There’s a common myth that a diamond ring is some form of investment. Back in the 1800’s diamonds were rare but with many more diamond sources discovered in the late 1900s, diamonds became more and more abundant. The only reason the price has remained so high is that the main company mining and selling diamonds, DeBeers, steadily purchased all diamond mines across the globe, in effect, creating a diamond monopoly and setting whatever price they chose. That monopoly ended in 2001 but the prices have stayed consistently high ever since.
Like a car, a diamond is a depreciating asset. It loses a large portion of its value the second you buy it. Think about gold and silver. The market for them is very liquid since you can store coins, and buy, sell or trade them at just about any time. That’s not the case with diamonds though since the resale market is nearly illiquid.
Selling a Diamond
Since there’s generally a 100-200% markup on the retail price of a diamond, most stores won’t even buy back diamonds from consumers for two reasons. The first is that since most retailers receive their diamonds from wholesalers they don’t need to pay for them until they’re sold.
A half-carat diamond ring, which might cost $2,000 at a retail jewelry store, could be sold back to a wholesaler for only $600.
What is important to each of you?
Did you know that just 80 years ago only 10% of women got engaged with a true diamond engagement ring? It wasn’t until recently that the large majority of women began receiving diamond rings when getting engaged. It is important to recognize that handing over an expensive ring has certainly become the norm in America and it is something that your significant other many be expecting. For this reason, you and your spouse may believe that having an expensive diamond engagement ring is essential to the happiness of your marriage and that is okay! However, please understand that the expense of that ring may land you deeper in debt and may prevent you from enjoying other investment or life opportunities. Also understand that if that is the case then you’ll want to find a different blog that discusses the importance of the cut, clarity, and carat of the ring.
On the other side of this issue, if you are both legitimately on the same page and agree that a real diamond won’t effect the happiness of your marriage and you’d prefer to put those funds toward a different use then there may a few alternatives that you should be looking into.
One Alternative Options
If you have spent any time shopping for a ring you’ve heard about how important the cut, clarity, and carat of a diamond are, but did you know anything about that before shopping for a diamond? I doubt it. Have you ever noticed anyone inspecting their friend’s ring to determine the exact clarity of the diamond? Probably not. If the look of a high quality diamond ring is what you’re after and if you understand that a silver ring with a diamond stone looks pretty darn similar to a stainless steel ring with a cubic zirconia stone then you might be ready for the “under $50” aisle on Amazon. Seriously. Go to amazon, search engagement ring and set the max price at $50 (or $100 if you really want to go overboard). There are some incredible rings being sold at life changing prices. What’s more, each of the more popular rings has hundreds of 4 and 5 star reviews. Check out this one for about $17 which my fiance and I decided on. Will the ring last forever? Probably not. However, you certainly have the option of buying one or a couple back up rings as well as the option of replacing the ring with a real diamond ring when you reach a more financially stable point in the future.
“But won’t people laugh at me for having a $17 engagement ring?” This can certainly be a concern and having a $7,000 rock on your finger can at times be a confidence booster, but you don’t have to tell anyone that that’s the case AND NO ONE WILL BE ABLE TO TELL ON THEIR OWN!
If you do choose to tell people you may get a kick out of their reactions. Typically when young men who are soon to be engaged hear about this they show a stunned look on their face while you can see them calculating whether or not they’d be able to pull of something like this with their soon-to-be fiance. Regardless of the reaction you’ll be happy knowing that you’re not paying 25% APR on a $7000 credit card bill while trying to pay the ring off or knowing that the investment you put that money in is bringing you one large step closer to financial independence.
There are many trade offs to make in life and I believe that if you can save yourself from a significant amount of debt or put a significant amount of money toward investments early in life then you are setting yourself up for a much more stable financial future. That’s the route we chose to take and we are certainly happy with it as a couple. That being said, I want to repeat that you’ll want to make sure that this is what each of you want. If either partner had dream all their life about giving or receiving a diamond ring and that doesn’t turn out to be the case then there may be a more uncomfortable conversation following the proposal. Do what makes the most sense for you!