Diamonds are Forever Stupid

This blog basically serves two purposes. One, it is entertainment for me; and two, it sometimes helps people save money. More recently, however, I discovered it actually serves a third purpose, which is… three, it helps make sure that I never get laid.

And even while aware of this, with every post, I continue to shoot myself in the foot (penis) time and time again. I don’t know if it’s my dislike for wasting money or love for making sense, but I can’t seem to stop. Well today, I’m here to continue to dig myself into a deeper hole in order to address a topic that affects my current age group.

Diamonds, more specifically diamond engagement rings, are a waste of money.

Diamonds are kind of a fucking scam. If you do a little bit of googling, you can find that giving diamond rings didn’t even become a tradition for marriage proposals in the United States until the late 1930’s. De Beers, a family of diamond companies (read: cartel) that pretty much monopolizes the market, launched a successful advertising campaign in 1938 to convince average Americans that they basically can’t get engaged without a diamond ring. Fast forward 75 years to the present day, and you can see that we are now all programmed to associate our success with how expensive of a ring we can afford.

This was strategically done through De Beer’s ingenious marketing tactics. Have you ever heard of the 4 C’s? Color, clarity, cut and carat right? Who do you think invented that? Yes, it was De Beers, the diamond company with a surplus of smaller diamonds that was trying to break the “bigger is better” consumer mentality. Here are the directions they provided on every ad: “Ask about color, clarity, and cutting — for these determine a diamond’s quality, contribute to its beauty and value. Choose a fine stone, and you’ll always be proud of it, no matter what its size.”

How much money should I spend on a diamond ring? Oh, don’t you worry; De Beers has that part covered for us as well. They recommend two months’ salary. Yes, the company selling you the diamond is also helping you budget how much money you should spend on it. Their slogan asks: “Isn’t two months’ salary a small price to pay for something that lasts forever?” The answer is no. Fuck no, it is not.

It’s actually kind of insane. They’ve basically made it a social norm for us to completely overspend on something that is completely unproductive. And we’ve eaten it right up. Just imagine if you proposed to your girlfriend today with a diamond ring you bought for something you could very easily afford. You’d probably be scared of coming off as a dickhead to her friends and family right? My god… and what would other people think when she takes a picture of it and posts it online?

Anyways, let’s do some math.

Let’s say Bob is 28 years old and is ready to take the next step with his girlfriend, Jill. Bob is financially responsible and does very well for himself. Bob loves Jill and wants to give her an engagement ring fancy enough to prove it. He makes $100,000 a year and wants to spend about $12,000 – $15,000 on a ring for his fiancé to be. Jill expects this because that’s a little less than 2 months’ salary.

Keep in mind that Bob, alone, has an income in the top 80%ile of American households. Let’s break down his finances:

On a 100k salary, after tax (~34%) and 401k (5%), on a monthly basis, Bob sees about $5,100.

Here is a list of his Monthly expenses:

Car: $300
Rent/Utilities: $1,500
Student loans: $200
Health insurance: $150
Car insurance: $70
Long term investments: $200
Food/Alcohol/Going out: $1,200
Random expenses (buying things, vacation, ect.): $300
Total expenses: $4,220

So after expenses, Bob is able to put away ~$1,200 in cash every month. Keep in mind, Bob is practicing self-control and not blowing money left and right, but at the same time, he is living a rather comfortable lifestyle. At this rate, Bob is able to save ~$14,500 in a year.

After just a year of saving he managed to afford that beautiful ring for Jill. Now they can get married and live happily ever after right?

No. Actually, fuck no. In reality, this is absolutely irrational. We are talking about an entire year of savings. That’s 365 days of hard work and self-control. Why in the world would he spend an entire year of savings on a piece of jewelry that literally does nothing but “show” their love, and more importantly, impress other people (read: her friends)? The ring can literally do nothing except get looked at.

Also, they are about to start a new life together. They need to be saving money for the future of their family. More immediately, they need money for their wedding and down payment on a house. How is Bob supposed to afford this if he just dropped a year’s worth of savings on a ring? “What if the parents help out?” Eh, I guess that is a possibility, but that is another story. The ring that Jill will be flaunting to her friends would actually be bought by Bob’s dad, not Bob. Their parents might also help with their wedding or down payment on a house, but then by definition, this means that Bob and Jill are no longer living within their means. And, when does this stop? The problem at hand here is that there is a large disconnect between Bob’s and Jill’s expectations of the diamond they think they can afford and their reality.

Anyways, let’s get back on topic. You might say “Oh, but diamonds are rare and have a really good resale value.” Shut up. They aren’t and they don’t. If diamonds were so rare, why would almost every household in America own at least one? Diamonds are a horrible investment because they aren’t actually rare. De Beers basically controls the prices of diamonds by controlling the supply. They literally sit on their supply to drive prices up. Also, the retailer markup on diamonds is about 100% to 200%, which means, if they were to buy back your diamond from you they would have to significantly undercut you, thus proving that diamonds aren’t a good investment, which was one of their selling points. It has been reported that diamonds generally resell for about 25% of the original cost.

Realistically speaking, De Beers already got us. They’ve started a tradition that has already been engrained into our society. Most likely, you won’t be telling your girlfriend that the whole country has been tricked and now she won’t be getting a diamond ring when you propose. But maybe there is some common middle ground you can reach. Scientists have actually been able to create diamonds in labs that are so similar to natural made diamonds it is practically impossible to tell the difference (not CZ). And since these diamonds were made in a lab, they are completely flawless, unlike real diamonds which naturally have imperfections. Additionally, these diamonds are a lot more affordable and provide the same value, which is basically only means they look equally as pretty.

I’m not exactly sure about how girls would react to this idea, but it is kind of hard to make the argument to spend exceedingly more money on something that is basically exactly the same. The tradition was essentially made up to profit off of you, you won’t be reselling the diamond, nobody can tell the difference between man-made and natural diamonds, and real diamonds don’t even last forever (which is why it’s supposed to represent your marriage right?).

There’s really nothing that could rationally argue in favor of spending more money on a natural diamond besides the fact that natural diamonds are more expensive and therefore worth more. When it comes down to it, I think that is what diamonds are truly about. It is just another way for people to outwardly, yet classily, express their success and worth. It allows the man to show how much money he can afford to throw away on a rock that is only expensive because the seller tells him it is. Meanwhile, it gives the woman satisfaction in showing the world that her new life partner is someone who will be capable of providing for them. Yeah, you can argue it represents love and commitment or whatever too, but that doesn’t explain why people are pressured by society to overspend on it. I think this is a cultural, behavioral and maybe even an educational problem more than anything; because, if you really think about it, diamonds are kind of really stupid.

Sources:

Sorry, I forgot how to do AMA formatting.

http://blog.priceonomics.com/post/45768546804/diamonds-are-bullshit
http://www.theatlantic.com/magazine/archive/1982/02/have-you-ever-tried-to-sell-a-diamond/304575/
http://www.nytimes.com/2013/05/05/fashion/weddings/how-americans-learned-to-love-diamonds.html
http://www.neatorama.com/2008/12/01/10-facts-about-diamonds-you-should-know/
http://en.wikipedia.org/wiki/De_Beers
http://www.diamondnexus.com/

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