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Personal finance expert and podcast host Dave Ramsey recently taught his audience why many Americans are “broke,” Yahoo Finance reported.
During an episode of The Ramsey Show, Ramsey spoke with a listener from Spokane, Washington on why he uses the word “broke” often and why several people fall under that category. According to the financial expert, the term “broke” is used to describe a person who tends to spend more than they can afford, all to keep up with appearances, saying, “a lot of talk, [but] no money.” “You’re trying to ‘put on the dog,’ as we say in Tennessee,” he added.
“You’re trying to look like something you’re not… in Texas, they say, ‘Big hat, no cattle.’”
A survey from CNBC and SurveyMonkey revealed close to two-thirds of Americans would fall under the “broke” category. Sixty-five percent of adults across the United States admit to living paycheck to paycheck. Most would blame it on the rising cost of living, but the reality of the lack of financial planning and overindulging could be labeled as the real culprits.
Ramsey’s co-host, Jade Warshaw, piggybacked on the sentiment, saying her definition of being “broke” is that a person is simply financially irresponsible, and their lifestyle and income don’t match.
Ramsey, who has been transparent with his fanbase on his past financial struggles, admits that hitting rock bottom caused him to go “through a CSI autopsy” of his finances, referring to the hit crime investigation TV show. He then identified the leading cause behind why Americans are struggling: car payments. Ramsey said an unreasonably expensive car is a crucial indicator of being broke. “When you pull up to the stop light and there’s five nice cars sitting around you, you’re looking at five car payments,” he said.
Edmunds, an online resource of car reviews, found the average monthly car payment in the first quarter of 2024 was $735. Data shows a little over 17% of car owners with a car loan hold a monthly payment of over $1,000 during the same time range. Quarterly, Americans are being forced to stretch their budgets thin to maintain their vehicles.
“In the United States of America, cars are a status symbol,” Ramsey said.
“However, stretching your budget to keep a car you can’t afford is a clear sign of financial mismanagement. They’re sitting in stinking apartment complexes, and there’s a $40,000 car out there. That… 100% broke people.”
The author of The Total Money Makeover said more Americans need to learn how to cut back on unnecessary expenses and how to set money aside to invest and save. Another listener, according to The Street, asked Ramsey his thoughts on taking money out of a savings account in order to pay off a credit card totaling $5,000. He told the fan that it makes more sense to just pick up a part-time job, especially since it’s not a massive amount of debt. “Honestly, I’d rather see you pick up a side job, nights or weekends,” he said. “That’s not a ton of debt, and you could have it paid off in just two or three months with a decent part-time job. Plus, it’d keep your savings intact.”
If listeners don’t go that route, Ramsey gave some helpful guidance, including not wiping out savings to make the move. Secondly, and probably the most easy, ditch the credit cards. “Cut up the credit cards, close the accounts and never go into debt again,” he said.
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