'The Ramsey Show' gives listeners 'clues' to tell if you're broke, average or wealthy — do you need 'a good reality check'?

“You can make a great income, but you’re still broke,” Cruze said. “You can make a great income, you could still be middle class. You can make a great income and use that income and build wealth, or you could make an OK income and build wealth, or be broke, right? So much about it is our behavior.”

Kamel agreed.

“It’s habits,” he said.

The hosts say these habits will land you in one of three categories: broke, average or wealthy.

‘Broke people habits’

They first outlined the “clues” of “broke people.”

Taking out payday and title loans

Kamel characterized payday and title loans as “probably the saddest [clue] on the list,” noting that you see them in “low-income areas.” These types of loans are “high-interest, short-term loans that spiral into a debt cycle” or end up costing you your vehicle, Kamel said.

Cruze added, “When you get stuck in that cycle, you’re paying high-interest debt and you just feel like you can’t get out of it, and that will keep you broke if you stay in that life.”

Leaning on rent-to-own and cash advances

Kamel said rent-to-own can seem “like a smart thing,” because “one day I’ll own it.” And that cash advances might not seem that bad, because “I’ll pay it back when I get my paycheck.” But the fees and “exorbitant interest,” of these deals, much like with payday loans, can keep people “stuck in this [...] cycle of poverty.”

Buying lottery tickets

Cruze flagged that low-income ZIP codes typically have the higher shares of lottery ticket sales, saying that lottery tickets offer “false hope.”

“It is sad because it is stealing from people,” she said.

Kamel agreed.

“And it’s statistically impossible odds, but you tell yourself ‘someone’s got to win,’ and when you’re that hopeless, you turn to these terrible habits,” Kamel added.

‘Average person’ habits

Kamel noted that “average person” habits, which he characterized as “middle class America,” are “not much better” than the so-called “broke people habits.”

Chasing credit-card rewards

Cruze said that the idea of all the things you’ll be able to do with your rewards, like travel, also helps people get stuck in debt. She said the credit card that “was supposed to be, ‘I pay it off every month,’” ends up catching people if they lose a job, or have an emergency and no savings, and then “they look up and they’re $18,000 in credit card debt.”

Kamel and Cruze added that the individuals who pay interest and can’t pay their balances “end up subsidizing the rewards.”

“Save up and pay for things,” Cruze concluded.

Making newer car payments

Kamel explained, “This is where someone goes, ‘Well, I want the newer car, and the dealer said he can get the payment down to where I can afford it.’”

Kamel said it’s yet another cycle people get stuck in.

“You’re paying top dollar for a depreciating asset,” he said. “So, you paid $50 grand for a car. With interest, you end up paying $60K, and that car is only worth $20K by the time it’s paid off. That’s bad math.”

Cruze called it a “classic example of making someone else rich.”

“You’re making the credit card companies rich, the car dealers, the banks,” she said. “And you’re paying interest on something that’s going down in value versus actually making interest for yourself.”

Piling up consumer debt

The hosts said this is a bigger category that includes HELOCs and buy now, pay later plans. “These are all really used to fund a lifestyle that people can’t afford,” Kamel said.

He said that younger people were “falling for” buy now, pay later, because “it seems better than credit card debt.”

‘Wealthy people’ habits

Lastly, the hosts outlined what “wealthy people” do.

Earning interest, not paying it

Cruze summed this up as “you have more things invested — you have things that are actually paying you or making you more money — versus debt companies, right? Banks and car dealerships, all of it.”

Kamel added, “You’re not going backwards here; we’re moving forward.”

Investing

According to Kamel, “you can’t save your way to wealth.” He advises investing in stocks and real estate.

“And really, all you need is something like a 401(k), an IRA, mutual funds and your primary home,” he said.

Buying used cars

Dave Ramsey often tells callers that new cars are a huge money mistake; his rule of thumb is that unless you have a $1-million net worth, buy used.