Robbing Peter to…

Prior to Martin Luther nailing his Ninety-five Theses on the door of the All Saints’ Church in Wittenberg, Germany on Oct. 31, 1517 to dispute papal power and the selling of indulgences, the Catholic Church required taxes be paid for the construction of St. Paul’s Cathedral in London and St. Peter’s Church in Rome. “Robbing Peter to pay Paul” originated from the practice of neglecting to pay one tax so that one could pay the other. This practice is still occurring in a variety of ways.

I recently talked to two business owners from out of town, and I asked them if they feel that people are going into debt to pay them. They both said yes. They said that customers will pull out several credit cards and say, “Put $50 on this card, $20 on this one, and I’ll pay the rest in cash.”

I often look around Port St. Joe at the patrons at our local shops and restaurants, and I am thankful for their presence. Many of them are older and appear to have plenty of resources. However, some are younger families who appear to be less affluent, with several children in tow, and I wonder about their ability to pay in cash versus going into debt. I am amazed that they can eat out several nights a week – and I imagine their tabs are several hundred dollars each time. That’s good for the local owners and employees in the near term – two of my children are servers for the summer – but is it good for our economy, and for the patrons, in the long run?

In a blog posted by the Federal Reserve Bank of New York on May 14, several charts reveal in pictorial form the typical ebb and flow cycle of credit card balances and delinquencies prior to the pandemic. In 2020 and 2021, credit card balances and delinquencies decreased because of government stimulus to taxpayers and because people could not go out and spend the money. But, since the economy reopened in 2022, balances and delinquencies have skyrocketed and continue to grow. 

This data, and my personal interactions, lead me to the sad conclusion that agrees with the blog referenced above: Younger credit card users from the lower income demographic are more likely to be maxed out on their credit limits. Data shows 12% of the lowest income quartile, 12% of millennials (born 1981-1996) and 15% of the Gen Z (born after 1996) are delinquent on their credit card payments.

What does this mean for you? If you have friends or family in these demographics, it means you should proactively teach them about money management. You may consider helping them financially, but only after helping them realize the source of their spending problem and commit to changing their haunts, habits, and hangouts. 

If you are currently profiting from the increasing credit card balances, save as much of that money as you can so you can survive when they are no longer able to rob Peter to pay you. If you have your financial house in order, keep it that way – and help others learn from your experience and success!

Gulf County resident Walter L. Woodrick, a certified financial planning practitioner, is the author of two books. His website is WoodrickFinancial.com, and his text number is 850.724.1369. Securities and advisory services are offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. #599057-1