Could the sparkler cost you your marriage?

How much should you pay for an engagement ring? One month’s salary? Maybe two?

How much should you pay for an engagement ring? One month’s salary? Maybe two?

Well back in the 1930s, in an effort to sell more diamonds, and increase profits the diamond giant De Beers suggested that a man should spend the equivalent of three month’s salary on an engagement ring for his bride to be.

An engagement ring should be special, of that there is absolutely no doubt? But spending a considerable amount, if not all, of your savings, or indeed getting into debt for the sake of this particular ring is, in my opinion, financial insanity.

My rule of thumb, for what’s it worth, is to simply spend what you can afford without getting yourself into too much debt or using up all of your savings; savings that could be used for a bigger deposit on a house, or later when you are actually married.

This I think would mean much less pressure on a marriage, by starting off with a good solid financial base behind you.

Research backs this up because for the last 20 years, the number one reason for divorce or marital disharmony has been conflicts over money. Some of the other reasons by the way are sex, communication and the in-laws.

The only reason I am writing about this subject matter is that I encountered this problem first hand last Tuesday when I met with a gentleman in Dublin who asked to see me because he was looking for financial advice; he wanted to put in place a financial plan, so to speak.

Anyway, over the course of our conversation, he was telling me how financially insecure he felt because he had no savings whatsoever. He was always in his overdraft at the end of each month; he was paying €500 each month towards a term loan with his bank that still had five years to run; his wife had a credit card balance with €13,000 outstanding and worst of all because their finances were so bad, his elderly father was paying the crèche fees each month for his only child.

But here was the thing that surprised me, he firmly believes - and he is probably right - that the reason they are in such a bad place was because of two things; the first is what he, in particular, did before they got married and secondly what she didn’t tell him!

You see they were madly in love and it was a bit of a whirlwind romance where they were married within 12 months of first meeting one another. And to display his affection at the time in the biggest and most generous way possible, he used up all of his savings and even borrowed some money to buy his wife an engagement ring.

I didn’t ask him how much the ring cost but I can only assume it was very expensive.

He didn’t think rationally, he said, at the time about how expensive the ring was, he just wanted the best for his bride to be and, you know, the savings would be rebuilt and the debt cleared over time.

Her role in their financial woes was that she didn’t tell him before they married that she was carrying a credit card debt of €15,000 at the time. It seemed to both of them that their individual financial situations were not a major concern or worry for either of them and that when they were married they would deal with them.

He said if I asked her about her finances and what debt she had, it would have been like asking for a pre-nuptial. He remarked to me, and it was a quote I made sure to write down “why would I wanted to have burst this ‘love bubble’ that we were in?”

Interestingly, and I will get back to their story in a second, I wanted to tell you some interesting facts from various studies before I forget them, about what people keep from their significant other.

n 32% of women said they have hidden purchases from their partner, compared with 17% of men

n More than 25% of women said they would pretend something was old when in fact it was a new purchase , compared with 8% of men

n 71% of men and women earning more than €70,000 have “money secrets” – and 13% of this figure was hiding a huge amount of debt

n 45% of separated or divorced couples discovered financial secrets about their spouse, compared to 16% of couples who are currently married

Anyway, back to the couple I was talking about because they admitted to me that their love bubble has deflated quite a bit in the past couple of years and I think is probably about to burst because they are both under considerable stress and, without a doubt, it has greatly affected their relationship.

So how do you avoid ending up like this couple? Well before you ever say “I do” for the first or even second time, I recommend you have a conversation with each other, where you sit down and discuss your current financial situation i.e. what you have and what you haven’t. Don’t be ashamed of your past or the mistakes you might have made, just be honest.

Some basic questions that you need to talk about are: is there debt and if so how much? How is it going to be paid off? How will we handle our money? Couples need to understand how they will share accounts and pay bills.

Is there a budget? This is a great exercise before a wedding because it shows you what you are going to be up against and what your outgoings are going to be each month. And even if one person ends up handling most of the bill paying, the other spouse needs to at least have some idea what’s going on.

And finally please try to avoid unnecessary debt if you can, before and after you are married. And that means not getting into debt on expensive engagement rings, where you feel pressurised into believing that you have to buy a ring based on what others say.

Don’t forget the money you spend on loans could be used to repay your mortgage earlier, towards your emergency fund, your retirement fund or used if you are blessed, to have children together when you do tie the knot.