One ring to rule them all, one ring to find them. One ring to bring them all and in the darkness bind them. – The Lord of the Rings, JRR Tolken
The discovery of the One Ring and subsequent quest to destroy it in Lord of the Rings is one of my favourite stories of all time. I am going to share with you a more personal story because I think there are a number of valuable financial lessons in it. I too once pursued the possession of a ring with the single-mindedness of Gollum.
Back when I was in medical school, I had been dating a girl for a couple of years who loved me despite my stringy hair, bulgy eyeballs, and odd plhegmy cough. I decided that I had better try to lock it in and marry her. For that, I needed to get an engagement ring.
This is a major purchase that could range from a few hundred bucks to thousands of dollars. It is also sautéed in expectation, tradition, emotions, and hormones which makes it an excellent target for marketing. That recipe also steeps this decision in risk from all sides. You could be hobbled financially for over-doing it or clobbered socially for under-doing it.
Back then, I was roughly following my Quatropro spreadsheet budget.
I couldn’t stray very far off budget because I had no income. I lived off of a combination of what was left of the finite money that my parents had diligently saved for my education (on which the budget was based) and supplemented by a line of credit (on which the “roughly following” was based).
Research about how much you should spend on a ring yielded great news – one to three months salary. One to three times zero equals zero – awesome!
Well, clearly that would not be deemed acceptable. So, what did I do?
I talked with my future wife about it.
While the actual proposal timing, romantic gestures, and actual engagement ring really should be a surprise – the fact that it is coming at some point should not be. If the boy/girl that you propose to is unimaginably shocked that you are thinking marriage, that is an alarm flag that you have different views on your relationship! We openly discussed finances and planned together.
She was clear that she did not want some big ring because that was a waste of money and would be clunky and get in the way of doing things.
This was a very important test of compatibility of financial values. One of the forces that dooms professionals and professional students is the fact that they make or will make a large income. People therefore expect them to spend like it. If she had wanted a “doctor-sized” rock, that would have been a warning that projection of wealth was important to her. That is a bad treadmill to get on. It only speeds up and is hard to jump off of without doing a massive lip-skid. We were aligned in our frugality, practicality, and love of physical activity. Frugality and practicality – sexy. Very sexy. Of course, when we were in our early twenties, pretty much anything was sexy.
We visited jewelry shops around town to get a sense of her taste and cost. Now, I just needed a plan on how to get the money.
While, there was the line of credit, my principle rule was that it was for emergency use for core living expenses only. I was focused on learning medicine and didn’t want to take on another job to make ends meet. That meant that I had to save by spending less.
With that, I started tracking everything that I spent money on rather than “roughly” following my budget.
Whenever I came in under budget at the end of the month, I put that money in an envelope hidden in my closet. While tracking every penny spent is standard personal finance planning advice, it is a pain in the ass. It is vital when you are living on a tight margin between expense and income or when trying to figure out what your baseline spending is.
I don’t miss it. It did however, yield some boons.
When you track everything, you invariably realize that you spent more in some areas than you thought. You can objectively weigh whether those costs are more important than other goals and find areas to save. Tracking what you spend also has that magical effect of making you hang your head in shame as you log that you spent an unplanned $4.00 in a fit of french fry lust. An excellent deterrent.
After about a year of this, I had saved up about $1200 and was able to get the ring.
Turns out in retrospect, that was actually a good number. A 2014 study showed that men who spend $2K to $4k on a ring are 34% more likely to get divorced than those who spend $500 to $2K.
Higher spending was associated with a higher risk of divorce!
Financial tension is a major underlying cause of marital break-up and a lack of fiscal discipline or a high expectation to spend money on bling would certainly contribute to that.
Before you go all cheapo, those who spent under $500 also had an increased divorce rate. Although it was only in the female side of the sample used in the survey. That did not reach statistical significance, but is endorsed by an expert consensus panel (my wife and her friends).
Key Messages To Avoid Financial & Marital Hardship
There are 5 key messages embedded in this story:
- Openly communicate about major financial decisions with your partner. That may even include some things that should be “surprises”. You need to be comfortable and established in your relationship, but don’t wait until after you’ve made major life-altering commitments like marriage.
- Open communication also helps you establish your financial compatibility. While it isn’t what draws couples together, to most people, it can be a major cause of breaking couples apart if ignored. Achieving goals, including financial ones, together as a couple actually builds the relationship.
- It is worthwhile to track what you spend in detail. Tracking what you spend in detail helps you make a budget and better weigh financial decisions. It is a pain to do all the time, but doing for tight financial periods, to figure out your baseline, or just periodically to check-up is vital to achieving financial goals. It also helps you spend less.
- Don’t overspend on bling. It may be a symbol of love and commitment, like in this case, but don’t fall into the marketing trap of making it a symbol of status.
- While you don’t want to overspend, don’t cheap out either. You’ll end up paying more. In the case of material items, that may be in it breaking or not doing the job well. Or in the case of symbols like this one — a beating from the expert consensus panel.
One ring to rule them all, one ring to find them. One ring to bring them all and in the darkness bind them. – The Lord of the Rings, JRR Tolken
It is kind of ironic that our engagement ring gave my wife the power to rule. Here we are 20 years later still bound together. Further, she rarely wears the ring anymore. She follows Gandalf’s advice – keeps it hidden, keeps it safe.
I was only reminded of this story because the other day she pulled it out and wore it to take our son to his music lesson so that she “wouldn’t have to punch some artsy husband in the face for trying to flirt with me”. Have I mentioned her karate? The ring is occasionally practically useful, but more so it is a symbol of something very precious. Preccccccciooouuuussssss….
