Updated on 05.26.10

Reader Mailbag: You Vote With Your Dollar

Trent Hamm

If you like a particular film and want to see more like it, see that movie in the theatre or buy the DVD or at least check it out from the library or watch it on a streaming service like Netflix. If you like a particular type of music, pick up a legal mp3 of it from Amazon or at least listen to it streaming on Pandora.

To put it simply, if you just complain about what’s available and buy nothing, you can’t realistically expect it to get better. In fact, if you put even a cent towards supporting stuff you don’t like (like going to a really bad movie), then you’re going to definitely get more of the same.

Your purchasing dollars are also a vote for what you want to see/hear/enjoy more of. Keep that in mind the next time you consider seeing an awful sequel or remake. Instead, go buy a discounted DVD of a really great movie from a few years ago and watch it at home with some friends.

So here’s my overall situation first. I am 26, unmarried, work for the Navy in a secure job as a GS-11. I’ve been here for almost three years now, and I enjoy it, but I’m not planning for this to be my job forever. Back in 2007, about a year after I had the job, I bought a small but comfortable house (~1000 sqft) with the extra cash I had saved for a 3% down payment. I have a decent interest rate (5.95%), no other debts (no school or car), put 5% of my check towards my TSP (with matching employer contributions of 5% as well, putting me around ~$10,000 there), save at least $600 a month, with a comfortable $13,000 in my “emergency fund” as of this month (in ING at 1.1%).

My question relates to my house. I am not sure if paying more towards the mortgage is a good idea at this point, since I doubt this house will be my final house. I do really like it, and it’s a good place for the moment, but all improvements I’ve done are with resale value in mind. I have plenty of other things I could think of to save for, or spend the money on. I’m sure you’d say Roth IRA, but I’m pretty hesitant and ignorant about investments/retirement stuff at the moment. Give me a break, I’ll get there eventually! I just worry that if I put money into my house, via payments towards principle on my mortgage, I won’t recoup it when I sell the house in a few years. Suggestions?
– Melody

Generally, when you make a mortgage payment, you don’t ever recoup the interest portion of the mortgage payment. Check out your statements – each payment you make has some portion going to interest and some portion going to principal. You’ll likely recoup the principal (assuming the housing market stays steady); you won’t recoup the interest.

I usually view mortgage interest as being roughly equivalent to rent on an apartment or other similar housing. In each case, you have a cost that’s not recoupable, but in exchange you do have a roof over your head for the next month. Thus, I usually encourage people to compare the interest on a mortgage against the cost of the rent and live in the place that is cheaper.

Don’t worry that much about how you specifically save. You’re far better off saving $100 in a savings account than saving $80 in virtually any investment in the world (at least for timeframes less than 10-15 years). What’s important is saving.

Should you sell? I don’t know for sure what your housing situation is from your email. If I were you, I’d look at rental options (living on the base, perhaps?) as compared to the interest portion of your monthly mortgage payment. Your decision will probably follow from there.

I am an avid reader of TSD. How do you generate such article volume? I know you are a writer. I also know it takes time to create the quality and quantity that you post.
– Peyton

Part of it is practice. I simply write a lot of words each and every day, so over time it just becomes familiar and natural to me. It’s much like a person who jogs several miles every day – it’s easy and routine for them, but incredibly difficult for a person not in good shape.

Another part of it is that I intentionally write for The Simple Dollar in a conversational tone, which is easier to write. I make an effort to write in a way that is similar to how most people speak, more or less. This makes writing seem friendly and familiar, but not always highly authoritative. It does have the advantage of being quicker to produce than a polished, finished article a person might find in, say, The New Yorker. I get criticised for this sometimes, but I know why I write with this style and who I’m writing for, so I don’t really care about that criticism. I could certainly write such polished pieces (and sometimes I do), but I think this style works much better for a frequently updated blog called “The Simple Dollar.”

Another piece is the routine of writing. I keep a notebook (or some kind of note-taking equipment) with me constantly. Whenever I have an idea, whether it’s at the grocery store or at the doctor’s office or after waking up in the middle of the night after a dream, I jot it down immediately with as much structure as I can give it. Later, when I sit down to write, I usually have more ready-made ideas to choose from than I can write.

I’d also add in the fact that I read voraciously. I read two or three books a week. I read tons of articles and magazines and newspapers. Whenever they give me an idea, I jot it down somewhere and I usually follow up on those interesting ideas. If I see a word in print I don’t know or an idea I don’t understand, I write it down and look it up later. Simply put, I keep a fairly high flow of information going through my head and it certainly helps when it comes to writing as much as I do.

Currently because of costs associated with my son’s autism therapy (which we had to pay for out of pocket until just recently), a couple of cross-country moves and some plain stupid spending in the past we are in alot of debt. Right now we have approx $55,000 in credit card debt, $26,000 at 12%, $21,000 at 14%, $4,800 at 16% and $3,000 at 24%. We also have a personal line of credit with my credit union of $20,000 at 12%. Plus I have a $1000 mortgage payment and a $300 second mortgage payment. At this current time we are about $800 in the hole every month. I have been covering this by getting money from my parents. My wife will be hopefully be getting a teaching job this August which will really help things out. My concern right now is my parents really can’t afford to keep giving us money for the next 3 months and I really don’t know where it will come from. My credit is ok because I do not have any late payments on any of my debts but of course I get killed on the fact that I have so much credit card debt. I have called the credit card companies and asked for lower rates but keep getting turned down. I have tried to get a new card with a low rate to do a balance transfer but have been turned down. My question is if I can’t make some payments for a couple of months should I call the credit card companies and explain the situation or will they not care? I basically just need to survive the next 3 months until my wife gets a job. I am desperately trying not to ruin our credit and want to be able to start paying down this debt.
– Chris

If I were you, I would simply be late on one of the credit card debts for a while, perhaps on a rotating basis to preserve my credit as best as I can. Your credit is already suffering because of your large amounts of outstanding debt (I’d imagine that your debt-to-credit ratios aren’t good).

Remember that a late payment is usually not reported to the credit agencies until you’re thirty days late on a payment. So, one method for doing this might be to keep most of the debts up to date (to avoid late fees), but allow one or two of them to be 20-25 days late before paying it. Yes, you’ll incur late fees, but it shouldn’t affect your credit.

You might also want to try stopping by a local credit union, laying out your entire situation, and seeking a personal loan to help consolidate your debt. This would work better if you had some form of collateral on the loan.

I really struggle with how much I should spend on an engagement ring for my girlfriend. We have dated for just over two years now and I’m starting to feel like the time is right. We live together, and I feel like she is the one. The thought of buying the engagement ring is overwhelming given the cost. How much is appropriate to spend? I have heard the conventional “norm” is three months of your gross salary. Which for me, is about $14,000 (Salary-[$55,000 / 12 months * 3 months] =$13,750). I think this is ridiculous quite honestly. On the other hand, I don’t want to be the cheapskate and I think something in the vicinity of $4,000 to $7,000 is pretty cheap. I want my girlfriend to be proud of the ring, but also realize that we can certainly “upgrade” it as time goes on. What do you think is appropriate?

I recently got done paying cash for my MBA program which I completed last spring and I also came up with a 15% down payment for my home. I was fortunate not to have any student loan debt from my undergraduate studies and my only current debt is a $160,000 mortgage loan and a $5,000 car loan which I plan to have paid off by this time next year. I have steered clear of credit card debt and plan to stay that way. I know I am still pretty young, but I am honestly a little tired of monthly payments and want to avoid debt at all costs. Given my current liquidity situation outlined below, I think I’d almost have to finance this purchase. I know of a couple of places with zero interest financing for two years. I’d clearly like to avoid financing, but I just don’t see how I can avoid it. I have $10,000 in an FNBO Direct account which I rarely touch ($8,000 from the First Time Homebuyer’s Credit plus a little extra), another $2,500 in a savings account at my brick and mortar bank which I contribute about $200 per month to. I consider this my “emergency fund” that I tap for car repairs and other unexpected expenses. I have about $25,000 in my 401k plan (which I think is pretty darn good considering my age and how bad the market has been) and another $6,000 in a Roth IRA I started about two years ago. Ideally, as my income increases and my car payment disappears, I want to start maxing this out.

So, as of right now, I have about $10,500 in cash plus whatever I have in checking at the time. What are your thoughts about how much I should spend? I certainly expect my income to increase (I know everyone says this, but given the industry I currently work, MBA, professional certifications I am acquiring, it is almost a given). I want to do the right thing. I want a ring that my girlfriend and I can both be proud of, but at the same time, I don’t want to be behind the proverbial 8-ball financially. Does this make me selfish?
– Martin

You’re asking this question of someone who gave his wife-to-be a $50 sterling silver engagement ring.

How did that go over? I sat down with my wife-to-be and we just talked about all of this. The discussion went like this: “I have $X,000 to spend on an engagement ring and I’m happy to buy you something wonderful. However, if you’re happy with a $X00 ring instead, we could use that remaining money to pay off the car/make a house down payment/have a great honeymoon. What do you want to do, honey?”

I wouldn’t really worry about being “proud” of the ring. One big key of personal finance success is stop caring what other people think.

If you’re happy with and she’s happy with a $50 sterling silver ring, get that and save your money for something else. Just sit down with her and talk about it.

One of my medium-term goals is to go back to school for my PhD. I’m 25, completed my MA in 2008, and wanted to work for five or six years before going back into academia. While there are definitely options that will help offset the cost of working towards a PhD, such as a teaching position or research assistant, I want to save towards the expense but I’m not clear on the best way to do it. I’ve read about 529s, but I can’t figure if it’s available only for parents saving for their kids, or if adults saving for their education can do one as well. What would you reccomend?
– Sandy

An adult can absolutely start a 529 for themselves, and it’s probably the best option for you. It allows you to sock away money and not have to pay taxes on any interest earned as long as you use it towards your education. I’ve actually started an account for myself at College Savings Iowa (for a long-term goal of the University of Iowa’s Writer’s Workshop).

My suggestion would be to use a “targeted” fund when you start investing – most 529s have these. What “targeted” funds do is that they gradually scale back from aggressive investing to conservative investing as you grow closer to your target date for returning to school. Given that you seem to be three to five years out, you’ll already be fairly conservative (a good thing, because the stock market isn’t good for short term investing).

Good luck – and congratulations on your decision.

My husband and I are 29 and 25 years old respectively and I would like to think we are on the right path financially. We got into $8,000 in credit card debt when we moved to New York City three years ago but a combination of aggressive saving and job promotions/raises dug us out of the hole. I’m realizing that being comfortable financially can be just as stressful as being in debt — I’m always second guessing what I’m doing with my money.

Some vitals: we have $20,000 in an ING savings account (for emergencies as well as a down payment on a house someday), we both contribute 5% to our 401ks at our jobs, I have $4,500 in a Roth IRA and add $100 a month to it, we have $2,000 in a Schwab brokerage and no credit card debt. My husband’s monthly income after taxes is $5,400. Of that, rent is our biggest payment, at $1,400. Luckily we are able to save my entire paycheck (about $2,000 a month after taxes) to our ING savings account. Here’s the clincher: my husband is getting his MBA in addition to working and, when he is done in a year, will be carrying about $80,000 in student loans. We have started paying about $600 a month from his paychecks to the highest interest loans.

Here’s my question: Should we continue to put my paycheck in savings for a down payment on a house or should we start aggressively paying off the loans? What would be your priority? We hope to buy a home in the next five years and would like to have enough for a 20% down payment obviously. But the idea of paying off loans early is appealing as well. Kids (at least three) are also in our future. Any advice would be appreciated.
– KJ

From my perspective, the biggest factor is where you’re intending to buy a home in the future. Are you going to be buying it in a New York suburb where you’ll be paying hundreds of thousands of dollars and your monthly housing costs will go way up? Or are you moving somewhere else where housing costs will be way lower?

If your costs will be lower, you’ll likely be able to find a home that won’t escalate your monthly housing costs. In that case, I wouldn’t change a thing about what you’re doing right now, assuming the rates on the loan are reasonably low (8% or lower or so). If it’s way above that, focus on the debt first.

If your costs will be really high, you’re going to need to maximize your monthly cash flow to pull it off, and the best way to do that is to eliminate your debt as fast as you can. Hammer his student loan debt HARD and get rid of it quickly.

I just graduated from college (with no student loans to pay off) and am looking to start up my own freelance web design business. Admittedly I know plenty about my career but almost nothing about running a business and a lot of the tips I’ve gotten have raised as many questions as they’ve answered. I know I’ll probably want to register as a LLC as well as needing to set up my own bank account for the business. My biggest concern is the money management aspect of it and most pressing on my mind is how to avoid getting slammed come tax seasons. I save my receipts for business based purchases but I also know that’s only a start. Do you have any advice and tips about how to start off on the right foot?
– James

It really depends on what this business is going to entail. Is it just going to be you or are you going to be hiring a team? When some people hear “small business,” they imagine several employees, but I’m not sure that’s the case here. Also, do you have a lot of clients lined up or are you going to be starting completely from scratch? Are you going to have a separate office or are you going to be doing this from home?

If it’s just going to be you and it’s going to be very simple at the start (which is what I think you’re saying), I would just do it as a sole proprietorship at first until I was sure that it was going to take off. Basically, that means you just keep track of your income and expenses on your own, don’t actually form a LLC, and file the taxes on this as an extension of your personal income tax.

If it’s going to be a larger operation, you should seek out forming an LLC. Transitioning from a sole proprietorship to an LLC is pretty easy, provided you were keeping track of things as a sole proprietorship.

I have a home which is paid for. Also have about 300K for investment. Was thinking of buying second home and converting first to a rental. Have been looking for deal but yet to find good one. In mean time where can I invest which will give me fluidity to take out if I find a home while giving me secure and better than saving or CD interest rates
– Vikram

If you want liquidity and security, you pay the price of not having a strong return.

All investments have some amount of liquidity, some amount of security, and some amount of return. The reason people diversify their investments is because no investment is great in all of these areas.

A savings account is liquid and secure, but returns poorly. Stock market investments return well (over a long time scale) and is fairly liquid, but isn’t secure at all (remember 2008?). Owning property usually returns fairly well and is pretty secure, but is very illiquid.

There really isn’t anything out there that is liquid and secure that beats a savings account. You should just shop around for a while. You can find banks that offer savings rates over 3% right now.

Currently my husband and I have a 2 bedroom townhouse that I bought back in 2006 before we even met. I have a 30 year mortgage at 6.25%. The monthly payment, including insurance and property taxes, is $837. We are hoping to start a family soon and would likely want to move into a house with its own yard in about 5 years. We are currently putting $400 a month into a saving acoount for a down payment for this future home. We should be able to bump this savings up in the coming months as we will both be getting raises this year. We do not have much equity in the townhouse, but it has held its value since the purchase in 2006. Luckily there was no housing bubble where we live! Would we be better served paying down the mortgage as quickly as possible instead of just parking the money in an ING account? Maybe save half and pay down the mortgage with the other fast of the savings? I’ve looked for advise on this subject, but almost everything I’ve found assumes that you are saving for a down payment on a first home. Thanks so much for any insight you can provide.
– Lauren

Provided you have a healthy emergency fund, the best thing you can do with your money is to put it wherever you’ll get the best interest rate. Since your mortgage is at 6.25% and most savings accounts earn 2% or less right now, you should be paying down that mortgage.

Of course, this could change over time. Within the last few years, some banks have offered interest rates over 6% on their savings accounts and this could easily happen again during the later years of the next economic upturn. If you can find a savings opportunity that returns more than 6%, you should sock your money away there.

Is there any advantage/disadvantage to getting a 30 year mortgage and planning to make higher payments each month than getting a 20 year mortgage? I think of the lower payment as a bit of a safety net should something happen, but would rather pay less on the house in interest.
– John

First of all, a 30 year mortgage will usually have a worse interest rate than a 20 year mortgage. This means you’ll spend far more in interest over the life of the mortgage than you would with a 20 year mortgage.

Second, most people don’t consistently pay “optional” bills. When you realize that you’re spending $200 a month (or whatever amount it is) on an unnecessary bill, you have a very high likelihood of finding something else to do with it, even if your intentions are good.

The best bet is to simply get the mortgage with the lowest interest rate, provided you can make ends meet on the monthly payments.

When you first started doing reader mailbags, they were about 50% personal finance and 50% questions related to other stuff like pop culture and politics. Lately, they’re almost all personal finance. What gives?
– Kenny

I’d say the balance is about 80%/20% now, but there’s still a definite trend in that direction.

Why did I do this? Quite often, the non-personal finance questions ended up in flamewars with name calling and other rude behaviors that simply took away from the readers who wrote in with genuine personal finance situations and were asking for genuine help.

So, as time has gone on, I’ve moved the non personal finance stuff to other places, like TrentHamm.com. I still touch on such topics here, I just give a lot more room to the readers that actually need help.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Vicky says:

    Aw, I had an $8 ring from Claire’s, and I was absolutely thrilled with it. I’m not a jewelry wearing girl, it was small, and we had other things to do with money at the time. If I had been given a really expensive ring I would have been too afraid to wear it for fear of losing or damaging it, and honestly, I’d rather have a car than a $14K ring.

  2. Olivia says:

    As for the question about getting a 30 year mortgage over a 20 year, I do think there are some situations where this may be a smart idea. For example, my husband works as a farmer. Some years, we do quite well monetarily. Other years, we bring in nothing. There is no way to predict what a particular year will be like. In our situation, the smaller minimum payment of the 30 year mortgage would allow us to continue making our payments even during the years we brought in no income. Then, during the years we brought in substantial income we could pay a large chunk of the mortgage off. I recognize that this strategy requires great discipline to actually pay off extra during the good years, but without that safety net a mortgage could be quite dangerous for us. Now, we actually hope to never have to get a mortgage, but hypothetically we believe a 30 year mortgage may actually be the smarter option for us, despite the higher interest rate.

  3. Gumnos says:

    “I intentionally write for The Simple Dollar in a conversational tone, [instead of] a polished, finished article a person might find in, say, The New Yorker”

    Funny…I read TSD, but not The New Yorker. Correlation? :-)

  4. Johanna says:

    @Martin: No, what makes you selfish is the fact that you wrote a three-paragraph question that’s all about you, and you don’t even mention what you think your girlfriend (whose ring it will be, after all) might want. Do you even know? Do you even care? You must have noticed by now whether she likes to wear sparkly jewelry, or whether she’s uncomfortable carrying around expensive things, right?

    If you’re going to ask her directly, I’d recommend not being quite as obvious as Trent was that there’s a “right” answer that you have in mind. Maybe something like “I have $X,000 that I’ve saved up for this, and I’m prepared to spend any of it or all of it. What’s most important is that you get a ring that you like and you’re happy with.”

  5. boxty says:

    If you live in Los Angeles or probably New York, you can get an engagement ring at wholesale prices in the diamond district. The diamond on my fiancee’s ring was about 60% the price of an online wholesaler like Blue Nile. They have all the same settings as Blue Nile but at the fraction of the price. It’s like you’re almost paying for just the material cost and not the manufacture. You can get a huge honkin ring for $4K. Since your range is $4-7K, you and your fiancee could fly out to LA for the weekend (it’ll probably take two days to shop around and decide on the best deal) and get an awesome ring. Just do your research and get educated about diamonds before you go.

  6. Adam says:

    Chris: as far as the credit card payments, I know from working at a credit card company that most card issuers have hardship programs available for people who can’t make their monthly payments. They can reduce your payments and lower your interest rate for a set amount of time at no cost to you (which is why credit counseling companies are usaually a scam). Sometimes you have to be past due already, but some are willing to do it before you go past due. It’s definitely worth looking into.

    Martin: I bought my now wife a $1200 ring with one stone, financed it, and paid it off in a year with no interest. The ring isn’t crazy expensive but it’s very unique and she gets compliments all the time on how pretty it is. So the more the better is not true in this case. Find out what your lady likes and search for it until you find it at the best deal. Don’t feel like you have to spend a ton on it. (Also all that diamond clarity and color business is BS)

  7. Johnny says:

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  8. Adam says:

    Voting with our dollars is so important. I support local and independent businesses whenever I can. However, I think we also vote with our investments, and most of our investments are not in local and independent businesses, in fact, the government makes it very hard to do so. IRA’s and 401k’s seem to be designed to send at much money to large investment firms and big businesses as possible. This is something that I’ve been struggling with for a while. I don’t want to invest in mutual funds that send capital to companies that I’d rather not shop at or support, but that’s not easy.

  9. Amy says:

    To the young man hoping to get engaged soon: that “three months salary” is a load of bull. I remember about 15 years ago there were jewelry commercials on television trying to convince men that TWO months salary is necessary, which goes to show that it’s a completely contrived (by the jewelry industry) guideline. And don’t let anyone tell you that the ring is an investment. You will not be able to sell it anywhere for the amount you paid for it, esp. since diamond rings are hardly in short supply.

    Instead of buying an engagement ring we couldn’t afford, my husband and I bought my wedding band with tiny diamonds in it, and I wear only that. It’s dainty and pretty and I love it. It cost about $800, which felt like a huge amount at the time.

    The ring isn’t the important thing. Heck, the wedding isn’t the important thing. The MARRIAGE is the important thing.

    Best of luck to you!

  10. Diane says:

    In regards to Martin’s question, for God’s sake don’t spend alot. My engagement ring cost $169 and I’ve been married for 36 years. It just doesn’t matter. Alot of women don’t wear the engagement ring much once they are married because it can get in the way. Talk to her and ask her opinion.

  11. Kingsley says:

    @James.. If you’re worried about getting slammed by taxes at the end of the year, I would suggest that you try as soon as possible to get a handle on your expected yearly income and set up a savings account to hold your tax money. Your government website (IRS?) should have all the info you need to estimate your tax bill. Deduct taxes from your pay on a monthly basis if you can. If your cash flow doesn’t allow it this month, try to make up for it next month. Continue adjusting your yearly estimate every month to be sure that your tax savings are on track. But you need to be disciplined about this, or you will suddenly find yourself under a pile of debt at tax time. If you save more than enough to pay for your taxes, then you get a “refund” at tax time. Plus those tax savings will be earning for you in a high interest savings account, right?

    I agree with Trent about going the LLC route. Don’t do it unless you’re going to have employees, or you’re expecting really big income — it opens up some opportunities for tax savings when the business income exceeds your personal needs (your accountant will advise you best on this). But it’s expensive and carries a big paperwork burden — at least here in Canada anyway.

    If you do go the LLC route then your pay situation becomes a little more clear. You’ll be an employee (well, a director) of your company. In Canada, the government provides employers a nice table of pay cheque deductions for all levels of income, on a weekly, biweekly, monthly or annual salary basis. Set yourself a monthly wage and remit your deductions to the government regularly. Needless to say, your business cash flow needs to be reasonably predictable. I find a monthly pay cheque works best for me.

  12. Johanna says:

    @Chris: It sounds like you’re not actually sure whether your wife will be getting the teaching job, so it would be a good idea to do some thinking now about what you will do if she doesn’t. I recommend doing some digging through Liz Weston’s articles online – many of them have links to resources that can help people in your situation figure out what their options are.

  13. Kingsley says:

    @James: I almost forgot.. will you need to collect and remit sales tax? Again check with your state or fed government about the rules, and you will probably need to open some kind of remitting account. They will probably want a mponthly or quarterly remittance so if applicable be sure to charge the tax and make the remittance regularly. It really is all about research and discipline.

  14. Jane says:

    Maybe I just have different expectations than you do, but I think your definition of “cheap” being a $4,000 to $7,000 ring sounds pretty crazy to me. Diamonds and engagement rings are ridiculously overpriced and the minute you buy them they drop dramatically in value. Just go sometime to look at one of the many auction websites where people with either broken marriages or engagements are trying to unload their rings. They might have paid $7,000 a few months ago and are trying to get $1,000 back. I’m neither suggesting that your relationship is not going to last, nor that you should buy a “used” ring, but I am trying to provide some perspective on the jewelry market. Just try not to get caught up in the whole expensive ring = proof of my love or regard for her. Even just your vocabulary (“something that she can be proud of”) strikes me as bizarre. Why would that pride be at all connected with the monetary value of the ring?

    And I agree with Johanna. You need to find out her expectations. If my husband had bought me a $7,000 ring I would have told him to return it ASAP. I actually told him pretty early in our relationship that I thought engagement rings were silly. He ended up proposing and gave me some modest diamond earrings, which was perfect. I now have a $400 wedding ring that I love, and I get compliments on it all the time. All women are different. I was actually appalled when a jeweler told me that they often have men come in to return a ring that their fiancee rejected because the diamond wasn’t big enough.

  15. Allison says:

    @Martin: Have you researched anything about diamonds? Price is determined by the 4 Cs: Cut, Clarity, Color and Carat. The price will be determined by how big it is, how perfect vs. imperfect the diamond is, where on the color scale it is (everything from completely colorless to yellowish), etc. My 1 carat ring with a diamond split-shank band was $8,000. Is that a lot? Maybe. Is it cheaper than other rings? Yes. Is it what I want? Absolutely – I helped pick it out!

    If you only have $2,000 you can buy a perfectly nice diamond, but it’s going to come in at a certain part of the price spectrum. If you want a big diamond and have $2,000, the diamond is probably not going to be as perfect. However, if you want an almost perfect diamond at $2,000, it probably won’t be that big.

    Do some research into what influences the price of a diamond (bands and settings also play a huge part – buy a single solitaire to start!). Then decide what out of your options you think your girlfriend will like the best and get that.

    Also – engagement rings can be upgraded! Just because you buy something smaller now doesn’t mean you can’t buy something better in the future. My mother has upgraded her wedding ring 3 times so far, the older my parents get and the more resources they have.

  16. Honey says:

    My boyfriend and I have been together for 4+ years and have just started looking at rings. We are going to get either a CZ or moissanite (a diamond-lookalike gemstone) in a white gold band – I do want the ring to look a certain way but from the shopping around we’ve done the outside cost is $900 and there are plenty of rings that I’d be absolutely happy with around $350. I agree with what others have said, you should ask her what she wants.

  17. Brent says:

    Whenever I think of the two/three month salary for rings I think of it differently. It implies that you should spend a lot of time and energy making sure this is the one. The traditional start to a marriage is expensive. Ring, wedding, honeymoon, and then the combination of lives. If you actually save up for all of that you know how committed you are. But even by dropping the expenses it doesn’t make you a cheapskate. Apply the same guiding principals of frugality and priorities to this part of your life.

  18. Steffie says:

    To Martin, 3/4 carat diamond engagement ring valued at 5k for insurance, they offered me $200.00 at the pawn shop when no job for a year. And I had been afraid to wear it on the bus to work everyday so didn’t wear it very much. Ask her to marry you and then go shopping together.

  19. Claudia says:

    In regards to Melody’s question – Trent, I don’t think you answered her question at all… After reading her story, I came away with “should I pay extra on my mortgage or just save the money?” Am I completely off base here?
    In the first portion of your answer, you seem to say that she should pay more to her mortgage so as to reduce her total interest payments. In your next paragraph, it appears as though you contradict that statement by saying she should keep that money in savings, not in an investment (like a house?).

    I’m in a very similar situation as Melody, and I’m keenly interested to know what you were trying to suggest.


    As for Martin – get her the ring you want her to have, not the one that society deems “right”. The price is just an arbitrary number. Remember that bigger isn’t always better – make sure the ring doesn’t overpower her hand!

  20. Kathryn says:

    For the young man wanting to get engaged: This will be a conversation that will indicate how you will work together with money. Of course, if you are not secure, it might not be an honest discussion.

    The fact is, i love diamonds & am fascinated by them. I don’t wear much jewelry, & so my wedding set is important to me. We didn’t spend a lot of $$$ on my set (probably about 1 month of his salary or less) & i didn’t WANT him to spend a lot. We talked about “upgrading” my diamond someday, but the reality is that we probably never will. I can’t see us spending the money on something that is a non-essential.

    I love my ring. We’ve been married 5-1/2 years now & i’m quite content with it.

    Asked my hubby about his advice on this. He said that he recommends finding a beautiful ring/setting. You can add whatever diamond you desire to this setting. Some rings are made so that the diamond can easily be changed if you think you might want to “upgrade” to a larger diamond at a later time. He said, also, that it depends on the setting. Some rings are made so that the diamond is set in deeper & so you could buy a larger, cheaper diamond if its flaw is in a place that is covered or disguised by the setting.

    Overall, my recommendation would be to buy what she likes now, because upgrading/changing later is usually just not something that happens.

    I know someone who is an heiress of a huge estate (“old money”). Her wedding band & engagement ring are not fancy. She always wears her engagement ring which has a small, marquise diamond (probably 1/4 C or less). I don’t know this, but i think it is probably because that was all her fiance could afford at the time & he was marrying her because he loved her & not her money. They’ve been married 35 years now & she’s never “upgraded.” I think she sees it as a symbol of his love for her & she doesn’t need the flashy, showy ring for that symbol of love.

  21. Finance Nerd says:

    I have to disagree a little with your answer to Melody. The only way you don’t get back the principle put into your home is if you have to do a short sale, and instead of being upside down $50K you are only upside down $40K, AND the bank does not/can not persue you for the deficiency. In that case the extra $10K you paid was “wasted” in that you would be in the exact same spot whether you had paid it or not.

    Otherwise every dollar of extra principle paid is an extra dollar you get when you sell. In fact more than a dollar, because you are also decreasing the monthly interest charge (compounding at work!).

    An example might make this clearer. Let’s say you owe $100K, and if you make regular payments, you will owe $90K in 5 years (made up numbers). You are thinking about paying enough extra so that in 5 years you will only owe $85K. It doesn’t matter what the housing market does, you owe $5K less NO MATTER WHAT. When you sell, you will get $5K more (or be upside down $5K less) than you would have if you hadn’t paid extra.

    And if your home has declined in value, like many others have, that $5K might be the difference between having to bring cash to closing and getting a check when you sell.

    You may have better things to do with the money, that is for you to decide, but mathematically, the extra you pay will be recouped in almost all circumstances.

  22. kristine says:


    If your wife does not have a teachng job lined up for the fall already, do not hold your breath. Most hiring for the next year is done in April/May in NY, and there are very few jobs out there- schools are relying on attrition to help their budgets. Good luck to you both, but you should definitely run the mental- what if not? scenario. If your wife does not get a job, what will you jettison? House, car, cable? Then you might want to do that now. If she gets a job, great! Then the money you saved on austerity can be used to eliminate debt. If not, then you are just plain being repsonsible.

  23. Kellie says:

    @Martin – the 3 month salary for a ring is crazy. Like someone else said, it’s not about the ring or the honeymoon or the size of the wedding – it’s about the marriage. We were in college with almost no income when we got married. I have a very small diamond that we said we could upgrade later on. 19 years later, I still proudly wear that little diamond for what it symbolizes – a happy marriage. I wish for you a happy marriage, regardless of ring size.

  24. Adam says:

    @ Finance Nerd
    I agree with you, and I think Trent would agree with you too. What Trent was saying was that you don’t get your interest back, not that you don’t get your principle back.

  25. a.k. says:

    @Martin – why not pop the question without a ring? The decision to get married is far more important and momentous than the ring that accompanies it.

    Then, once she accepts, you can discuss the budgeting and her preferences and go shopping together. Also, that ensures that the ring on her finger is one she’s happy with.

  26. imelda says:

    Oooh, engagement ring drama.

    Depends totally on the girl. Some girls want an expensive ring, some gals don’t give a damn. Martin, you should know by know what kind of woman your fiance is.

    My guess, given your tone and the fact that you even thinks this is an issue, is that she likes her bling. In my opinion, $14K is a RIDICULOUS amount of money for a ring. But if that’s something you and she value, then you seem to be in a good enough financial situation to afford financing the purchase.

  27. T says:

    We depleted our emergency fund and ran up a little more than $30,000 in debt due to medical bills that stretched for three and one half years. We have a debt repayment plan and we are working hard at it. We don’t have an emergency fund – YET. Recently the pump went out on our well. My husband’s parents paid for the replacement with the comment pay us back some time when you can. We worked our budget around being able to pay them between next November and the following April. When my husband mentioned it to his Dad, he told us to put it towards the debts we are paying off. Our plan was to begin rebuilding our emergency fund as soon as they are paid off.
    So… here’s the question…We will of course apply this money to the first debt in line to be paid. Should we continue adding this amount until that debt is paid and THEN begin our emergency fund or pay the amount that they paid on the well towards the debt, build our emergency fund and then start applying that amount to our debt snowball?

  28. T says:

    To the ring buyer… I picked out my wedding set – engagement ring and wedding band. Together $250. My husband was the one who thought bigger and flashier was the way to go. Three months salary…thousands of dollars…rediculous!

  29. Johanna says:

    @KJ: I think Trent’s advice for you was exactly backwards. If you plan to buy a less expensive home, then you don’t need such a large down payment, so you can put more money toward the student loans. But if you plan to buy a more expensive home, you’ll need much more than $20K for a down payment, so you need to be aggressively saving for that.

    You didn’t ask about this, but I think you should consider saving more for retirement. 5% plus the small amount you’re putting into the Roth will almost certainly not be enough to maintain your standard of living. Maybe you feel like you have other priorities for the money right now, but you’ll *always* have other priorities, especially if you plan to have kids.

  30. KC says:

    Martin – I agree with the others in determining what type of ring to buy by what kind of gal you are dating. Is she the big sparkly jewelry type? Is she more subtle and modest, sporty, etc? You want something she can be proud of makes it sound as if you are trying to impress her family.

    10 years ago today I married the man of my dreams. He gave me a $3500 ring of high quality. It’s less than a carat and is adorned with small emeralds. He’s a doctor, he was a doctor when he proposed to me. Trust me, it’s not about the ring – it’s about the people. I didn’t try to impress people with the ring, I impressed them with the choice of human being I married (not the doctor, but the good person/husband he is).

    To this day I still wear this ring even though I can afford much nicer. It’s just a ring. It’s a symbol, nothing more. I think if you spend around $7k (which you considered cheap) you’d be spending plenty and could get a good quality ring. And I think your fiancee would be plenty pleased.

    Be careful, when I was reading your letter I kept thinking how much of a jeweler’s dream you are – you are young, proud and worried about how others will see you through this material purchase. You are prime for the big sale!

  31. karishma says:

    @Martin: If you feel obligated to spend at least 10k on the ring, how much will you then feel obligated to spend on the wedding? And where is that money going to come from?

    I think the engagement ring purchase needs to come out of the wedding budget, so you both realize that more money spent on this equals less available for other things. And you might both decide that that’s what you want. Or one or the other of you might decide that a smaller ring in exchange for a fabulous honeymoon might be a decent trade-off.

    For perspective, our entire wedding cost less than 10k, and the rings (my engagement and both bands) made up less than $500 of that.

  32. KC says:

    Change that $7k to $4k in my above statement. I think if you spend around $4k (which you considered cheap) you’d be spending plenty and could get a good quality ring.

  33. chacha1 says:

    I knew there would be a lot of comments on the engagement ring question. :-)

    I agree with others that after two years, Martin probably knows what kind of ring his lady “wants.” And clearly keeping up appearances is important to him – perhaps more so than making a good financial decision on this.

    But just a suggestion, here. My then-boyfriend bought a gemstone when he was on a vacation (alone) not long after we met. Once we started talking marriage, he took that stone to a jeweler and had a ring made, and that’s what he gave me when he made the proposal officially.

    I don’t believe it cost more than $1500, but it is infinitely more precious to me than some generic, anybody-with-money-could-have-one, diamond ring.

  34. Des says:

    @Martin – I think you and your girlfriend should both read Millionaire Next Door, then have an honest discussion about where you see your finances over the next several years. You don’t have to mention the ring if you want it to be a surprise, but you need to get on the same page with regard to your finances.

    I will say that if I would do it again, I would take the same route Trent did and ask for a $50 CZ ring. It just doesn’t matter. It used to be a symbol to indicate that you made enough to take care of her, but nowadays its more of a Jonses thing.

  35. Kai says:

    If you must continue an outdated ‘look! bribe!’ purchase, buy her a pretty, simple ring with a little shiny thing attached.
    If she needs more than that, you really don’t want to marry her anyways.

    Any woman who would set minimum standards on the present accompanying a request for marriage isn’t in it for the man. You should run far, far away.

  36. Katie says:

    To the gentleman who is starting a business– Go down to your local community college and see if the business department has a class tilted something like “small business administration”– I have taken this exact class and while I was taking it for credit the majority of the rest of the class was not. It will take you through all the forms of business, taxation issues, advertising, expenses vs. revenues, loans and investment– all the things you will need to get off on the right foot. Bonus: Community college credit hours are usually very inexpensive (my class cost me about $250).

  37. Claudie says:

    @Chris – I think it’s important to be aware that if you are late, your credit card company may raise your interest rate to the default rate and that will depend on your agreement with them. It’s true that paying a little late may not effect your credit score, but you’re going to be paying a whole lot more in interest in the long run. I certainly wouldn’t pay late your credit cards that have the highest balance and the lowest interest, that’s for sure. Maybe you can sell something (or some things) to just make the minimum payments.

  38. Ruth says:

    @Melody: Ditto what Finance Nerd said. Your potential buyer doesn’t care how much you owe on the house, they are going to pay you the same amount regardless.
    What you still owe when you sell is subtracted from what they pay to get your net. Every dollar that you pay to the principle is another dollar that you will have in your hand when you sell the house.

  39. WendyH says:

    @ James, try and find a small business mentor, free or low cost consulting service or class, or use online resources and make sure to write a Business Plan to help you to identify questions and find answers for starting your own business.

    SCORE (Service Core of Retired Executives) SBA (U.S. Small Business Administration) and Business.gov were some of the sites I used for writing a Business Plan. You can also look at your local bookstore for resources such as “How to Start a Business in (your state)”. SSA.gov is the social security information for self-employed, IRS.gov is the federal tax site, and your state site will probably also have tax information.

  40. Rita says:

    I just want to add my two cents to the engagement ring question. Most women have been dreaming of having the question popped since we were little girls. If you ask her what she wants, she can probably tell you exactly what she wants. When my husband asked me what I wanted, I told him I did not really care if I have one or not, but I did not want him to go into debt for what is really a chunk of rock with a piece of metal that has been twisted around it. My ring was less than a weeks pay for him and I love it. My brother gave his wife was given a flawless diamond that he bought at a pawn shop and had reset and the cost was less than $300.00 total. Good luck to you.

  41. Stephanie says:

    $4000-$7000 for the ring?!?! If you truly have the money, then I guess go for it but talk to your fiancee first. She may be like me and want to wear the heirloom great-grandmother’s ring. My ring cost us nothing and I get comments on it all the time since it is clearly an antique and unlike what any of my friends have.

  42. bethany says:

    I’m ABD on my PhD degree, and I’ve never been out of school. I have no more debts than I started grad school with, though my parents have helped me with some emergency costs like lending me money for a car and car insurance.
    Most good PhD programs have assistantships that cover tuition and give you a small stipend. I live pretty frugally because I’ve never gotten used to anything else, but I would warn you against marking too much money for tuition, because most good programs don’t charge for it, and having a good assistantship signals you’re a good student to future employers.

  43. beth says:

    @Chris Your situation sounds stressful but there is one solution you may have overlooked. If it were me in your situation I would have the non-working spouse get a job over the summer. I assume that your wife feels she cannot work during the day because of your son’s autism over the summer but she could be a waitress on evenings and weekends or she could do overnight janitorial work or other weekend work (nurseries often need help on the weekends). She could probably earn enough to cover that $800 this way. Be creative. Bring in that income.

  44. Shan says:

    Chris: Why are you waiting for a teaching job that starts three months from now to earn the extra income? I am a teacher, and still spend a part of my summer doing *something* for extra cash. $800 over a month isn’t that much to pull in – can your wife wait tables at a busy restaurant 2 nights a week? Or could she tutor a few hours per day? There are lots of part time options available for teachers, and it seems crazy to wait until August to start working when you guys are that short every month.

  45. ryan says:

    I think anyone that rejects a ring because its not big enough or flashy enough, isn’t worth marrying. It isn’t about the ring, it’s about the love.

  46. Amanda says:

    Martin, I have never heard of the three month salary rule. When we were in college, my husband bought me an engagement ring for $1,000. What I love about the ring is the thought and time he put into selecting something he knew I would like, he could afford and that was high quality for a good price. Depending on what your fiance is like, I’m guessing that with some time and effort you can find something lovely for less than a couple thousand. PS Congratulations on your future engagement!

  47. Amanda says:

    Also, Lauren, if you are planning on staying in your condo for five more years. I would refinance- rates are at 4.8 percent in our area (for a 30 yr).

  48. Amanda says:

    Also, Lauren, if you are planning on staying in your condo for five more years, I would refinance- rates are at 4.8 percent in our area (for a 30 yr).

  49. partgypsy says:

    I am someone who always has liked gemstones and jewelry (heck, my uncle is a geologist). As far as what to get for the ring, I highly recommend involving your girlfriend/spouse in the discussion. Read the diamond forum “pricescope”. There you will find many many stories of women who wished their man involved them in the decision making process. There are far more ways to make a wrong decision than a right one. You do NOT need to go by the Debeers 2 months salary rule, that is just an ad campaign. Look into the reputable internet dealers of diamonds (ones that sell GIA, AGS graded diamonds with ideal cuts). You do not need to spend a fortune for a beautiful ring, but if you do it right, only have to do it once!

  50. jim says:

    Martin: Find out what kind of ring your finacee would like and what her priorities are. Don’t spend outside your budget. Those are the keys.

    There is no “right” amount to spend nor any “expected” amount. I don’t know where you heard a “3 month” salary rule (diamond ring salesman?). I’ve commonly heard a 2 month salary “rule” which I bet originated in the marketing department of DeBeers. Actual amount people spend is closer to $2500 to $5000 which equates to roughly 1 month salary typically.

    Its not selfish to be practical with your ring purchase but at the same time I wouldn’t be a cheapskate. Your fiance might not care a lot for jewelry and might think cash in the bank is much more important. But if she likes flashy jewelry then thats not evil either.

    It sounds like you’ve got about $20k in the bank. In that case financing at 0% doesn’t seem too bad. I mean you do have the money if you need it. You could just spend cash but you prefer to keep liquid capital. Thats a priority choice on your part and in this case financing isn’t awful assuming you pay it off in a reasonable amount of time and get good interest term as you expect.

    Also keep in mind you can always upgrade the ring later like for a 10 year anniversary gift.

  51. Amy B. says:

    Re: The Ring

    A good bit of advice we received was to let her pick the setting (which is really about how it looks) and him pick the stone (which can be the really pricey part). Worked for us. I have a ring I love and wear every day, and he was able to control the bulk (probably 80%)of the ring’s total cost in our case.

  52. KC says:

    I’ve been thinking about this two month rule (it’s 2 months, not 3) and I’m really astounded. Say you make $200,000/year. I realize this is a well above average salary, but not an uncommon one. Probably everyone who reads this site knows someone with this salary. So 2 months salary would be $33,333. Ask yourself – would you wear this ring in public? Would you want your wife to wear this ring in public? That’s why I think the 2 month rule is ludicrous (it was invented during WWII – which makes it a bit dated). You really can’t use that as a guide on how much to spend. Do your research about diamonds so you know what you are getting into (the 4 Cs and all that crap) and then go to a store and see what they have in certain price ranges. You might be surprised.

  53. Jonathan says:

    @Martin – This engagement ring situation is a good opportunity to make sure that you and your girlfriend are on the same page in regards to finance before getting married. Chances are good that by this point you already know that answer, but if not, now is the time to find out.

    If she expects a $14,000 ring, but you are only comfortable spending $4,000-$7,000 then you have an issue. The ring isn’t the issue, but the way you view money very well might be. Maybe this is just the first sign that you will have many more differences related to money down the road. Perhaps when you are ready to buy a $20,000 car she’ll want a $40,000 car, or she’ll want a $500,000 house when you think a $250,000 house is in your price range.

    As others have suggested, you need to find out what her expectations are, if you do not already know. She may think that $4,000 is too much to spend, and prefer the money be spent in some other area, as Trent suggested. I know that if I bought my wife a $4,000 gift she would be incredibly upset, because we could make better use of the money. I can’t even imagine the reaction that a $14,000 gift would get.

    My suggestion is to find out what she wants, and be sure you can reach a compromise that you are both happy with. Otherwise this may not be the last time that money related questions arise in the marriage. Good luck.

  54. jim says:

    At least a couple people now have cited fear about wearing an expensive ring in public. Is armed robbery really that prevalent where you live? I don’t even know anyone who’s been mugged.

  55. Leah says:

    For rings, definitely check out some alternate places. I love http://www.etsy.com – there’s some lovely rings on there. Particularly, look for a rough-cut sapphire titanium ring; that’s my absolute favorite, and I think it’s only $200.

    So, another lady weighing in here that the ring is not the big deal — the person is. Definitely get a handle on what the lady likes and gauge from there. I work outdoors teaching kids, and something fancy would just get in the way. Even if I get the ring I really like, I’d probably buy a cheaper ring elsewhere to wear on a daily basis.

  56. valleycat1 says:

    @Chris – I applaud your efforts to get back on the right track financially. Before slowing down on your credit card payments, consider: 1) Is your family living on a bare-bones budget, or are there items you could cut out to reduce the deficit monthly spending? I recognize your son needs the additional therapy, etc. & am not recommending you cut that. But cable/satellite, extended cell phone plans, dinners out/take-home meals, etc. should go until you’re self-supporting. 2) Is your wife working at all right now, or could she (or you) get a part-time job to cover your expenses? Or do either of you have a hobby you could make money at, or items you could sell to bring in some cash? 3) any extra room in the house you could rent out?

    Despite what Trent says, slow pay (sometimes even if you just wait until the due date to pay a credit card bill) CAN show up on your credit reports, and if you are late with even one payment the credit card company can and most likely will jack up your interest rate no matter what your history is with them. And ALL of your credit cards might go up, not just the one you are late on – I have friends that has happened to.

    And I’m with those who would caution you against counting on your wife’s getting the teaching job in August, if she hasn’t already received an offer. Most positions would already be filled, and there’s fierce competition these days for any openings.

  57. Sarah says:

    Huh. I basically agree with Trent’s advice to Martin regarding the engagement ring, but it seems a little disingenuous coming from him. I recall that Trent and his wife began married life with a ton of debt, and he didn’t have clarity about how deeply they were in trouble until their oldest child was born. Specifically, Trent has referred several times to how much debt they incurred to take their dream honeymoon. Trent’s wife took the less costly ring, but what did she or they choose instead? Was it a question of taking on less debt overall? Did they pay off a car loan? I’d be interested in hearing the full story.

    As others mentioned, how much to spend and where to pull the money from should be a joint decision. That doesn’t make it any less romantic.

  58. valleycat1 says:

    @ #36 – jim – I figure if I’m wearing good jewelry (not that any of mine is all THAT great) in a less upscale area, most people will assume it’s fake! I often leave the good jewelry at home when traveling, not for fear of muggings but because I’ve been known to leave or lose things.

  59. Joanne says:

    re: engagement ring
    When my husband and I got engaged we were both full time grad students in specialized accelerated programs, which meant that neither of us was able to work at all. Both of us were living on student loans basically. Well, when your salary is $0, then 2 or 3 X $0 is . . . still $0. He did not give me an engagement ring, and have never felt badly about it. In a way I feel that it just adds to the story of our relationship. We got nice wedding bands that do not have any stones or gems in them for about $450 each.

  60. Meg says:

    Writing about the first paragraphs, not the questions and answers.

    The trouble with telling people to buy what they want is — what if they’re not selling what you want to buy? I can only vote negatively if I don’t find what I want. And that doesn’t tell the seller what I want, only what I don’t want.

    Esp. with books and other entertainment, this is extremely frustrating.

    Just sayin’.

  61. adri says:

    On the engagement ring question–I know a lot of people that wear the same engagement ring forever, but I couldn’t do that. I was fresh out of high school when I got married, and my ring’s cost ($200) reflects that. You are clearly in a much better place financially than we were back then, but what about spending around 5k and then upgrading later? I know my tastes have changed quite a bit since I got married, and your future wife’s might, too. Good luck with the proposal and beyond :)

  62. anne says:

    for chris-

    i’d try care one credit counseling. they make proposals to your creditors, you send them a monthly payment, and they disburse the money for you.

    care one got my interest rates lowered from approx. 30% on some of the accounts i was late on down to 9.9%. 5.9% and in some cases 0%. i started about 4 years ago and am now down to owing only $3200 or so. i was able to include both credit card and medical debt in my program.

  63. Bonnie says:

    @Martin – Stop listening to those salespeople at DeBeers and steer clear of Zales. Forget what other people think. You should really be asking your fiancee what she would like and decide together what you’re comfortable spending on this ring. As many people have noted, some women really don’t care and only plan to wear their wedding ring, in which case you may not even need an e-ring. At this point, it sounds like you’re planning to use your savings to purchase the e-ring. But, who’s going to pay for the wedding? Or are you going to elope? How about a honeymoon? That’s another really important thing to think about. If you have to pay for the wedding yourselves, maybe you shouldn’t even bother with the e-ring, or maybe just buy a ring w/o a diamond solitaire and upgrade in a few years. Another trend has been precious stone solitaires other than diamonds (e.g. sapphires or emeralds). It really depends on what your FI likes. Seriously, you should never go into debt for an e-ring. If she really does want a diamond solitaire, though, I got married last year and we custom-designed an e-ring with Union Diamond out of Atlanta (via phone, email & FedEx). I highly recommend them. Really strong customer service (you can speak to a live person just by calling and talk to the designer if you like, too). They have a ton of diamonds (with GIA cert) at near-wholesale prices (lower than Blue Nile), of all different qualities, that you can search through on their site. Plus, they give a 15% discount if you pay via wire instead of credit card. Also, if she likes platinum, consider white gold or palladium for the same look without the inflated price. The finished product probably cost 1/2 what we would’ve paid elsewhere. $14K is insane. You should be able to get a beautiful, high-quality diamond ring for under $5K (otherwise, you’re just getting ripped off). And the best thing of all, I got my dream ring on the first round and DH will never have to hear me talking “upgrade” in 10 years.

  64. Sarah says:

    My husband got me a sapphire ring for my engagement ring, and I absolutely love it. He paid I think between $400 and $500. My favorite part is is has able to talk the store (jewelry store in the mall) to let him do layaway! That is really unheard of nowadays with these mall chains — they want you to get a credit card with high interest rates just to buy jewelry! But he was able to convince them to bring the price down a little on the ring, and then let him make payments directly to the store for about six months. I love that he did that — we did not have much money at the time, and it showed he was looking for the best deal while making me very happy at the same time.

  65. Mel says:

    I got engaged a few months ago. My now fiance put it off for about 3 months because he wasn’t comfortable buying a ring. So in the end, he just tied a ribbon round my finger when he asked, and we spent a few weeks looking at rings together. We finally found the perfect one – it’s white gold, with 3 small cubic zirconia. The price was the equivalent of about $500. I love it, it makes me smile and it reminds me of him and our future together.

    My point is that it shouldn’t be the pricetag that matters, but what the ring means to you and to her.

  66. kristine says:

    I was a divorced mom and struggling when I got engaged to my current husband. Instead of a ring, I asked him to instead give me a computer good enough to make and print my portfolio. I got a fantastic job with my samples, and we started off on the right foot. But we did get $10 matching stirling engagement rings- he still wears his occasionally.

    The diamond engagement ring is new- up till 1900, a diamond was considered less imaginative/personal, and engagement stones were rubies, emeralds, sapphires, etc. Diamonds are an example of excellent marketing. But if you have ever seen the movie Blood Diamond, then you would likely never buy one again. Nothing romantic about them at all- too much suffering attached.

    As far as “heirloom” goes- they depreciate wildly, and if they are heirlooms, then why aren’t we all getting engaged with great grandma’s rings?

    I have gone through 6 wedding rings. I get stirling, and hubby has white gold. We both knew I lose rings al the time, so it makes sense! He will never lose his. Besides, if I need a ring to know I am married- then we’re in trouble!

  67. deRuiter says:

    Chris, Either you get a part time job nights, or your wife does, so the non working parent (on each shift, days / nights) stays with the children, and the other earns money to pay the $800. shortfall, instead of taking from your parents who can’t afford to subsidize your past financial mistakes. The likelyhood of your wife getting a teaching job in August isn’t good, all contracts for the fall term have been given out by now. Get her working nights right now, waitress, hostess, whatever, and start paying your own way, or you get a job nights delivering pizzas. There is no law that she doesn’t have to work all summer and you work only one job. Don’t wait on your wife getting a job in August, then not getting one and continuing to sponge off your family. One of you needs a night job right now.
    As for the engagement ring, try the pawn shops for a blockbuster diamond cheap, and have it reset, or if the setting is beautiful, have it resized.

  68. Former welfare child says:

    So happy you mentioned this. I make an effort to vote w/ my dollar. Right now I’m driving back down to New York in a rented Prius from Boston after my cousin’s graduation. My husband and I volunteered to drive so that we could rent a Prius. I looked for a Prius all over Long Island until I found one. We own a prius too, we live in Cali and when we come back home to New York, we still make an effort to be green. Over X-mass I ordered green household products on line, split them up and gave them out in a reusable grocery bag to each family in my extended family.

  69. Christa says:

    I SO agree with you about the engagement rings! My husband bought me two inexpensive engagement rings (real gems, real gold, thanks eBay!) before we were married. I would have been happy with no rings. At the time, he had substantial savings that I didn’t know about – hadn’t combined our finances – and he could have bought one heck of a ring with that. But that savings let us, only a few months after getting married, put a full 20% down on our house! Would I rather have a house to live in and not pay PMI or would I rather have a “big rock”? I think the answer is pretty clear ;-)

  70. Katie says:

    For the PhD / doctorate guy, I don’t think your advice was necessary. In my PhD program, they will not accept you unless they can provide you with tuition and a stipend for a guaranteed five years (and historically, people have ALWAYS gotten more funding if they needed more years). So, that money might end up going to waste unless you can use it to supplement your stipend. I’d recommend that guy check out more about his desired field, and what’s the norm. In many fields, if you have to pay for a PhD, then the degree isn’t worth the paper it’s printed on.

  71. Geoff Hart says:

    Martin is seeking an engagement ring: “I have heard the conventional “norm” is three months of your gross salary.”

    Ask yourself this: The jewelry industry typically marks up the price of jewelry by 100% from the basic wholesale price, and often much more than that for the really artsy stuff. (My former mother-in-law was an AGA-certified gemologist and jewelry maker, so I know whereat I speak.) Do they have your best interests in mind in making this recommendation, or are they just trying to fleece you? My first wife didn’t like diamonds, but did want a gem, so we settled on an emerald instead; she loved it.

    An engagement ring must be something meaningful to you and your fiancé. If the only thing that is meaningful to your fiancé is money, then (i) you’ve chosen the wrong fiancé and (ii) 3 months income probably isn’t enough. As Trent suggested, you should sit down with your fiancé and learn what she feels is important; my wife didn’t want any engagement ring, not even the silver graduation ring I’d worn for many years and that had strong significance to me. I don’t like gold, so when my wife and I discussed wedding rings, we agreed I could have a white gold ring instead. (I wanted silver, which I love, but she wasn’t comfortable with that.)

    I’ll bet you a beer you can find a local artisan who will sell you something spectacular and not mass-produced for less than $500, and that it will become a treasured memento because it has significance beyond its price.

    James is “looking to start up my own freelance web design business. Admittedly I know plenty about my career but almost nothing about running a business and a lot of the tips I’ve gotten have raised as many questions as they’ve answered.”

    Find the local chapter of the Service Corps of Retired Executives (http://www.score.org/index.html). They offer all kinds of free mentoring and counselling programs from experts that will help you understand the challenges and figure out how to solve them. Don’t even think about starting a business without creating and having knowledgeable people reality-check a business plan; SCORE offers a sample template that is hugely valuable. (Saved my bacon!)

    Also have a look at my article on finding work (http://www.geoff-hart.com/articles/2006/finding-work.htm) for some inspiration. Web design is a highly competitive business, with many clients who really don’t “get it” and who buy design time based solely on the lowest possible price. To succeed, you may need to find a niche where you can charge what you’re really worth.

  72. beth says:

    NO ONE thinks you should spend $15,000 on your fiance’s diamond ring EXCEPT the Jewelry STORE! If your GF does, dump her for someone smarter and less shallow. What is SHE giving you worth $15,000 to celebrate the engagement? The whole dynamic is so antiquated and based on OWNERSHIP of a wife by a MAN. Find a NEW tradition that reflects your relationship with your girlfriend nad its equality.

  73. mellen says:

    Martin, I can only tell you that every girl is different, some NEED a flashy ring to validate themselves, some want one to show off how much someone else values them, some, like me, don’t want one at all because I’d rather spend the money on a down payment on our house and have money in the bank so we don’t need to be worried all the time about how to pay bills if the market tanks (my husband and I didn’t lose a minute of sleep over the recent “crash” although we are pretty mad that our house value is so low, maybe I should’ve gone with the ring? :) We got beautiful wedding rings and he insisted that mine be a half eternity band b/c I didn’t get an engagement ring while I would have been happy with a simpler band but then for our first anniversary he got me the most beautiful ring that I had been admiring (not expensive, just beautiful) and I wear it very proudly with my wedding band. Most people think it’s a diamond and I always tell them it’s not, it’s my birth stone and it cost under $500 and I love it. And that is what matters to me, not how much it cost. In fact, I’m more proud of that ring than I would be of a more expensive one because it was thoughtful.

  74. On the ring: I’d suggest talking with your girlfriend before you buy anything (unless you already know what she wants, and know her size). What matters is what’s important to the two of you– not anyone else. It’s also important that the two of you are reasonably compatible in your attitudes towards possessions and money.

    In our case, we skipped the engagement ring altogether; we decided we’d rather spend the money on nice wedding rings for both of us, and on the wedding and the honeymoon. (We planned and largely paid for our own wedding, though we did get some gifts from parents to help out.)

    Likewise, as we planned the wedding, we talked a lot about what was most important to us, spent a fair bit of money on some of those things, and spent less (or skipped altogether) the things that we didn’t find important, even if they were “traditional”.

    We found the whole preparation a very valuable experience in our getting married. It helped us both establish our own priorities and autonomy as a couple, and taught us about working together for what we valued. (Conversely, I know of some couples that realized during the whole planning process that they *weren’t* compatible, and called it off– I’m sure for them that was valuable information, and much better to learn before than after the wedding date.)

  75. MelodyO says:

    My husband and I are both frugal people, and I still remember him sweating blood in the jewelry store at the thought of laying out $1500 for an engagement/wedding ring set. Hee. I picked a ring that to this day I love more than any other I’ve seen, but I have to say that we’re celebrating our 20th anniversary this year and the ring, the wedding, the photos, the dress have VERY little significance now. They’re all just things – it’s the love that means everything.

  76. CDG says:

    @36 Jim – don’t know where you live, and I feel pretty safe in my current town, but when I was a downtown city worker I was mugged 3 times in two different cities and I now have a habit of turning my engagement ring around if I ever feel nervous about my surroundings. Women are targets to begin with, and if you look like you’re carrying wealth around, seems like that would make it worse (although I don’t dress rich, so wrong place/wrong time probably in my cases).

  77. erin says:

    I also have a sapphire engagement ring, and I love it with all my heart. It is a beautiful piece of jewelry my husband had custom made for a very reasonable price by a small local jeweler. I recall a friend/couple were engaged around the same time and he proposed with a very flashy, expensive diamond solotaire. She demanded the sparkles!!! Well, long story short, she turned out to be very high maintenance and ran up huge bills shopping, expensive house, cars, etc. If your lady is throwing the three months salary hooey at you I would encourage you to consider whether or not you can afford this marriage, as the ring is just the beginning…


    Martin — ANY engagement ring is ridiculous. Just go ahead and marry her and then -both- of you wear wedding rings.

  79. Adriana says:


    Please run spell-check on your articles… you wrote “criticised” instead of “criticized” with a “z”. It’s a bit annoying when I’m reading and I have to pause and re-read the misspelled word.

  80. Adriana says:

    Trent please spell-check your articles. It is a bit annoying when I read and find misspelled words. (criticised is spelled criticized)

    -don’t know why my other comment did not go through.

  81. RBK says:


    Please refresh the page before double-posting a comment. It’s a bit annoying when I’m reading and have to go over the same comment twice.

    Also, FYI: “criticise” is the proper spelling in the UK and, as far as I know, the rest of the English speaking world outside the USA. I bet you didn’t realise that.

  82. Bettye Cheatam says:

    Unless things have changed in civil service, Trent, Melody is not eligible to live on the military base (only military and traveling civil service workers.)

  83. JonFrance says:

    Martin, just in case you want another opinion, this time from someone else with an elite MBA and similar means: yes, basing it on months’ salary is patently absurd. The standard of liking in the western world has come a long way since that marketing ploy was devised. What woman would want to go through life with a rock the size of a marble on her finger?

    As all the women have said, the important thing is to find a ring that she thinks is beautiful and will cherish. It is extremely unlikely that such a ring will cost two months’ salary. It’s also true that the very act of working out your relative expectations can be extremely revelatory with regards to your respective attitudes towards money in general.

  84. I think overall you are on the right path. Just the fact that you are asking important questions at a relatively young age is great. Unfortunately, most folks in their 20s aren’t asking questions about retirement.

  85. Sara says:

    Martin – you should know what your gf likes jewelry wise by now. If you don’t, start paying attention to what she wears. Call her mom. Talk to a close friend of hers to find out what she likes. My husband knew that I hate for people to pick out jewelry for me (my poor dad who always tried so hard) and so we went and designed a ring together (with no diamonds, but that was my preference. Sapphires and tourmalines are much prettier in my opinion). If she really wants the big diamond ring, you’d better figure that out now.

    And wow…when did it become three months for that “rule of thumb”? Darn inflation – it used to be 2 months for years and years and years!

    One more thing to consider – the size of your lady’s hands. I have quite a small ring size and if I had anything more than a 1 carat diamond on my hand, it would look just ridiculous. Whereas other woman have quite large fingers and a 2 carat diamond might look just right on her hand. Also, multiple smaller diamonds can enhance the look and relative size of a ring without costing as much as one diamond with the total carat weight of all of the diamonds. One more hint – a 0.97 diamond will cost much less per carat than a 1.03 carat diamond. Don’t take my word for it – just go visit some jewelers and you will see. And noone will know the difference if you just say it is a carat.

  86. Jane says:

    Trent FYI Melody said she was a civilian working for the Navy so she cannot live on base.

    Melody- as a fellow federal worker my advise to you would be it depends. You said you were not planning to say at your job, but are you planning to stay in the government. If yes even though most would tell you to invest in a ROTH I’d say invest more in your TSP at least until you decide you are ready to look at investing. The TSP is set up well for “dumb” investors.

    Personally in my situation I do both paying off principal and investing. I max out TSP and a ROTH every year (I’m a higher grade than you though.) I also am prepaying my mortgage a little but right now most of my extra money is going into temporary savings as I will be PCSing in 2 years probably to a higher COLA possibly a much higher COLA so will need a larger down-payment and may need to replace my car at about the same time. In 2 years where I’ll be basically at my last POD, I’ll be concentrating on paying down more of the mortgage while still investing/saving some.

  87. anon says:

    I’m surprised the author and commenters missed that Melody from letter #1 is probably paying at least $50 a month in PMI (mortgage insurance). She says she put down 3% (3.5%?), so until she’s up to 20% down, that’s another $600 a year.

  88. Carol says:

    I believe that the question was if a subject should pay more each month into the equity of his house, not if he should sell his house and buy a new one. This is a question that I would like answered. I’m currently paying an addtional $100 per month on my mortgage and it goes entirely to the principal. Is this a good idea?

  89. Virtual CPA says:

    I wouldn’t pay more towards the mortgage. In this economy and with housing prices so low, keep your cash and save or invest it. You will be better off in the long run.

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