Dave Ramsey Says This Is the Key Difference Between Rich and Broke People. Is He Right?

Do you find yourself identifying with rich or broke people?

Some people become rich due to good luck and others become broke due to bad luck. But, in many situations, decisions that you make throughout your life will impact whether you end up wealthy or struggling. 

Finance expert Dave Ramsey is a firm believer in the idea that your money mindset can have a huge effect on your ultimate net worth. Specifically, Ramsey thinks that rich and poor people approach one particular type of decision in a very different way -- and that these differing approaches have a meaningful impact on whether you end up financially successful. 

This makes all the difference in your financial success

According to Ramsey, a big difference between rich people and poor people comes down to the question they ask before they make a decision about whether to buy something or not. 

"Rich people ask 'How much?'" he said. "Broke people ask 'How much down, and how much a month?'"

Obviously, these two questions are focused on different things. The first question, which looks at total cost, gives you the chance to assess whether the purchase is really worth it when you take the big picture into account. It's also the question you would ask if you were going to pay for the item without borrowing, since you'd need to know the total price if you were going to pay it all at once.

The second question, though, is one you'd ask if you're looking to finance a purchase you can't afford to pay for all at once. And while there are times when taking out a personal loan to buy something can make sense, even in that situation, you'd still want to be focused on whether the total cost was worth it, rather than just on whether you could afford the monthly payments. 

If you're asking how much you'd have to put down and how much you'd need to pay each month, you're likely not considering what committing to buy is going to do to your overall financial situation. You could find yourself stretching to purchase something that really, ultimately is too expensive for you and committing to monthly payments that last way too long in order to do that. And that's not a good way to grow wealth. 

"Don't buy things you don't need with money you don't have to impress people you don't even like," Ramsey said. 

Is Ramsey right?

Ramsey is absolutely right that a focus on the monthly payment alone isn't the right way to make a borrowing decision.

Committing to a monthly payment for a long period of time can hinder your ability to do other important things with your money -- like saving money for your future. And you could end up spending far more over time than what the item is actually worth to you.

You should ideally avoid borrowing for anything that doesn't go up in value or isn't absolutely necessary, so start asking the right question before you make a purchasing choice if you want to end up rich instead of broke.