You Can Usually Tell If Someone Is Smart With Their Money By The Car They Drive, Says Dave Ramsey
Photoroyalty | ShutterstockCars are a necessary expense for many people, so it makes sense that the make and model of the vehicle someone chooses to own would be a good indication of their financial acumen.
Personal finance expert and radio host Dave Ramsey claims he can quickly tell who is actually staying middle class and who's not just by the brand of car in their driveway. The type of car that a person owns can usually reveal a lot about their personality and even their status. But according to Ramsey, the type of car you drive can offer even better insight into how you spend your money.
You can usually tell if someone is smart with their money by the car they drive.
"The way you know someone is going to stay middle-class is when they have two very nice cars that are obviously $500, $600, $700 payments, sitting in front of a middle-class house," Dave Ramsey said on his show last year. "One hundred percent, those people are going to stay middle-class until they break that habit. It’s a huge indicator."
Ramsey, who takes calls to his radio show from his YouTube subscribers, often gives money management tips, and one thing that he constantly spouts is the fact that people shouldn't be spending above their means.
"One of the guidelines we’ve developed here is to not have more than half your annual income tied up in things that have motors and wheels," Ramsey said. "We tell folks not to buy a brand-new car until you have a net worth of a million dollars. If you do have a car, you should sell it if it violates those things."
Ramsey suggested that middle-class people should buy used cars.
Ramsey referred to nice cars as "toys" and said they should be out of the question until an owner can afford one without having to budget. He claimed that buying new cars saddles anyone who might be struggling financially with assets they can't afford.
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About one in four Americans (27%) consider their personal financial situation to be poor or worse. The last thing most individuals are thinking about is affording a car. They're instead worrying about meeting their basic needs.
In terms of living expenses, more than one in four Americans indicate they struggle most with utilities (30%), food (28%), and gasoline (27%), followed next by healthcare (24%), housing (24%), and transportation (14%). And on top of that, one in four Americans (26%) admitted: "My income isn’t enough to cover my expenses even with careful budgeting."
Americans are in deep when it comes to auto-loan debt.
"While mortgage delinquency rates are similar to pre-pandemic levels, auto loan delinquency transition rates remain elevated," Wilbert van der Klaauw, economic research advisor, said in a press release. "High auto loan delinquency rates are broad-based across credit scores and income levels."
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Debt balances for cars increased by $11 billion during the last couple of months of 2024. That means people can't afford the cars they buy.
There is definitely practicality in not spending above your means, especially if you're already in a position where paychecks have to be stretched over weeks at a time. You can definitely find a good and reliable car that doesn't have to be brand-spanking new.
Nia Tipton is a staff writer with a bachelor's degree in creative writing and journalism who covers news and lifestyle topics that focus on psychology, relationships, and the human experience.
