June 23, 2014 at 1:00 am

Sizing up engagement ring prices

Consider realities and goals in gauging the cost of what will be relationship's first big expense

Choosing a ring requires balancing your wish to impress your beloved without handicapping your future. (Maria Sestito / AP)

Youíre in love and ready to buy an engagement ring.

But are you ready to part with three monthsí salary as the diamond industry has traditionally suggested? If not, whatís your magic number?

Figuring that out can be a stressful, high-stakes undertaking. Engagement rings come with unique financial and emotional expectations. And in a relationship intended to last a lifetime, itís the first big test.

ďIt does set a certain tone about whether a womanís expectations will be met by her husband or not,Ē said Julie Albright, a sociologist and marriage and family therapist at the University of Southern California.

Here are five tips to help you determine how much to spend on an engagement ring.

1. Weigh financial goals

Whether you have a wheelbarrow full of cash ready to bring to your local jewelry store or not, your future plans as a couple should be part of the calculus for how much you can afford.

Sit down with your partner and go over your short- and long-term financial goals. Beyond wedding expenses, goals could include saving for a down payment on a home, preparing to start a family, as well as retirement planning.

ďThis is the perfect entry point to see where each personís money values come from,Ē said Michael Branham, a certified financial planner in Edina, Minn.

2. Assess expectations

First off, donít feel compelled to heed to the expectation that a ring cost three monthsí salary, the benchmark established by the De Beers diamond cartel.

ďThatís actually kind of a myth that people somehow still believe,Ē said Jamie Miles, editor of TheKnot.com, a wedding planning website.

A good way to gauge how much you may have to spend is to find out what kind of ring your would-be spouse is expecting. These days itís increasingly common to see couples browse jewelry stores together to remove the guesswork.

Last year, 64 percent of brides were involved in picking out their ring, while nearly a third helped decide the budget, according to a survey by The Knot.

The average spent on an engagement ring grew 3 percent to $5,598 last year from a year earlier, according to TheKnot.

The average carat size for the center stone is just over 1 carat. The average total carat size for engagement rings, including any diamonds on the setting, is 2 carats, Miles said.

3. Review ways to pay

Youíve had a look at the setting and diamonds (or other gemstones) your beloved covets, and figured out which merchants offer the best price. The next step is to decide how you will pay for the ring, as that can be a huge factor in how much ring you can afford.

If you can put off the proposal, itís best to save up money to buy the ring with cash, said Gregg Wind, a certified public accountant in Los Angeles.

Everybody should determine whether the ring payment will fit into their budget, Wind said.

This savings goal calculator from Bankrate.com may help: http://www.bankrate.com/calculators/savings/saving-goals-calculator.aspx

4. Know financing terms

Major jewelers generally offer financing with the enticement of six months or one year interest-free. But if the ring isnít paid off within the promotional period, or if youíre late on a payment, you could end up being retroactively charged 25 percent interest or more on the total price.

An exception might be if you have a credit card that offers rewards, such as free points toward air travel. But only if you can pay the balance off in the first month.

5. Upgrade later

Even if you determine that you canít afford as nice a ring as you hoped, consider buying something more modest. You can always trade up for a nicer ring in a few years when your financial picture is more established.