Just to chip in with this...
I bought my Wife an engagement ring a few years ago and I didn't pay that much for it (in the end got it for free because they forgot to put the transaction through on my card

). I'm now looking at replacing it because the quality was very poor. I always felt a bit bad not spending much on it when I was earning a decent wage, but now the rings at the stage where it gets deformed if she grips on something too tight. This is for a white gold ring that is only 4 years old.
I'm now looking to get her a 'proper' ring now that I've got the money spare to do it. I just wish I'd have done this straight away and not been cheap about it. Looking back I don't think its fair for me to spend <£500 on a ring for her thats meant to last a lifetime and she will happily spend >£2000 on a watch for me.
Although you might think its a bit steep, spend more money now as its something she should have for the rest of her life.