Couple Kissing At Sunset

The Price Of Love For A Silicon Valley Man

in Financial Planning by

The price of love is more than just the dozen roses you need to buy after a fight. The price of love entails gifts, dates, trips, wedding ceremonies, homes, college tuition for your kids (if you make it this far), and the constant upkeep of making sure your significant other knows you still care.

According to the US Census Bureau, Americans spent $11.5 billion on chocolates and $8.4 billion on non-confectionary items in 2011. In the month of February alone, jewelry stores sold an estimated $2.8 billion worth of merchandise in 2013 compared to $1.5 billion during normal months. Forget about saving the children. Let’s save our marriages!

Think how much simpler a hug and a kiss would be. Well, not if you want to hold on to your woman. Despite many women saying it’s the thought that counts, no man should ever come up empty-handed during Valentine’s Day, birthday, anniversary, or winter holiday.

Let’s go through an exercise on the growing price of love from the perspective of a 30 year old Silicon Valley man who lives in San Francisco. Mr. Engineer makes $120,000 at a tech startup, rents a $3,000 a month one bedroom apartment, has a net worth of about $200,000 and hopes to make a couple million dollars when his company goes public in an estimated three years.

Before you judge him, remember that love makes people do anything and everything.

THE PRICE OF LOVE

Dates

Mr. Engineer meets Ms. Daisy, a middle school teacher who makes $45,000 a year. A typical date consists of going out to a mid-tier restaurant like Garcon in the Mission District for some clams in white wine sauce, steak frites, seared scallops, and a bottle of pinot grigio for $120 total. Afterward, it’s only right for him to take her to get some Butter Love pie and hot chocolate. Add another $15. By the time they reach the SF Jazz Center, they’re feeling a little sleepy thanks to all the food they’ve eaten. No matter, Esperanza Spalding promises to get them moving out of their seats. But those upper deck seats cost $90 for two. The night is a blast for $225. All he’s hoping is for her to call again, and she does.

Once you start strong, you can’t fade. $225 nights are now the norm as he takes her out on at least 12 more similar type of dates plus 20 $50 dollar cheaper dates until he realizes she is the one! It’s time to ring shop.

Total date cost for the year: $3,700.

Ring

The engagement ring is another fantastically marketed item where all men are forced to buy a diamond ring, and hopefully a big one at that. Of course any educated man knows that carat size is not the only attribute of importance. He must also get a diamond of ideal cut, G or better color, and clarity no worse than VS1.

The reality is that only the carat size is what matters when your fiancee shows off the ring to her girlfriends. Let’s discuss some basic rules. First, there is the three month gross salary rule for how much to spend. Since our engineer friend makes $120,000 a year, he should consider spending $36,000. Another rule that is growing in popularity is the age equal to carat size rule. Let’s say the love of his life is 28, then a 2.8 carat engagement ring it is. Finally, there’s my absolute favorite rule which is the car rule for engagement ring buying. This rule states that the amount he should spend is roughly equal to the present value of his car. If he just bought a $60,000 BMW on lease yesterday, then he better go out and buy that 3 carat pillow top ring from Tiffany’s. If he’s driving in a frugal 2003 Honda Civic, then perhaps a nice $3,000 ruby ring would do.

Given engineers are practical people who tend to marry practical women, let’s go with a $10,000, 1.3 carat, G color, VVS2, princess cut engagement ring that was custom designed.

Total cost: $3,700 + $10,000 = $13,700.

Wedding

The average wedding costs $28,000 in America compared to the median household income of just $51,000. Some of you may be shocked by such ostentation for one night, but don’t be because the average car sold is now $31,000. Is there really any wonder why the average American is struggling to accumulate wealth for healthier retirement?

Mr. Engineer and his fiancee would like to have a Napa wedding for 120 of their closest friends and relatives. But after discovering the massive booking costs at Auberge du Soleil and Calistoga Ranch, they decide to make the destination even farther by going to The Resort at Squaw Valley, Lake Tahoe instead. Perhaps this way, less than 100 people of the 120 people will come, thereby saving $550 per head. The end result was a $55,000 destination wedding plus another $3,000 for dinners and drinks for guests who came early for the rehearsal dinner and party.

Total Cost: $3,700 + $10,000 = $58,000 = $71,700.

Honeymoon

No perfect wedding would be complete without the perfect honeymoon. After careful consideration, Mr. and Mrs. Engineer decide on a relaxing stay in one of those fancy huts over the emerald blue waters in Bora Bora for 10 days. The cost at the all-inclusive Four Seasons Bora Bora is $1,200 a night. Add on $2,500 for roundtrip tickets in economy for each and the couple is now at $17,000. Let’s budget in another $2,000 for random expenses such as taxis, souvenirs, and excursions. Considering the wedding cost $58,000 for the weekend, $19,000 is a steal for 10 nights.

Total Cost: $3,700 + $10,000 + $58,000 + $19,000 = $90,700.

House

Unfortunately for new home buyers in San Francisco, the median price for a single family house is roughly $1 million. Sadly, $1 million doesn’t buy you much unless you’re willing to live out in the Richmond, Sunset, or Bernal Heights districts. There you’ll find a healthy 1,800 square foot, three bedroom, two bathroom Edwardian that needs $50,000 of work if you don’t get outbid by the hundreds of real estate starved buyers.

Mr. and Mrs. Engineer don’t want to live that far away from work, so instead they opt for a one bedroom, one bathroom condominium in a high rise downtown. The cost for such modern living is $950,000 and $840 a month in HOA dues for a place at One Hawthorne Place. Mr. Engineer decides to pay the entire down payment like a good husband.

Total Cost: $3,700 + $10,000 + $58,00 + $19,000 + $200,000 (downpayment + closing) = $290,700.

Divorce

After three years of marriage, Mr. Engineer begins to hate life because his startup, which paid him $30,000 a year below market rate is dying a quick death due to intense competition. Half of his department was let go last quarter and he knows he’s next. Thanks to his fancy one bedroom condo, he was only able to save about $16,000 a year. With the thought of paying a $3,600 /month mortgage + a $840/month HOA fee and no job, Mr. Engineer is stressed out of his mind.

Before buying the one bedroom condo his friend warned him, “No matter how much you guys get along, get a two bedroom so you can have your own space when times are tough!” Mrs. Engineer is the loveliest, kindest woman in the world, but Mr. Engineer starts getting incredibly annoyed at always bumping into her in their 800 sqft apartment. To make matters worse, they’ve been trying to have a baby for the past year to no avail.

Mr. Engineer feels like a failure largely because the company on which he spent 12 hours a day for three years is now going bankrupt. He feels ashamed he can no longer provide the ideal life he promised his wife. One day, Mr. Engineer comes home early to find Mrs. Engineer swimming with Mr. Engineer’s old boss in the pool downstairs. He hated his old boss and seeing them together made his temper flare. Although nothing happened, Mr. Engineer began yelling at Mrs. Engineer and breaking everything in the apartment. It turns out his old boss was just there to offer Mr. Engineer a  job at his new company. That’s not happening anymore.

Mrs. Engineer files for divorce, and takes all of Mr. Engineer’s $50,000 in savings. They decide to sell the property for $1 million because neither of them can afford to live in such luxury. The proceeds net them only $930,000 after commissions and transfer taxes. After paying off the $750,000 remaining mortgage, they are left with $180,000 which they divide equally even though he ponied up 100% of the downpayment. Both realize things could have been much worse if they had to sell years earlier in 2008-2009.

Total Cost: $290,700 – $90,000 + $115,000 for the divorce = -$315,700

The Price Of Love Chart.

SOLUTION TO KEEPING COSTS DOWN

Lest you think such a scenario is entirely implausible, rest assured  it is because I just described a friend’s scenario over the past four years. In 2013, the median ages for first marriages for men and women were 29 and 26.6 years old respectively, according to the US Census Bureau. In big cities like San Francisco and New York, the ages are higher due to education and work.

The median length of first marriages that ended in divorce was eight years in 2009, the US Census Bureau reports. Unfortunately, Mr. and Mrs. Engineer split after three and a half years largely due to money. If Mr. Engineer’s tech startup made him a millionaire there’s no doubt in my mind they’d still be together. They’d probably have a new place with a couple more bedrooms to raise a family.

Divorce is the single greatest destroyer of wealth, followed by taxes, if you are the primary breadwinner. Hence, on Cupid’s celebratory weekend, think hard about the financial implications of love. After you’ve convinced yourself that he or she is the one, you may want to first consider cohabitation. You’ll avoid the marriage penalty tax and all the legalese that goes along with marriage.  And if you’re still inclined to get that piece of paper, then go for it knowing full well that life is but a coin flip away from financial harmony or financial misery.

In a future post we’ll look at the price of love from a woman’s perspective. Perhaps you’d like to even share your own.

Falling in love or already in love? It’s not too late to track your finances together.

Readers, what is the price of love? Have you ever been through a divorce? Why does a marriage penalty tax exist? What’s the best to minimize the cost of love and maximize happiness? 

Picture: Hawaiian Sunset, 2014.

Sam

 

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Financial Samurai

Sam is the former Managing Editor of the Daily Capital blog. He worked in finance from 1999-2012 before deciding to focus full-time on his online endeavors - FinancialSamurai.com and the Yakezie Network. Sam is an avid tennis fan who loves to travel. He received his BA from William & Mary and his MBA from UC Berkeley.

33 comments

  1. Wall Street Playboys

    This is a high end personal finance blog and even here people are starting to realize the headache of signing the contract is not worth it.

    If you are insane and in love… Pay for the ceremony, pay for the honeymoon, pay for the ring but never sign the dotted line. Why sign a contract where you have a 50% chance of losing money and a 50% chance of zero happening. Expected return is negative for signing a paper tied to the good old government.

    Also, if both the man and woman have high income it may be better to remain single, depending on how close to the $200k tax bracket you are.

    Cohabitate if in love.

    Reply
    • Financial Samurai

      The marriage penalty tax is something very bizarre to me. For folks with dissimilar incomes (exp $500,000 vs. $50,000), the person making $50,000 will be paying the $500,000 tax bracket income.

      Then folks with very high similar incomes will also have a higher tax bill as well vs. the combined individual tax bills.

      The government should and does want more people to get married so they can collect higher taxes.

      Reply
  2. FI Fighter

    That’s why this 30 year old engineer from silicon valley is gonna plan to do all that outside this country! That or find a sugar mama 😉

    Reply
    • Financial Samurai

      Good luck! Which country are you planning to find the love of your life?

      Reply
      • Andy

        Personal sampling: 1st gen immigrants tend to be much better at not wasting money on frivolous stuff.

        Our costs:
        -I didn’t buy an engagement ring, wife’s wedding ring was under $2k.
        -Wedding itself was under $4k, and the money we got from family & friend canceled that out
        -Haven’t done our honeymoon yet, but that will probably cost more than the wedding
        -On the same page in terms of spending and I think having a hybrid join/individual accounts and joint decision making on large purchases is an important part of that

        Reply
        • Financial Samurai

          Thanks for sharing Andy. Hope your wife is on the same page! Sometimes, women say one thing but are really thinking another e.g. “Don’t get me anything on Valentine’s Day,” really means, “I hope you do!” 🙂

          Reply
  3. Brian

    Your friend got what was coming to him and it was deserved in my opinion. Also if you need to buy the girl all that then she is shallow and you are probably compensating.

    I do agree with the fact that divorce is a common and that people should live together beforehand. However, if your friend didn’t build his relationship around materialistic BS then maybe she wouldn’t have expected it. I am not a huge fan of betting half my stuff that I will love them forever but if you don’t cover up all your problems with stuff you might be a lot better off.

    I also love how you switch around from mean and median to justify the ridiculousness. Just to point out that the median cost of weddings is something like $9k. I find that articles like these just encourage the problem. Buying a ring that is the value of your car, are you kidding me? If its real you could put a $300 zirconia ring on her and she wouldn’t care.

    Best of luck to your friend.

    Reply
    • Financial Samurai

      Love your tough love. Care to share your marriage experience? I can assure you that this scenario in my post is very common.

      Good thing he didn’t buy a ring based on the value of his car and went with a $10,000 ring.

      Reply
  4. a terrible husband...

    Woah… I’m so sorry that your friend went through that. I have not been through a divorce and am doing everything I can to avoid such a fate. But I can imagine they are costly.

    Without touching on the details surrounding the divorce, I would suggest that the price of true love may not include a divorce. Sure the divorce rate is high, but I’d venture to say that in many cases divorces are avoidable if both people take personal responsibility over their actions, seek counseling, continue to learn about what makes a strong marriage, and love and respect each other well.

    All that to say, I hope your friend recovers emotionally and financially. Ouch.

    Reply
    • Financial Samurai

      Hope your marriage lasts long and happily! It always seems darkest after a breakup, but I’m optimistic both of them will find someone new. Everybody who isn’t looking is looking after all! #optimist

      Reply
  5. Untemplater

    Divorce can get down right nasty and expensive. My parents went through a bad one and my dad to this day still feels like he got the short end of the stick. But at least they are much happier now!

    Reply
    • Financial Samurai

      Better to love than to never love yes? Glad your parents are happier!

      Reply
  6. Romeo Jeremiah

    There are plenty of missing details but, I understand the point. Notwithstanding, I think that it was his fault that he ponied up so much of the bills. *sigh*

    Reply
    • Financial Samurai

      Is it not fair to pony up the majority of the bills if he makes the majority of the income?

      Reply
      • WallStreetPlayboys

        Sam this faulty logic is exactly how the court system gets him. Why should the guy have to support a woman he no longer loves and why should she be entitled to his lifestyle (80%+ of divorces are filed by the woman). Makes no sense.

        Just don’t sign the papers. If she needs you to sign the papers she doesn’t love you at all.

        Feel free to shower with gifts and fun but why let the government get into your business as well. Other countries are not like this.

        Government taking advantage of the human inability to control emotions particularly when it comes to dating. It’s disgusting.

        Reply
  7. krantcents

    Not everything is dollars and cents! Bad judgment can cost a great deal more than that. You don’t say how long they went together before marrying, but I think you need to go at least all 4 seasons at a minimum. Time usually exposes how a person really is vs just presents. This is true for men and women!

    Reply
    • Chris

      Got to agree with you there!

      I knew I wanted to marry my wife within 6 months, but 2 things stopped me. 1) I wanted to save up to pay the ring and honeymoon off before the event happened (in-laws ponied up 75% of the wedding costs), and 2) I wanted to make sure that she really was the way I thought she was.
      If 1 & 2 weren’t good, then I didn’t want the relationship.
      15 years later (and after a 7 year dating cycle), we’re still happily married. 🙂

      Reply
  8. Mrs H

    I know people whose wives didn’t leave their husbands during layoffs or downturns. They stayed with them and supported them. Most are now into their 2nd or 3rd careers and still married. Your friend was unfortunate in investing his earnings on one who did not earn it. Having her swim and entertain the boss like that knowing how sensitive and stressed out he was, rather showed poor judgment on her part. Maybe it turned out for the best. At least he won’t have child support to add to his liabilities.

    Reply
    • Financial Samurai

      I like your positive attitude! I wonder though, how bad really is going for a swim or relaxing in a hot tub with a spouse’s colleague while s/he waits for the spouse to get home? If nothing happened, nothing happened. What a waste to not use the amenities, especially if they are paying $800 a month.

      Those spouses that stick with their spouses through pain are incredible. It should always be a team effort!

      Reply
      • tripper

        “Going for a swim while they wait for the spouse to get home?” I have to say, I think you’re being a little naive here. According to you, Mr. Engineer came home early and was surprised to find them in the pool. If everything was on the up-and-up, I think that Mr. Engineer wouldn’t have been surprised. Rather, he would have gotten an email from his old boss: “hey, can we meet up some time for a chat?” or a text from his wife: “hey, your old boss is here. Says he wants to talk to you about something. If you’ll be home soon he can wait.”

        But no, that didn’t happen. Instead, according to you, the old boss just happened to show up completely unannounced when Mr. Engineer wasn’t home, oh and he just happened to have a swimsuit. What a coincidence that Mr. Engineer came home early – otherwise, old boss would have been waiting for hours and hours. Right.

        Reply
  9. Aubrey Rose

    Great article, just signed up for Personal Capital’s RSS feed 🙂

    I’m a girl who hopes to avoid such a financial mess in getting married, although I’m in the same kind of position as your friend (I’m the breadwinner and my bf’s bankrupt). However, there are a few things I’m going to do to try and prevent ending up the same way:

    – use an heirloom. I have a necklace from my grandmother that I had my friend set into a gold setting for just $150.
    – honeymoon smart. With my Alaska card ($75/yr), I can get a companion fare to Hawaii for $99.
    – enjoy each other, not the stuff. On our first date, my bf took me hiking and brought PBJ sandwiches he made himself. I bought him a coffee at the cafe we went to afterwards because I could tell he felt uncomfortable spending $3 on a latte. We still live in simplicity and are happy because we have each other, not a bunch of fancy presents.

    Thanks for the great article, Sam!

    Reply
    • Financial Samurai

      Love it Aubrey and welcome to the site!

      I like how you’ve thought things out and are sensitive to his financial situation. I hope your future husband can claw his way out of bankruptcy and achieve his dreams. Tracking your finances together while planning for a future is a whole lot of fun.

      How cool is it that you are a NY Times and USA Today best selling author? Perhaps I could interview you as part of a readers series here on Daily Capital one day. One of the things we plan to do is have one of our CFPs provide a free financial profile and recommendation for readers and publish the advise here.

      Reply
  10. Barbara Friedberg

    Wow, I’m much more cost conscious. Our wedding cost less than $10K and my dress was less than $200. We spend more on travel and investing as those are more important to us.

    Reply
  11. Joe Saul-Sehy

    I love this “three month’s salary” rule for engagement rings. The people that made that a “rule” are absolutely brilliant and the rest of us are absolute suckers for thinking only two months’ salary means less love than three…..

    Reply
    • Financial Samurai

      Which is why Marketers should get more respect from Engineers here in the Valley. We create mega billion dollar industries!

      Reply
  12. Justin McCurry

    Justin McCurry

    Awesome story, Sam! I didn’t really get it in the first half of the article. Why is this guy blowing so much money on his honey, and why is it on a blog that usually espouses responsible personal finance, tax savings, efficient investments, and general money wisdom?

    Then I read the second half of the article. Yeah, poor guy. I spent exactly $7 + tax on my honey this year. A beautiful half dozen red roses that were $4 at the discount grocery 3 days before V-day (you know, when the selection is awesome and before the prices skyrocket!). And a bottle of fancy cherry vodka (that was on sale).

    My wife knows about buy when prices are low and get something that presents a great value in return for your money. We’ll take the savings throughout the year and blow it on a magnificent trip somewhere this year. Spending money in places where it matters – part of the glue that keeps us together.

    Ok, gotta go now. Only 359 days until next year’s big V-day. I need some time to figure out how to best deploy my capital ($7) on gifts for my honey!

    Reply
  13. konga line

    This article is hilarious. You sucked all the helium out of the balloon and turned Love into a flaccid blob of latex. Ahhh America, leave it to our entrepreneurs to exploit and sully the one saving grace of our humanity.

    Reply
    • Asian-American Man

      I think you’re missing the point. You can be fiscally responsible and in love without being an irrational fool.

      Reply
  14. Alice Pua

    You think that’s bad? Something tells me that you’re writing through the lens of very pale-skinned glasses. Sure, your average WHITE entrepreneur drops a lot of money on trying to impress a girl the wrong way (let’s not even get into that right now), but have you ever considered what it’s like for men of other races? Several studies have shown that white men are at the top of the totem pole, socially speaking. Due to several years of media saturation, white men represent financial stability and the height of what’s fashionable in the male race. Being black or Latino are okay, but being white is GREAT. Everybody wants you or wants to be you. So what if you’re an Asian guy and you want the same girl the white guy wants? You have to make over $200,000 more a year in order to do so. You have it lucky:

    http://www.abcsofattraction.com/blog/stereotypes-women-have-of-asian-men-paper-tiger/

    Reply
    • zidane

      The thoughts you speak come mainly from victim mentality. I’m an asian male, 5″7, average salary(for now), and average looking, yet I’ve dated attractive white and asian women easily both in the east and west coast.

      You can either blame your situation on the environment and spend decades trying to fight for a cause… or you can find out the efficient way that works and go along with it. It’s much easier to understand relationship dynamics and know that its how you make a girl feel rather than worry and attribute failure to other causes.

      Hope this helps..

      Reply
  15. Mghow

    Love is only expensive to the one who is too foolish to see the true cost of the lies they have been fed.

    Reply
  16. XYZ

    Budgeting is good. But if your “friend” is so reluctant to spend money in order to live decently here in Silicon Valley he should leave California immediately. He can become The IT guy for a small company, marry a frugal accountant, drive a Prius and still live in a McMansion-but on a whole acre instead of a 1/4 lot. No fun, love or reckless spending allowed though!

    Reply
  17. GladToHaveLeftSiliconValley

    Are you assuming that your friend wouldn’t have bought a condo without getting married? That seems to be a flawed assumption. Doesn’t seem to be a cost of love but rather of life in Silicon Valley. You also don’t consider the fact that your friend would likely have been spending ridiculous amounts of money going out if he hadn’t been going on those expensive dates with his “love.”

    This article is truly depressing – your friend has a very sad way of looking at the world. You can’t be surprised that you’re automatically factoring the costs of divorce into the costs of love when you act like $120 dates and $1,200 a night honeymoon should be the norm (all on your dollar, may I add), and that worthy women would expect nothing less. In fact, the opposite should be true.

    Reply

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