The Definition of Broke: What Does It Mean?

by Elizabeth on February 6, 2012 · 18 comments

Last weekend, a casual friend asked me if my husband and I wanted to join her and her spouse for a double date. The proposed plan was to leave the kids with a sitter, get dressed up (new shoes!) and hit the town for drinks, dinner and dessert at a trendy new tapas bar. “Sorry,” I told her as I expressed my regrets, “I’m broke.”

I find myself using those two words – “I’m broke” – as an excuse a lot lately. Why have I yet to pay my annual homeowner’s association dues? I’m broke. Why haven’t I purchased new tires for my car? I’m broke. Why am I still wearing the same jeans I bought eight years ago (aside from the miraculous fact that they still fit)? I’m broke.

But what does it actually mean to be broke? Miriam-Webster’s definition of broke can be summed up in one word – penniless. The fact is, while four in ten Americans live paycheck to paycheck – including an astounding 14 percent of those who bring home a six-figure salary – I’d venture to say the vast majority of people who say they’re broke aren’t.

Example 1: My Grandmother

I come from a long line of money hoarders, hence my penchant for saying I’m broke when I’m actually not. Case in point? My grandmother. At 85 years old, the woman hasn’t worked outside the home – and hence, hasn’t earned a paycheck – since the 1940s. That may seem like ample qualifications for her alleged penniless state, but on the contrary: she and my late grandfather saved and invested exceptionally well. My grandmother’s estate is actually worth more than a million dollars. But my grandmother refuses to liquidate any of these assets, relying instead on the meager paycheck she gets from my grandfather’s pension and her monthly Social Security check. When she says she’s broke, what she’s actually saying is, “It’s the 29th of the month and my social security check doesn’t arrive until the 1st, meaning for the next few days I’ll live off whatever gas is in the tank and food is in the cupboard.”

Example 2: My Dad

My dad, although not a blood relative of my grandmother’s, certainly inherited her definition of broke. I recently asked my parents if they planned to visit our house for my son’s first birthday. My father’s answer? Nope, sorry, I’m broke. Now, I know my father isn’t one of those high-earners who’s living paycheck to paycheck. Instead, he has an exceptionally frugal definition of broke. Instead of meaning he has no money in the bank, when he says he’s broke, he’s actually saying, “I didn’t fully fund my 401(k) this calendar year.”

Example 3: My Brother-In-Law

My husband’s oldest brother, in my opinion, encapsulates what many Americans who don’t live paycheck to paycheck mean when they say they’re broke. My brother-in-law and his wife, along with my two nephews, rent a home. They own two large SUVs, a 55-inch LED TV, every gaming console you can imagine and a membership to a ritzy country club. Yet, my brother-in-law is always complaining that he’s young and broke. But is he? When he says he’s broke, he’s actually saying, “I may not be able to afford to fill up my gas tank, but I’m not so broke that I’ll consider selling my gas guzzler.”

Setting Your Financial Priorities

The three examples above – as well as my own definition of broke – illustrate pretty clearly that the words “I’m broke” mean vastly different things to different people. Despite that, they all have something in common: whether you’re a millionaire senior citizen, a retirement-minded Baby Boomer or someone who thinks they’re young and broke, the way you view your financial state boils down not to how much money you make but how you prioritize it.

Ask yourself these three simple questions:

  1. Can I afford the items in my monthly budget without which I couldn’t survive? We’re talking the necessities of budgeting here: shelter, food, basic transportation.
  2. Is there enough money for the items in my monthly budget that I enjoy, but which aren’t necessary? You know this stuff, too: your $20 a week iced latte habit, my brother-in-law’s pricy membership to the country club, my addiction to cowboy boots (they are an investment, thankyouverymuch).
  3. Am I setting aside a part of my monthly income for my investments? This, of course, assumes you’ve already fully funded your emergency fund, which should have enough cash in it for at least six months of the expenses you listed in reply to Question #1.

If you answered yes to all three of these questions, then – sorry, Dad – you are not broke. Sure, you may be short on liquid assets, you may have a large portion of your net worth tied up in investments or property. You have the money to spend on frivolous things, you just choose not to because they’re ancillary to your life – in other words, they’re not a priority.

If you answered yes to questions one and three, then you’re probably not broke. You may not have the wiggle room in your budget to do the fun stuff – like whisk your family away on a grand vacation – but you’re doing what it takes to get by not only today, but in the future as well.

If you answered yes to questions one and two, you’re doing yourself a disservice. This would be my brother-in-law’s case. He has the money to invest in his retirement accounts and boys’ college funds, but they aren’t his priorities: instead, he’d rather blow the money on electronics and fancy cars. He may not be broke now, but if he continues on this path, he will most certainly be broke down the road.

If you answered yes to question one – and let’s be clear, if you’re only going to answer yes to one of these questions, it should be the first – then you are, truly, living paycheck to paycheck. While this doesn’t technically meet the definition of broke you’ll find in the dictionary (penniless, bankrupt), not having a stable financial foundation on which to fall back in case of emergency comes pretty darn close.

So why, then, do so many decidedly un-broke people, myself included, like to say “I’m broke”?

In some cases, I think people do it for the attention (I’m talking to you, brother-in-law). In other cases, such as my grandmother’s, they really do feel like they don’t have enough money. But for me, I simply do it because I don’t like to admit the truth: that the request at hand – be it a high schooler in my neighborhood selling magazines door to door or the friend who wants to out for an extravagant meal – isn’t a priority.

With so many Americans truly living under dire financial straits, I’m making a pledge to stop saying I’m broke when I’m actually not. The next time I find myself in a situation that makes me question my financial priorities, I’m going to take a deep breath, count to five and calmly say, “I’m sorry, but that’s just not in my budget.”

{ 14 comments… read them below or add one }

1 PKamp3 February 6, 2012 at 11:51 am

Does your brother in law read this site? Haha.

I agree with your definitions – and your priorities. Emergency fund, 401(k) to match… IRA if you qualify, then back to the 401(k). I can imagine saying you’re broke as a convenient excuse even if you are doing all of those things – even if it is just to stop people from asking you to borrow funds!

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2 Canadian Doomer February 6, 2012 at 12:25 pm

We’re not broke. I do quite honestly state that we’re low-income, since our monthly income puts us considerably below the “low income cut off”. But we pay our bills, buy what we need/want without worries, put an offering in the plate on Sundays, and put a large percentage away. We’re far less “broke” than many people who earn ten times what we do.

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3 Elizabeth February 6, 2012 at 3:56 pm

Isn’t it amazing how the so-called “wealthy” can squander their enormous income, while those of us who live on a budget can stretch every penny?

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4 shanendoah@The Dog Ate My Wallet February 6, 2012 at 3:52 pm

I don’t have a 6 month emergency fund sitting in savings, that would drive C crazy while we’re still in debt, but otherwise, I can answer yes to all three of your questions.
I don’t know that I ever say we’re broke right now (when C first lost his job and we didn’t know how long UE would last, and therefor didn’t know how long we’d be able to say “yes” to even question 1, I did say we were broke). I usually say it’s not in the budget, or for really big things – we have friends who like to plan an annual large group vacation- I say it’s not in the plan. If it’s something I’m interested in, but am not sure about, I say- let me see if I can make that work.
That one is nice and generic because if I come back and say I can’t make it work, no one knows if it’s the job, money, or some other scheduling conflict.

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5 Elizabeth February 6, 2012 at 3:57 pm

I love your explanations- I’m going to have to try the “Let me see if I can make that work” one. you’re right, it’s ideal because you’re leaving an air of mystery to the response and the underlying reason.

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6 Jason Cabler (@DrCabler) February 6, 2012 at 7:32 pm

I don’t ever say I’m broke, I say I don’t have the money for that right now. I do like the “let’s see if I can make that work” though, sounds more sophisticated, ha!

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7 Money Infant February 6, 2012 at 10:31 pm

We are definitely not broke even though we make less than $40k per year. “We’re broke” is just synonymous with “No we shouldn’t spend that money” even if could technically afford to. I suppose my “broke” is like your dads although in the past when we were paying off debt it was definitely more like your grandmother.

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8 Roshawn @ Watson Inc February 7, 2012 at 11:32 am

I do agree that a lot of people don’t perceive that they are broke. They rob Peter to pay Paul and are so familiar with that toxic pattern that it seems normal. The fact is for most people, broke is normal.

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9 maria@moneyprinciple February 7, 2012 at 12:48 pm

I generally find that there is a great confusion between ‘broke’, ‘poor’ and ‘doing ok’. Even I at one point decided that I am ‘poor’ when in fact I wasn’t even ‘broke’ – just slightly irresponsible for some time. Good article; we are a bit like your grand mother just worse…

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10 Jeff @ Sustainable Life Blog February 7, 2012 at 4:09 pm

Interesting perspective on being broke – I know exactly how you feel. When I was paying off debt hardcore, I actually wasnt “broke” but that’s what I said when I turned down things. Its a nice excuse because everyone feels it, but it’s also good to define. In my case, I wasnt broke, I just had other uses for my money.

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11 Sandy February 7, 2012 at 6:36 pm

I think we use “I’m broke” because it sounds better than “I have money but I don’t want to waste it hanging out.” Being financially responsible and prioritizing can often leave you feeling broke.

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12 Marie at FamilyMoneyValues February 8, 2012 at 8:19 pm

I’m definitely not broke!

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13 Christopher February 9, 2012 at 12:19 pm

I am definately not broke too, but I agree with your post. Broke has different meaning in the context of each persons own situation.

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14 Amanda L Grossman February 18, 2012 at 4:27 pm

My husband commented to me once after I said “we can’t afford that” that in fact, we could if we wanted to. It makes quite a difference mentally to be able to say “we could afford that if we wanted to, but we do not want to afford that”. If you say you are broke, or that you can’t afford something, over and over again then you start to actually feel broke. Just as you pointed out, most of us are not broke by definition.

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