2 or 3 months salary? Before or after tax? 401k?

[jchau]

Disclaimer: I know the salary rule is a marketing promo created by DeBeers and should not be used as a guideline to set the price of an engagement ring. One should buy what one can afford.

Just for the sake of argument, what''s the current society''s take on the salary rule? I have searched the forum and most threads date back to 2-3 years ago, and most agree it''s 2 months. I had a ''discussion'' with my girlfriend last night who insisted the new rule is 3 months salary. I also want to know whether it is before or after tax? She even brought up 401k.

Most of our friends are around the same age, and the topic of marriage and engagement ring have came up often. I just want to get my facts straight next time I jump into another ''discussion''. I know this can differ by geographical region, living environment, and etc. But I would like to hear everyone''s input to get a feel of what the general public expects.

I have already bought my girlfriend the ring (she doesn''t know yet), and just bought the diamond I liked that seemed like a good value. I actually spent more than I initially planned, but I am glad I didn''t base my search mainly by price.

 

[fabcrab]

Just get what you can afford.

 

[Lorelei]

Date: 4/13/2008 12:53:37 PM
Author:jchau
Disclaimer: I know the salary rule is a marketing promo created by DeBeers and should not be used as a guideline to set the price of an engagement ring. One should buy what one can afford.

Just for the sake of argument, what''s the current society''s take on the salary rule? I have searched the forum and most threads date back to 2-3 years ago, and most agree it''s 2 months. I had a ''discussion'' with my girlfriend last night who insisted the new rule is 3 months salary. I also want to know whether it is before or after tax? She even brought up 401k.

Most of our friends are around the same age, and the topic of marriage and engagement ring have came up often. I just want to get my facts straight next time I jump into another ''discussion''. I know this can differ by geographical region, living environment, and etc. But I would like to hear everyone''s input to get a feel of what the general public expects.

I have already bought my girlfriend the ring (she doesn''t know yet), and just bought the diamond I liked that seemed like a good value. I actually spent more than I initially planned, but I am glad I didn''t base my search mainly by price.

We always advise to spend what you can afford as FabCrab mentions. Whether there is some '' new rule'' doing the rounds or not, spending what you can comfortably afford is always the best advice in my opinion, and I am sure you will get more PSers telling you the same!

 

[WTNLVR]

You can''t get away with saying you already bought the ring and not post pics-LOL. I think the current De Beers marketing is 3 months salary, don''t know if that is net or gross. Either way, I don''t think anyone uses that guideline as it''s totally outrageous for most. Do a google search and you''ll come up with some interesting thoughts on this marketing campaign.

 

[diamondseeker2006]

I think the months salary would vary a lot from a guy making $2000 a month as opposed to one making $10,000 a month! The first probably can save little of his salary and may need to only spend less than a months salary. The other may have a lot of savings and can easily spend 3 months salary. So there can''t be any hard and fast rule. I would never use 401k money, but I am not against borrowing an amount that could easily be repaid within a year, either.

 

[orbaya]

Date: 4/13/2008 12:53:37 PM
Author:jchau
Disclaimer: I know the salary rule is a marketing promo created by DeBeers and should not be used as a guideline to set the price of an engagement ring. One should buy what one can afford.

Just for the sake of argument, what''s the current society''s take on the salary rule? I have searched the forum and most threads date back to 2-3 years ago, and most agree it''s 2 months. I had a ''discussion'' with my girlfriend last night who insisted the new rule is 3 months salary. I also want to know whether it is before or after tax? She even brought up 401k.

Most of our friends are around the same age, and the topic of marriage and engagement ring have came up often. I just want to get my facts straight next time I jump into another ''discussion''. I know this can differ by geographical region, living environment, and etc. But I would like to hear everyone''s input to get a feel of what the general public expects.

I have already bought my girlfriend the ring (she doesn''t know yet), and just bought the diamond I liked that seemed like a good value. I actually spent more than I initially planned, but I am glad I didn''t base my search mainly by price.

If I may say so, it seems like your girlfriend is hung up on how much you spend, and wants you to spend more than you can. Do NOT dip into your retirement for a ring. Honestly, I can''t believe she would even suggest that. You will pay a lot in taxes and whatnot. Not a smart idea. Where did she hear about the 3 month rule? As others have said, buy what you can afford and don''t feel guilty if you can''t spend as much as she wants you to. Don''t let her pressure you into doing something you aren''t comfortable with.

 

[gwendolyn]

If you've already got the ring, I'd try not to think about her 'suggestions' for your budget. I'm slightly appalled at the fact that she suggested you take money out of your retirement fund to pay for a more expensive ring too. I can understand wanting the most beautiful diamond you can afford, but it sounds like she's just hung up on the pricetag rather that what you're getting for that money. That's slightly worrying.

 

[fabcrab]

Date: 4/13/2008 2:09:21 PM
Author: gwendolyn
If you''ve already got the ring, I''d try not to think about her ''suggestions'' for your budget. I''m slightly appalled at the fact that she suggested you take money out of your retirement fund to pay for a more expensive ring too. I can understand wanting the most beautiful diamond you can afford, but it sounds like she''s just hung up on the pricetag rather that what you''re getting for that money. That''s slightly worrying.

These are my thoughts exactly, but I didn''t want to say it in the beginning.

 

[Ellen]

If it gets brought up again, simply tell them it''s a marketing ploy, and you''re far too smart to fall for that. That ought to leave them, speechless.

And yes, perhaps a refresher course in what a 401K is actually for might be in order.

 

[kcgunesq]

Date: 4/13/2008 2:30:20 PM
Author: Ellen
If it gets brought up again, simply tell them it''s a marketing ploy, and you''re far too smart to fall for that. That ought to leave them, speechless.

And yes, perhaps a refresher course in what a 401K is actually for might be in order.

My guess is that the question was really, "when calculating what my monthly salary is, should I include that amount matched by my employer". In other words, which formula:

1. (take home)x2
2. (gross)x2
3. (gross + employer 401k match)x2

Not should he take money out of his 401k.

 

[Rhea]

The basic rule is (drum roll please)...whatever you can afford as others before me have said.

You''ll see people spending all over the board. Don''t buy into the marketing ploy. I''m appalled that your partner even mentioned the 401K. That''s way below the belt.

 

[vfrhokie]

I confess it''s not clear to me if the OP was intimating that she suggested he dip into the 401k, or whether he was trying to figure out if the "3 month" figure should be with or without 401k deductions. Similar to taxes, medical and dental premiums, contributions to HCAP or ESPP plans. If you''re buying into the marketing, just which numbers should you use?

Personally, I''m not getting close to 3 months, even net of all that stuff, nor would she want me to.

 

[lyra]

Well, rather than x months salary, how about you promise her x size diamond? Then the PS'ers will help you find what you want within your budget. I only ever joked to my husband about the 2 month salary thing. When we got engaged 26 years ago, it was strictly what we could afford, and that was it. It wasn't a huge priority. He did upgrade my stone this year, but even then he still didn't pay 2 months salary, and once again I *joked* with him about that. Seriously, there are other priorities, both when you're just starting out, and when you're just sending your kids off to university!

ETA: Even though I don't believe in the x months salary stuff, it is *before* tax.

 

[pixley]

Poor jchau! You have really been put through the ringer on this whole e-ring experience! What with your mum going into a flap about the color and now this. I think you''re up against some pretty tough obstacles regarding the strong cultural expectations set up by your GF and your family. I grew up in San Francisco before moving to Canada and I have to say, I saw a lot of wonderful couples spending way beyond their means to live up to those expectations. It''s a stressful lifestyle, and one that never lets you enjoy what you have, rather it leaves you longing for more, which as we all know, will never be enough. I hope you can convince her that it''s better to start your lives together on stable financial ground, rather than dipping into your safety net for something that is ultimately upgradable when the right time comes.

 

[cara]

Wow. I probably wanted a more expensive ring than was prudent, but it was because I wanted the ring, not the arbitrary expense! And going with the DeBeers standard is like asking a car salesman how much car you should buy!

The monthly salary guideline is hogwash, except in extremes. I would be put off my someone making 6 figures buying a $500 ring, unless it was just what the woman wanted, and it would be foolish for someone to spend their annual salary on a ring, unless there is some unusual backstory (ie. trust fund, lottery winnings, future spouse makes much more money, etc.) See, even then I put caveats on my extreme salary guideline examples.

I guess my guideline would be: spend what you can afford, with some consideration of what your girl wants and your social/cultural environment. ie, you are proposing to a social worker who wants to wear her ring at work. best not to spend the $30,000 that is 3 months of your salary on anything that looks like it cost $30k. or an example on the other end: your girl wants 1 ct and will never upgrade and her mother will never forgive you for less than G/VS, and this puts you 10% overbudget. Maybe its best to stretch a bit in this instance for the sake of not hearing about it for the next 30 years.

Go back and ask your girl why this arbitrary number is so important, and consider if all your financial ducks are in a row otherwise. Making retirement contributions, have a 6-month emergency fund in savings, paid off all other non-house debt (student loans, car loans, etc.)? Who will pay for the wedding? Any need to save for a down payment on a house? Would your girl ever consider upgrading the ring in the future if she is aiming for a certain size/color/clarity/setting? Is she just wanting you to meet the salary guideline to "show she is worth it"?

I would only worry about what she thinks, your friends seem to be playing quite a bit of keeping up with the Joneses.

ps. i assumed that the 401k was mentioned as to whether or not 401k contributions counted as income for the 2-3 month salary calculation, not that retirement savings themselves would be used to finance said ring.

 

[Ellen]

Date: 4/13/2008 2:41:21 PM
Author: kcgunesq

Date: 4/13/2008 2:30:20 PM
Author: Ellen
If it gets brought up again, simply tell them it''s a marketing ploy, and you''re far too smart to fall for that. That ought to leave them, speechless.

And yes, perhaps a refresher course in what a 401K is actually for might be in order.

My guess is that the question was really, ''when calculating what my monthly salary is, should I include that amount matched by my employer''. In other words, which formula:

1. (take home)x2
2. (gross)x2
3. (gross + employer 401k match)x2

Not should he take money out of his 401k.

Thanks for clarifying what might have been meant. I can only assume since you chose my post on the mention of it, and not the four people before me, I must be special.

 

[lisamarie]

i agree with the rest - it''s just about what you can afford. i know that''s not much of the answer you were looking for so i''ll give you my personal budgeting theory - take it or leave it. for me, i thought one month combined salary at gross was a reasonable starting point. not that i''m saying she should chip in necessarily, but i think your joint salary is a more accurate measure what your lifestyle can accommodate. then adjust from there based on your financial position. in any case, i''m sure she''ll be happy with whatever you give her - she''s marrying you, not the ring.

 

[Pandora II]

We spent a lot less than a month''s salary - but that was because I could get both the ring of my dreams and something I felt safe and comfortable wearing.

It was paid for in cash and didn''t impact on our savings/pensions/mortgage etc etc

Spend what you feel happy spending and can afford without having difficulties.

 

[jchau]

Date: 4/13/2008 2:09:21 PM
Author: gwendolyn
If you''ve already got the ring, I''d try not to think about her ''suggestions'' for your budget. I''m slightly appalled at the fact that she suggested you take money out of your retirement fund to pay for a more expensive ring too. I can understand wanting the most beautiful diamond you can afford, but it sounds like she''s just hung up on the pricetag rather that what you''re getting for that money. That''s slightly worrying.

Oh no! I dont mean she wants ME to spend 3 months salary and take out from my 401k. We were just having a discussion about what the current trend/norm is. I am not trying to make her sound like a gold digger! It was just a funny, friendly debate. Honestly, she doesn''t really care how much I spend. She just wants a ring, any ring to symbolize our marriage. But of course, like most women, she would be happier with a bigger, more expensive ring, but she''s not pressuring me to go that route at all.

I am actually just curious to what are people''s opinion on this salary rule. What about your friends and families? What''s the general consensus of our society? Is the salary rule just an urban myth? Or do most people really buy into it?

 

[vslover]

Date: 4/13/2008 5:23:57 PM

Oh no! I dont mean she wants ME to spend 3 months salary and take out from my 401k. We were just having a discussion about what the current trend/norm is. I am not trying to make her sound like a gold digger! It was just a funny, friendly debate. Honestly, she doesn''t really care how much I spend. She just wants a ring, any ring to symbolize our marriage. But of course, like most women, she would be happier with a bigger, more expensive ring, but she''s not pressuring me to go that route at all.


I am actually just curious to what are people''s opinion on this salary rule. What about your friends and families? What''s the general consensus of our society? Is the salary rule just an urban myth? Or do most people really buy into it?

I don''t really know anyone who spends the 2-3 months salary actually. Most of our friends have .25-.5 carat rings on decent salaries....I''m the only one with a larger ring. My DH makes more than the others...but no way would I want anything 2-3 months salary. I love diamonds...but that would be a ridiculous amount of money for a ring IMO. If he made less, perhaps I''d feel differently.

 

[Pandora II]

I think it''s more of a size thing.

If all your gf''s friends have a 1ct stone, she''s likely thinking that way. If her friends all have 0.5ct then 1ct will seem very extravagant whereas if they all have 5ct stones, 1ct will seem a LOT smaller.

It''s all relative. Here in the UK, most of my friends whose salaries are in the 6 figure (GBP not $) have 1ct centre stones.

Most people think the salary thing is a load of ...

 

[Octavia]

I was actually appalled when I found out about the "x months salary" gimmick -- I never knew about it until a couple years ago. Honestly, I can see how it would have made sense in the past, when a woman generally wouldn''t work after marriage and her family wanted to be sure that the man she was marrying could take care of her, but in today''s world it just seems silly to calculate things out that way. Not to mention that nowadays, in many states, if the engagement or marriage doesn''t work out, the woman doesn''t have the right to keep the ring anyway, so it''s not an "insurance policy" like it once was.

Anyway, as for the salary calculation, my best friend insists it''s 3 months. I''ve more commonly seen 2 months. My FI spent about a week and a half of his gross salary, and I''m more than content. I haven''t asked anyone else, since money isn''t really a topic of conversation in FI''s and my social circles, so I really have no idea what people make and spend. And IMO it would be downright rude if someone were to say, "Ooh, what a pretty ring! How many month''s salary is it?" So I''m pretty much basing my knowledge on what Brides.com and The Knot say.

 

[NewEnglandLady]

Date: 4/13/2008 5:18:00 PM
Author: Pandora II
We spent a lot less than a month''s salary - but that was because I could get both the ring of my dreams and something I felt safe and comfortable wearing.

It was paid for in cash and didn''t impact on our savings/pensions/mortgage etc etc

Spend what you feel happy spending and can afford without having difficulties.

Ditto to Pandora''s post. When DH told me he wanted to spend 2 months'' salary I told him I''d kick him in the shin if he even thought about it. I ended up finding something I love for under 1 month''s salary--no need to spend anything out of saving, our travel fund, retirement funds, etc.

I second those who say spend what you can afford, but would go even beyond that and say spend what you feel COMFORTABLE spending, because even if you can afford it doesn''t mean that''s what you need to buy.

 

[spike13]

I would not factor employer matching into my monthly salary.

As for calculating it before or after the 401k and other deductions it depends what I am calculating it for. Generally I consider what it is without any of the option things like automatic savings, that said I don''t consider my 401k contribution optional, so I base it on the number after that and taxes are taken out. In other words, what my take home is plus my automatic savings.

As a note, my automatic savings is used for large purchases or things like trips, etc that I may want. So I think it''s reasonable to include it.

Not sure if that''s how it''s supposed to be done, but that''s how I think of it.

Now if I were applying for a home loan or something like that, I think they look at the gross amount.

 

[Broosta]

My understanding of it is the traditional rule of thumb was 1 months salary(presume gross), and modern thinking is anything between 1 and 3 months(presume net?) with De Beers trying to steer it all closer to 3 months.
Personally I took the traditional 1 month salary (gross) route as a rough guide. It seems a sound figure to me. I can afford it with a few months of spending lightly, and whilst I could go higher now we decided not to and can always upgrade in the future if we want. It was a joint decision in the end.

 

[DiamondExpert]

All things are relative...pay only what you are comfortable with, I mean REALLY comfortable with.

I'll be married 46 years (yikes, I can't believe it!) in August and the ring cost $140, so that's about $3/married year (not a bad bargain!)...Oh, and SHE paid for the ring since I was in grad school and she was working at the time!...ya, not a bad deal at all!

 

[mandielee]

Here''s the hilarious thing - DeBeers picked different numbers for use in different parts of the world!

2 months in the US, 1 month in Europe, 3 months in Japan, with the reasoning being that Europeans generally don''t give engagement rings and would consider anything more than a few weeks'' pay entirely excessive, but that Japanese men will lavish money on their sweethearts.

My German fiance offered to let me spend up to about two months of his pre-tax salary (and income tax in Germany is really high!), but my beautiful ring-to-be will run a little less than 1/3 that, because even spending that much at a good place in the US like Whiteflash will get a ring that is way nicer than anything I''ve seen on a German woman''s hand outside of the opera.

I picked out a 1ct stone in a relatively simple setting (WF''s "Sleek Lines"), and am wondering if it will look gaudy to my German neighbors. Most Germans exchange wedding rings, wear them on their left hands as engagement rings, and then start wearing them on their right hands after the wedding, and many more than in the US don''t bother wearing them very often. The jewelry shops in our medium-sized city have very few stones over 1/2 ct. A decent-looking 1/2 ct ring, btw, will set you back 2500-3000 EUR (about $4000-5000) around here...

 

[vespergirl]

Hey there, my husband''s a pretty conservative guy, and clueless about jewelry, so when he asked around, people told him to spend 2 months salary and that''s what he did. He had the cash saved, so that amount didn''t put him in debt to spend it. And, that also happened to find me around the size diamond that I wanted. But, you should spend more or less depending on what your girlfriend likes, and what your financial situation is. I just think that the old rule of 2 months salary is a safe bet.

 

[LitigatorChick]

My "push present", which I wear on my RH, was worth 2% of our gross income - that a whopping 1 weeks salary!!!

To echo everyone's comments, buy what you can afford and what you feel comfortable with.

 

[Splinter]

My girlfriend would kill me if I spent 3 months salary on a ring. I''m currently pricing stuff that''s maybe just over 1 month. And that''s only because I want something really unique for her. When I mentioned the price of rings (trying to be subtle because she doesn''t know what I''m up to...) she said she would rather I spend the money on a nice holiday for us, or a bunch of great evenings out or something like that. The memories and experiences of our time together are worth more to her than a ring and a stone. It''s just a symbol at the end of the day.