Who financed their engagement ring?

[OCmom3xboys]

I just got done getting a manicure/pedicure and this very sweet japanese lady (who did my nails) and I were talking about rings. She told me that her now husband bought her engagement ring from Tiffany's 10 years ago. He just started a new job and applied for a Tiffany's card, $15k for 1 carat, H/VS RB platinum solitare. She said it with her cute accent, "I didn't know, I thought that all engagement rings have to come from Tiffany's...my poor husband took almost 5 years to pay it."

It is a very pretty ring.

I guess people make monthly payments on cars too, why not engagement rings?...

 

[diamondseeker2006]

Hopefully the diamond outlasts the car, and at least the value eventually goes up!

 

[Spark_07]

I paid cold, hard cash

However, some people aren't in as liquid of a position and don't have the cash funds to do so. Some people will choose to finance and take advantage of the interest free offers, but that's only good if you can pay it off in full by the end of the term or that interest is capitalized from day 1. Those interest %s can be insane too - upwards of 20% easily. That $7K ring can end up costing you a heck of a lot more!

I've had a few friends take out loans from their 401k to pay for e-rings. Most plans allow you to take a loan for up to 1/2 of the total account balance, with repayment terms up to 5 years. You pay it back through automatic payroll deductions. You're literally loaning the money to yourself, and the interest rate is usually prime+1. Right now, that's about 4.5% - so a $6K ring over 5yrs would be about $55 a paycheck (bi-weekly). You're not paying interest to the plan sponsor - you're paying it to yourself. It's not treated like an early distribution, so no taxes or penalties from Uncle Sam. The main downside is that since you're pulling money out of your 401k you're missing out on potential investment gains.

 

[Dancing Fire]

I just got done getting a manicure/pedicure and this very sweet japanese lady (who did my nails) and I were talking about rings. She told me that her now husband bought her engagement ring from Tiffany's 10 years ago. He just started a new job and applied for a Tiffany's card, $15k for 1 carat, H/VS RB platinum solitare. She said it with her cute accent, "I didn't know, I thought that all engagement rings have to come from Tiffany's...my poor husband took almost 5 years to pay it."

It is a very pretty ring.

I guess people make monthly payments on cars too, why not engagement rings?...

the reason why he's POOR b/c he's been paying those high interest rates.the $15K ring now = $25K ring .

 

[Sheherizaad]

I would say it depends on your credit score. My fiance is a strong 780/800 so he got a very high limit card from Citi that was interest free for 15 months. He's paying it off monthly. Whatever amount is left after the 15 months, will be at a lifetime of 4.5% (not the interest from day 1 like the poster above mentioned although of course, that is true for MOST offers).

So in other words, hegot a free loan from Citi for the next year and a half and it's working out for us....

 

[Black Jade]

I paid cold, hard cash

However, some people aren't in as liquid of a position and don't have the cash funds to do so. Some people will choose to finance and take advantage of the interest free offers, but that's only good if you can pay it off in full by the end of the term or that interest is capitalized from day 1. Those interest %s can be insane too - upwards of 20% easily. That $7K ring can end up costing you a heck of a lot more!

I've had a few friends take out loans from their 401k to pay for e-rings. Most plans allow you to take a loan for up to 1/2 of the total account balance, with repayment terms up to 5 years. You pay it back through automatic payroll deductions. You're literally loaning the money to yourself, and the interest rate is usually prime+1. Right now, that's about 4.5% - so a $6K ring over 5yrs would be about $55 a paycheck (bi-weekly). You're not paying interest to the plan sponsor - you're paying it to yourself. It's not treated like an early distribution, so no taxes or penalties from Uncle Sam. The main downside is that since you're pulling money out of your 401k you're missing out on potential investment gains.

^That's a big downside.

 

[Black Jade]

I just got done getting a manicure/pedicure and this very sweet japanese lady (who did my nails) and I were talking about rings. She told me that her now husband bought her engagement ring from Tiffany's 10 years ago. He just started a new job and applied for a Tiffany's card, $15k for 1 carat, H/VS RB platinum solitare. She said it with her cute accent, "I didn't know, I thought that all engagement rings have to come from Tiffany's...my poor husband took almost 5 years to pay it."

It is a very pretty ring.

I guess people make monthly payments on cars too, why not engagement rings?...

the reason why he's POOR b/c he's been paying those high interest rates.the $15K ring now = $25K ring .

Yes. $15K ring +$25K ring by the time you finish paying for it very definitely. I can't think of a situation in which this is smart. I don't think engagement rings should be financed. I think a person should get one that they can afford and not go into debt. Debt is bad. I would think the financial crisis would have taught people that.
As for investment, try to sell that ring for $15K, much less for the actual price after the interest is paid. I don't think the person who bought it would get $3K fof it, honestly. Diamonds have very little resale value. You probably actually do better with the used car.

 

[Tanzigrrl]

People use credit cards in all kinds of different ways. My knee-jerk reaction is "credit card = bad," but there are times when it is useful. I have been known to use a CC on jewelry. BUT, that said, I also had the cash value ready to pay. I have never used a CC to finance a piece of jewelry that I could not buy that day in cash, if that makes sense. On occasion, I have found that it was advantageous for me to pay the CC across several months (before any real interest charges kicked in) as opposed to dipping into savings or a cash stash of some sort. I thought of it more as a lay away card because I thought I might need the cash or didn't want to part with the cash and wanted the the piece of jewelry, too. I'd almost always prefer to save up for the item, but there are moments when the CC, when used responsibility, is another useful tool.

 

[suchende]

I paid cold, hard cash

However, some people aren't in as liquid of a position and don't have the cash funds to do so. Some people will choose to finance and take advantage of the interest free offers, but that's only good if you can pay it off in full by the end of the term or that interest is capitalized from day 1. Those interest %s can be insane too - upwards of 20% easily. That $7K ring can end up costing you a heck of a lot more!

I've had a few friends take out loans from their 401k to pay for e-rings. Most plans allow you to take a loan for up to 1/2 of the total account balance, with repayment terms up to 5 years. You pay it back through automatic payroll deductions. You're literally loaning the money to yourself, and the interest rate is usually prime+1. Right now, that's about 4.5% - so a $6K ring over 5yrs would be about $55 a paycheck (bi-weekly). You're not paying interest to the plan sponsor - you're paying it to yourself. It's not treated like an early distribution, so no taxes or penalties from Uncle Sam. The main downside is that since you're pulling money out of your 401k you're missing out on potential investment gains.

^That's a big downside.

Ha, depends on the market conditions. Most of us would have been better off investing in engagement rings and effectively pulling our money out of the market at certain points this decade.

 

[iugurl]

My husband did. He COULD have paid cash for it, just chose not to. He also used a 0% interest card, so he did not pay a cent more for it than he would have had he paid cash. He wouldn't have used a CC had it meant any sort of interest charge.

 

[iugurl]

I just got done getting a manicure/pedicure and this very sweet japanese lady (who did my nails) and I were talking about rings. She told me that her now husband bought her engagement ring from Tiffany's 10 years ago. He just started a new job and applied for a Tiffany's card, $15k for 1 carat, H/VS RB platinum solitare. She said it with her cute accent, "I didn't know, I thought that all engagement rings have to come from Tiffany's...my poor husband took almost 5 years to pay it."

It is a very pretty ring.

I guess people make monthly payments on cars too, why not engagement rings?...

the reason why he's POOR b/c he's been paying those high interest rates.the $15K ring now = $25K ring .

Yes. $15K ring +$25K ring by the time you finish paying for it very definitely. I can't think of a situation in which this is smart. I don't think engagement rings should be financed. I think a person should get one that they can afford and not go into debt. Debt is bad. I would think the financial crisis would have taught people that.
As for investment, try to sell that ring for $15K, much less for the actual price after the interest is paid. I don't think the person who bought it would get $3K fof it, honestly. Diamonds have very little resale value. You probably actually do better with the used car.

Tell me where I can buy a 1 ct Tiffany Ring for 3k

 

[Haven]

We paid cash for my engagement ring, but we pay cash for everything except homes. Everyone's philosophy about this is different, but I prefer to live debt-free, as I love the freedom that comes with it.

I don't know many people who financed their engagement rings, to be honest.

 

[Acrossley]

We paid cash for my engagement ring, but we pay cash for everything except homes. Everyone's philosophy about this is different, but I prefer to live debt-free, as I love the freedom that comes with it.

I don't know many people who financed their engagement rings, to be honest.

We do the same as Haven. We comprised our budget according to D. Ramsey. My first ring consisted of my husband's late g'ma's .5 carat diamond. I now have the diamond in a right hand antique setting, but the diamond is kept purely for sentimental reasons! We were young and wanted to put our savings in a house rather than my ring. He upgraded my diamond for our second Christmas when we had the surplus. We JUST chose my upgrade setting and new diamond last week as we are now in year seven. Again - cash when we had it

I think it would be great to have a dream setting/ stone from the start IF you can afford it. We knew upgrades were (and are ) in our future. I think too many young couples get sucked into the commercialism of marriage - nice ring, new home, designer wedding. Cant afford it?? Just finance it. I see it often as a wedding photog ... It sets couples up for potential disaster.

 

[Spark_07]

^That's a big downside.

It depends on your situation - age, amount of money in your 401k, etc. If you're young and decades away from retiring, pulling $5K out of your 401k is hardly going to make a difference. Now if you were pulling out huuuuge dollars, like $20K, then that will obviously have a bigger impact. So the downside, for most, isn't actually that big.

 

[Sheherizaad]

Different strokes for different folks

We're skipping the wedding, no fancy honeymoon until we can afford it a couple of years from now and just saving money for a house (and paying down my ring). Your debt to income ratio I think makes a difference. We make a very decent salary and so for us, the zero percent credit card made sense. For others, it may not...

I pressed for the ring, I'll be honest, is because for me there is no upgrading. I'm the type that would rather wait 10 years than get something they don't want. In this case, it just so happened that 10 years is too daggone long for an engagement ring! lol

 

[diamondseeker2006]

I agree with your reasoning, Sheherizaad! If you can responsibly pay it off without paying much interest, I think it is great to go ahead and get the ring you can keep forever without upgrading!

 

[kelpie]

We put mine on a 6 month, 0% interest card although we could have paid cash if necessary.

 

[mayerling]

We bought it on the spot, but FI's parents asked at some point if he's still making payments on it, so I assume they must have come across people who finance.

 

[hoofbeats95]

We fiananced part of my recent upgrade. The upgrade was not planned, just a reset and a wedding band. So with the wedding so close we chose to finance. It's o% and will be paid off by the deadline. I try to never judge what people choose to finance or how they pay for things. I know people that take personal loans out to purchase horses. . . horses that have great potential, but could ultimately have a career ending injury at any time as they are a large animal that you can't control. I'm sure there are crazier things that are financed as well. To each their own.

 

[mrswahs]

Luckily FI paid for mine with cash. We've both been working on saving up for a down payment on a house. His savings took a bit of a hit, but that's much better than debt in my mind!

 

[lbbaber]

Cash, but I waited a few years for it because we bought our house 1st. My parents complained that we did things backwards---had a baby then bought a house and just now bought a ring (getting married next month) but we did it the way WE are comfortable with. I could have gotten my DREAM ring years ago but we put $100,000 cash down on our house. With the economy the way it is, I feel blessed to just have a home. The ring is now the icing on my cake Besides, I have the rest of my life with this man to aquire nice jewelry---and I am looking foward to it!!! (now that I have found PS, my gears are turning!!!! what GORGEOUS things I have seen on here)

 

[MichelleCarmen]

If a person has enough cash to pay for the ring but instead can use a 0% credit card and pay off within the time frame and make interest on their money which they can keep in the bank instead, seems like that could be an option. But, really, I doubt it would be worth the hassle, unless we're talking big bucks to begin with. It's just one additional bill to keep track of every month. That's just me though...I'm not perfect though...no debt now, but have used my CCs in the past for unwise purchases (lol!).

The Tiffany ring situation mentioned in this thread is sad though. Imagine if he had financed at a less pricey place and could of at least used the $$$ to buy her a great ring and a pair of earrings too.

 

[MichelleCarmen]

I paid cold, hard cash

However, some people aren't in as liquid of a position and don't have the cash funds to do so. Some people will choose to finance and take advantage of the interest free offers, but that's only good if you can pay it off in full by the end of the term or that interest is capitalized from day 1. Those interest %s can be insane too - upwards of 20% easily. That $7K ring can end up costing you a heck of a lot more!

I've had a few friends take out loans from their 401k to pay for e-rings. Most plans allow you to take a loan for up to 1/2 of the total account balance, with repayment terms up to 5 years. You pay it back through automatic payroll deductions. You're literally loaning the money to yourself, and the interest rate is usually prime+1. Right now, that's about 4.5% - so a $6K ring over 5yrs would be about $55 a paycheck (bi-weekly). You're not paying interest to the plan sponsor - you're paying it to yourself. It's not treated like an early distribution, so no taxes or penalties from Uncle Sam. The main downside is that since you're pulling money out of your 401k you're missing out on potential investment gains.

This is veering OT for a sec. I thought that if you take out $ from your 401K, you have to pay income tax on that amount? Is that different than a loan? Just curious. Someone I know took out a chunk and found herself owing a large amount to the IRS.

 

[OCmom3xboys]

Thanks for your stories and opinions, I just wanted to hear what others have to say about the topic, not to judge.

My now husband paid for me e-ring in cash too, we were older, both homeowners and he did have a budget of $15K for an e-ring and we both agreed that someday that we can always upgrade to my dream 5 carat ring

 

[diamondseeker2006]

I paid cold, hard cash

However, some people aren't in as liquid of a position and don't have the cash funds to do so. Some people will choose to finance and take advantage of the interest free offers, but that's only good if you can pay it off in full by the end of the term or that interest is capitalized from day 1. Those interest %s can be insane too - upwards of 20% easily. That $7K ring can end up costing you a heck of a lot more!

I've had a few friends take out loans from their 401k to pay for e-rings. Most plans allow you to take a loan for up to 1/2 of the total account balance, with repayment terms up to 5 years. You pay it back through automatic payroll deductions. You're literally loaning the money to yourself, and the interest rate is usually prime+1. Right now, that's about 4.5% - so a $6K ring over 5yrs would be about $55 a paycheck (bi-weekly). You're not paying interest to the plan sponsor - you're paying it to yourself. It's not treated like an early distribution, so no taxes or penalties from Uncle Sam. The main downside is that since you're pulling money out of your 401k you're missing out on potential investment gains.

This is veering OT for a sec. I thought that if you take out $ from your 401K, you have to pay income tax on that amount? Is that different than a loan? Just curious. Someone I know took out a chunk and found herself owing a large amount to the IRS.

No, no tax if it is borrowed from the 401k and paid back according to the rules.

 

[bertg16]

If they take out a distribution (or early withdrawal) from their 401k, then they'd have to pay taxes and penalties, but if you take out a loan and repay it, you won't have to pay any taxes/penalties on it. As was stated before, you can borrowe up to 50% of the value and have payments taken out of your check to repay it. If you change jobs, however, a lot of the times the balance will come due and you'll have to pay back the balance or the 401k company will treat it as a withdrawal and you'll get hit with taxes and penalties.

 

[MichelleCarmen]

If they take out a distribution (or early withdrawal) from their 401k, then they'd have to pay taxes and penalties, but if you take out a loan and repay it, you won't have to pay any taxes/penalties on it. As was stated before, you can borrowe up to 50% of the value and have payments taken out of your check to repay it. If you change jobs, however, a lot of the times the balance will come due and you'll have to pay back the balance or the 401k company will treat it as a withdrawal and you'll get hit with taxes and penalties.

Thanks for answering DiamondSeeker and Bertg16. I think she changed jobs...explains things!

 

[rosetta]

all my jewellery is paid for by cash. FI bought both rings with cash (savings did take a hit though!)

my philosophy for luxury items: if you don't have the cash, you can't afford the luxury.

it has served me well so far, so no plans to change the strategy.

 

[Spark_07]

I paid cold, hard cash

However, some people aren't in as liquid of a position and don't have the cash funds to do so. Some people will choose to finance and take advantage of the interest free offers, but that's only good if you can pay it off in full by the end of the term or that interest is capitalized from day 1. Those interest %s can be insane too - upwards of 20% easily. That $7K ring can end up costing you a heck of a lot more!

I've had a few friends take out loans from their 401k to pay for e-rings. Most plans allow you to take a loan for up to 1/2 of the total account balance, with repayment terms up to 5 years. You pay it back through automatic payroll deductions. You're literally loaning the money to yourself, and the interest rate is usually prime+1. Right now, that's about 4.5% - so a $6K ring over 5yrs would be about $55 a paycheck (bi-weekly). You're not paying interest to the plan sponsor - you're paying it to yourself. It's not treated like an early distribution, so no taxes or penalties from Uncle Sam. The main downside is that since you're pulling money out of your 401k you're missing out on potential investment gains.

This is veering OT for a sec. I thought that if you take out $ from your 401K, you have to pay income tax on that amount? Is that different than a loan? Just curious. Someone I know took out a chunk and found herself owing a large amount to the IRS.

No, no tax if it is borrowed from the 401k and paid back according to the rules.

That's correct. A loan is different than an early withdrawal. You'll be forced to pay an early withdrawal penalty (usually 10%) as well as income tax on the amount. Most plans do not allow a withdrawal before age 59 1/2. The loan is an entirely different thing - you're just agreeing to pay back the money you borrowed from yourself. It doesn't appear on your credit score, etc. Now if you fail to pay back the loan to yourself then it'll be treated as an early withdrawal and would be subject to the 10% + tax.

As for the changing jobs thing - it depends on the specific plan, but some plans will not force you to pay the outstanding balance in a lump sum as long as you continue the bi-weekly (or whatever you established) payments. All of this would be spelled out in the plan policies.