‘Big hat, no cattle’: Dave Ramsey shares his definition of ‘broke’ — says there’s 1 indulgent purchase in particular that keeps Americans living paycheck to paycheck

Big hat, no cattle

During the episode, Ramsey said his definition of “broke” is a person who spends more than they can afford in order to keep up appearances. “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.’”

Ramsey Show co-host Jade Warshaw agreed and said her definition of “broke” is someone who is financially irresponsible and whose lifestyle doesn’t match their income.

In addition, both Warshaw and Ramsey said they would consider someone living paycheck to paycheck as “broke” regardless of their income.

Based on this metric, nearly two-thirds of Americans would be considered broke. According to CNBC and SurveyMonkey’s financial security survey, 65% of adults across the country said they were living paycheck to paycheck as of 2024.

The rising cost of living and lackluster wage growth in recent years could be part of the reason why so many Americans are struggling to make ends meet.

However, Ramsey insisted that overconsumption and lack of financial planning are the real culprits.

“Let’s be clear here. The debt is not because of inflation,” Ramsey said in another episode of his show. “The debt is because [people] wussed out and refused to cut [their] freaking lifestyle to offset inflation.”

In fact, he said the biggest indicator of “broke-ness” is the overconsumption of a specific item.

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The biggest indicator of being broke

An unreasonably expensive car is a key indicator of being broke, according to Ramsey.

“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.

The average monthly car payment is $735, as of the first quarter of 2024, according to Edmunds.

However, the data reveals that 17.3% of car owners with an auto loan had a monthly payment above $1,000 during the same quarter. Simply put, many Americans are stretching their budgets thin in order to hold onto 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, he added.

“They’re sitting in stinking apartment complexes and there’s a $40,000 car out there. That... 100% broke people.”

To escape this trap, he recommended budgeting accordingly and living within your means.

Avoid living above your means

According to a survey by Wells Fargo, 58% of Americans report they are able to live within their means and not worry about money. Only 40% said they are in either “good” or “great” financial shape.

One in four of those surveyed (23%) said they were in “poor” financial shape.

To avoid that last cohort, Ramsey believes more Americans should cut back on unnecessary expenses and learn how to set money aside to save and invest.

But it might not be as simple. According to a survey from LendingTree, 51% of respondents admitted to overspending to impress others. Amongst this cohort, 56% are now in debt because of this overspending.

Consider reviewing your spending habits for a month or two. Keep tabs on money flowing in and out on a spreadsheet. This will help you build a realistic budget and set financial goals that work for your lifestyle.