What does it mean to be “broke” vs. “poor”?


When I was growing up, our next-door-neighbor was a single mom who supported herself as a freelance writer. Needless to say, she wasn’t exactly burdened with the intricacies of where to invest her big fat paychecks. One thing she used to say was:

“I’m not poor, I’m just broke.”

I remember being so confused by this statement. Weren’t poor and broke the same thing?! I just didn’t get it. I’m long past my childhood years, but I’m still puzzling out what it means to be broke vs. poor.

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The difference between broke and poor

To describe oneself as poor is to accept an external definition of oneself, to believe that there’s a distinction between the classes, and you’re simply stuck at the bottom. It’s who you are and there’s no way out. It’s a long term situation and (this is important here) your financial identity is labeled by others.

To be broke may mean that you have no money, but it’s a temporary situation. You’re just one good paycheck away from financial stability. Perhaps your bank account is empty today, but flush times are just around the corner. It’s a short term period and importantly, it’s self defined.

But is there an actual difference between poor and broke?

Yes and no. Poverty is a valid and real existence for billions of people the world over, but for many Americans, we’re just broke. We have the opportunity to take on a second job, hold a garage sale or take a focused look at how we’re spending our money. Chances are we can figure out at least a couple ways to spend less and earn more.

The problem with the word poor is how negative it sounds. We all know people who choose to live beyond their means in order to avoid an appearance of poverty. Leasing cars they can’t afford, buying stuff on credit cards and even renting furniture to paste together a false image of financial comfort. By accepting that we’re broke instead of poor, it’s easier to temporarily drive a paid-for beater, wear thrift shop clothing and decorate our homes with upcycled castoffs and hand me downs. All the while living within our means and setting money aside for big picture goals.

Whether you choose to label yourself as broke or poor, what really matters is taking a deliberate role in your own money matters. Investigating the smartest ways to be financially responsible, on both the spending and earning sides so that you can move past either label.


So the next time you find yourself bemoaning your finances, take a note from my old neighbor and tell yourself, ‘I’m not poor, I’m just broke.’

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Want more financial advice? See our Money section.

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