their dream home.

    As a couple, they should discuss what they really want out of life together, and use that as a guide where to put their money. The conversation might be quite illuminating.

  8. If his future fiance is on the same wavelength as Dean she might be happy with a fake diamond. I have a real diamond and rarely wear it – as I have gotten older it is not as comfortable to have a “rock” on my finger and I just don’t find importance in jewelry the way I once did. Partly it is a change in values, partly it is the realization of the “cost” of mining. I have a friend that has a CZ engagement ring and she is happy with it. If they want a real diamond I would look for an estate (used) diamond that could be reset into the setting of her choice. It would save money and the environment.

  9. You may also consider, depending on her tastes, getting a smaller centerpiece diamond now and upgrading to a larger one later down after debts are taken care of and you feel financially sound enough to splurge.

  10. My husband and I married right out of college and we both had some student loan debt. My ring is not extravagant, but it is a good quality diamond that he saved for for over a year. It was important to both of us for me to have a nice ring. We didn’t spend a ton on the wedding but 15 happy years later we are both still happy with his decision regarding the ring.

  11. When my parents got engaged hey didn’t have the money for a ring, instead of going into debt he proposed with a wedding ring made from electrical wire, and a promise to save up for a real ring before the wedding. After six months of being engaged and her proudly wearing her wire ring he had enough for a good engagement ring.

    While the story doesn’t seem glamorous it’s got a certain amount of romance IMO.

    -MBirchmeier

  12. Most women I know would (and are) happy with something pretty and simple, or a family heirloom. It sounds like Dean could up his student loan payment some, sock the rest in a liquid savings for a time, and buy the ring at a pawn shop with cash (she’ll never know unless you tell her.) Then, down the line when they are completely debt free, if they want to, upgrade for a special occasion or anniversary. This would seem to take care of all of the issues.

  13. If you’re going to buy a ring, look for online vendors. You’ll get a lot more for your $$, and typically a lot more for less $$. Bluenile is one of the largest online jewelers, they are even a publicly traded company.

  14. We spent about $30 for two 10K plated bands at a wholesalers 26 years ago – LOL! After we were married, my MIL gave me the ring my husband’s late father had given her, so I (I did not know about it) ended up with a $8K rock that I never wear. And then my grandmother willed me her engagement ring (not really sure why) a few years ago, and I never wear that either. I think it really depends on the woman and the couple as to whether a ring is important or not to the upcoming marriage… Not every gal needs or wants one to be happy.

  15. I’d like to say “congrats!” to Dean for sounding like he has his head on strait and is looking into how to build the best future for himself (and a possible wife).

    I have to agree with FD on this one – even the online high interest rate banks aren’t paying enough interest to compete with paying down the debt. Maybe 1.30% earned vs paying 3%? Pour that money into paying down the debt and get that albatross from around your neck. You’ll be amazed at the wieght that will lift off your shoulders once the loan is paid off.

    As for the ring… Honestly, I’ve never understood the fuss. If my guy got me a really expensive one, I’d be terrified to wear it daily for fear of losing/damaging it. If it took him into debt to get it I’d be putting a size 8 in his butt! There are perfectly lovely rings that don’t cost an arm and a leg and that your girl won’t have to worry about.

    Handy hint: the two months salary thing for the ring is a merketing ploy that most of the country has bought into. Take the sucker sign off your back and buck the trend.

  16. Instead of focusing on the ring, I’m going to focus on this sentence:

    “Bank accounts aren’t paying 3% so you must be investing in the stock market.”

    There are many fixed-income investments that pay more than 3% and have nothing to do with the stock market. A few examples: Muni bonds; corporate bonds; Lending Club/P2P lending; real estate based on cap rates instead of speculation.

    There are also dividend stocks that will pay out far more than 3% as a stable income.

    I’m currently a fan of Lending Club; I’m earning over 12% there consistently, but muni bonds and corp bonds would also work in this case, and in each case, there is not a ton of downside risk.

    -Erica

  17. Erica,

    He’s talking about investing short-term so muni bonds, corp bonds etc would be, IMO, would not be a choice I could get behind. Interest rates are low…and when they rise those bonds will get creamed.

    Also, not sure you can say that Lending Club has little downside risk.

    I’m not an investor so I can’t say but if you absolutely need the $$$, I’d suggest shying away from those choices.

    Paying down the debt seems most attractive to me.

  18. I don’t believe in participating in the diamond trade (the problem isn’t just blood diamonds) and I told my husband – then fiance – so.

    I basically let him know that I wanted some fabulous cubic zirconia. (You can find some GORGEOUS rings, really!)

    He didn’t feel comfortable going that route and he ended up getting a synthetic sapphire set (blue is my favorite color) which cost less than $500.

    We managed to work it out and the ring is GORGEOUS.

  19. We purchased a Ring for 1K & 500$ for our wedding, Opal & Gold.

    Would never buy a diamond, Ethics Issue.

    We decided it was much better to save the $.

  20. i got married at age 28 and my ring costs $349. my husband had a hard time with the idea that i wanted to pay cash for a ring and i don’t like diamonds. he thought that buying an inexpensive ring reflected that he was cheap and/or could not take care of me. now that we have been married 3 years he is proud to say that we are not paying off a ring and we have money in savings instead.

  21. I agree with Rob. When you are in love you’ll figure out what the other half wants and try to give it to him/her.

  22. I know this is nitpicky, and I know that most people don’t give a damn about how something is spelled (especially on the internet)….

    but the young man is the fiance and…
    the young woman is the fiancee

    (Sorry, didn’t put in the accent marks, but in French male versus female are often spelled differently).

  23. Sometimes, it’s not really about a ring, regardless of what it costs.

    But it’s important not to discount the importance of a ring, now, for his fiance.

    It doesn’t matter what any of us thinks about the ring and the cost. It’s all up to Dean and his fiance. He should be honest about his monetary concerns and discuss his discomfort at spending the money on an expensive ring now…and then they should both be able to figure out an acceptable alternative.

    When you really love someone, you don’t want them to be unhappy –on either end. So how this is resolved should tell them both a lot about how they will be able to communicate with each other. This is just the beginning of many talks about things requiring some degree of compromise.

    Good luck.

  24. My husband gave me a princess cut small diamond ring (I dont even recall the carat, being a woman myself:O) and that was for $700 bought during Thanksgiving sale 2 years back;-)With the ring, all I know is that I have someone whom I can trust and who belongs to me. Apart from that I dont really think that spending on bigger and more expensive diamond holds that much importance!

  25. You’ve heard a lot about the ring, so I’ll just say I agree with those who say keep it reasonable. Let’s talk investing vs. paying off debt.

    I invested a lot when I was 22-23, just before the dot-com boom. I was convinced I was going to be a millionaire by 35 because the returns were out of sight. Let’s just say it didn’t work out for me. Today, those investments are worth close to what I put in initially, and that’s actually an improvement.

    Around age 28, I went on a debt-elimination kick. My debt was almost entirely what people call “good debt”: Just a car payment (on a Honda Civic, so it was reasonable) and a mortgage. It took about five years to pay that debt off. Had I been dumping that money into the market at the time, it would have lost 40% of its value. Instead, I own a house and a car outright. I’m pretty sure I did the right thing there.

    I do think you should be saving some. But you know exactly what the rate of return on paying off debt is. You don’t know the rate of return on the market. So let’s say at the end of the month after you’ve met all your commitments, you have 20% left over. Invest 10% and pay down debt with 10%.

    Then, when you have no debt, you can afford to ride out the market’s storms and invest for the long term.

    Also, make sure your girlfriend (and hopefully future fiancee and wife) is on board. My wife was far more understanding than most would be. But she wasn’t as gung-ho as I was. That said, not having car or house payments eliminates a big source of worry.

    I hope I don’t sound harsh, because you really should be commended to even be asking these questions. In my early 20s, I sure wasn’t.

  26. Retire your debt. Grow your emergency fund. Forget the ring. Lifelong debt is a curse from which you want to be delivered first and foremost.

  27. My son just went thru a very similar situation. Marital debt after a divorce. He ultimately shared this info with his new girlfriend. Her response: No dinners out until he paid off his debt. She dutifully cooked for a year until he was debt free…talk about a keeper!!!

    If Dean really wants to knock down his debt…take a 2nd job for awhile & put all he earns on that debt….his fiance will appreciate it!

  28. I hate debt. My wife of 32 years and I have been debt free since 1993. We taught our son to be debt free and he is. The real question is: does your future bride to be have a heart of gold or a heart for gold? Marry the first and run from the second. At least you are thinking in the right direction.

  29. If anybody wants a good read on diamond engagement ring shopping, I wrote I post called “Diamond Engagement Rings, Bling Bling!” where I chronicle my journey to getting the sweetest deal I could find.

    Don’t go into debt for marriage or the ring!!

  30. Since we know nothing about the writers fiance I think it is rude to assume she has nothing less than every best interest for the relationship. Just because he wants to buy a ring doesn’t mean he is spending all his money on it. I would be more worried about him spending too much money on the wedding.

    My ring was the most expensive part of the wedding,it was $1200 for a engagement / wedding ring combo. I can wear both forever, and didn’t waste money on the engagement ring. Plus, I got a killer ring that I absolutely love and don’t care what anyone else thinks.

    Now for my wedding, including honey moon, travel, dress, ect., it cost about $2000 total. Not kidding, it was that cheap. I wanted more to have the ring to wear every day to remember us getting married, than a day of parties and pictures that wouldn’t mean as much to either one of us.

    So before anyone complains about the cost of the ring you should really find out more about the situation. I for one have been happily married for 5 years and have no regrets over either the rings or the wedding. I would do it the same way if I did it over.

  31. ALL of the above posters have the right ideas…the two month salary diamond is an advertising ploy. CZ & family rings are all a good idea. I wore a beautiful birthstone ring, and then we exchanged simple gold bands. I had a moral stance—I had seen an inverse relationship between the size of the “rock” and the length and happiness of the marriage. It worked for us–thirty years this December of joy!

  32. It will be 28 years in December…and I still do not have an engagement ring. We were so broke when we got engaged that we agreed to put our money into the best gold wedding bands we could afford. That was between $100-150.

    Would I have liked to flash a ring? Sure. But I wanted to know we had no debt even more. Someday I’ll get my ‘engagement’ ring — but first, I want to travel to Ireland. No ring will change my husband’s love for me — and mine for him.

  33. Although ring is important it’s not the most important part of the marriage or relationship between man and woman. It is way more important to have your partner on the same page with you. If your future wife gets hysterical about not having the biggest ring in the store you might want to revise your decision to marry her.

  34. So what if you want to buy an expensive ring? I read once that statistics show that when a woman eventually decides to ‘upgrade’ the diamond on her engagement ring, the chances of divorce increase dramatically. In other words, she was not happy with the ring size, the couple did not see eye to eye on monetary issues. Have a heart and give the girl the ring of her dreams…15 yrs. later and I still look at mine and think how lucky I am that my then-poor (now doing just fine, thanks!) husband made such a leap of faith! :) Good luck! You can save and eat cake, too!

  35. A big, fancy ring does not show any more love than being reasonable and paying down the debt. We have matching wedding rings (no engagement ring)and have a happy marriage. I thing being on the same page financially is more important than a ring to flash. It shows more love and commitment to go into the marriage with as little debt as possible.

  36. I have to agree with Neal on every point here.

    Dean… pay off your debt first man. Sure, maybe you could make a little more by investing now, if you can average a higher rate than your loan. But if you pay off the debt, you are guaranteed not to owe on that debt any longer.

    When you parlay debt repayment and choose instead to invest you are presuming upon your future ability to earn money… which is not wise. Always get rid of debt first.

    As far as the ring goes, like Neal said – talk to your fiancee and explain the situation to her. If she is also wise, she will undoubtedly put her own wants aside for the length of time that it will take you to save up to purchase the ring she desires.

    Hope this helps man, Godspeed!

  37. I personally think Lab diamonds are prettier than mined diamonds. When I got married I spent $130 for my wife’s ring, and I just got a simple band from Wal-Mart.

    I recently read 100 Secrets of a Stingy Scoundrel and he had a great idea. Buy a really nice cubic Zirconium ring and pass it off as a family heirloom. If she ever get’s it appraised and finds out it’s not real, It’s ok. You can just pass the buck.

  38. Wedding bands should not have to be expensive, they just have to represent your love and happiness. A $100 ring should be just as meaningful as a $10,000 one.

  39. My boyfriend and I talked about engagement rings, and he’s going to get me a CZ. No ethical dilemmas and it looks just the same.

    Though shame on those who suggested that he just buy a CZ and lie about it! That’s no way to start a marriage.

  40. My wedding “band” was 7.99 stainless steel from Amazon. My wedding “ring” (I didn’t have an engagement ring and didn’t want one) was more expensive but was paid in cash. I was so happy not to have ring debt like so many people I know.

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