How This Couple is Climbing Out of $23K in Credit Card Debt and Towards Retirement
Credit cards. They’re just small, rectangular pieces of plastic, yet have the ability to help people prosper—or cause unexpected financial damage. SoFi members Peter and Gloria Hoch of St. Louis, Missouri, know something about that. Together for 36 years, the couple racked up about $23,000 in credit card debt in just over five years.
Credit Card Debt in America Today
Let’s clear something up first. Credit cards aren’t always detrimental. When used appropriately and paid off on time, they can actually help boost your credit score. Still, many people struggle with the negative effects of credit, making it hard to think past minimum monthly payments, and even harder to maximize their financial futures.
A recent report by ValuePenguin reveals that American households carry an average credit card balance of $5,700. That doesn’t sound too bad, but definitely not nothing. Where things start to get interesting is in understanding that that average increases by age and by income.
People under the age of 35 have an average credit card debt of $5,808, while those between ages 45 to 54 hold $9,096 in card debt. Additionally, the more you earn, the more likely you are to have deeper levels of debt. People making $70,000 to $114,999 annually carry an average of $5,800 in credit card debt, while those making $115,000 to $159,999 have $8,300 in card debt. And for high earners making over $160,000 a year, that number spikes to $11,200.
These numbers may not mean much on their own, until they’re put into the context of expense types, which creep up on people unknowingly. Case in point: Many American households don’t have the means to pay for an unexpected expense of around $1,000. Even worse, while 37% percent of respondents would pay for that expense with savings, 15% would have to rely on their credit cards (via Bankrate).
Using credit cards responsibly and dealing with debt management properly are important steps to financial freedom. Risky behavior, or what may just be unforeseen circumstances, can often lead to unexpected problems.
Meet the Hochs, a well-intentioned couple
For the Hochs, much of their credit card debt stemmed from a desire to help family members.
“I paid for the funeral of my niece, who died suddenly,” said Gloria, a manager in the research department of Washington University School of Medicine. “We also help support our son Max’s 7-year-old son, Kingston.” Kingston and his parents lived with Peter and Gloria for a while, and at times, they were his sole caretakers. “Peter and I continue to pay for many things for him, like summer camp, after-school programs, and sports. Plus, we help our sons Paul and Max as much as we can.”
Over the years, Peter and Gloria have helped Paul, 33, and Max, 30, with car and health insurance costs. They also footed the bill for Max to join them on a “trip of a lifetime” to Europe, where Paul was living a few years back.
The Hochs certainly don’t regret helping their sons and grandson over the years, but as time passed, they realized they needed to get a grip on their credit card debt. It was holding them back from other important financial goals, primarily, their retirement.
While the Hochs were able to put some money toward retirement even as they accumulated debt, it’s only because they have employer-matching retirement plans at work.
Yet like so many other Americans, in trying to pave a straight path towards their retirement, they admittedly made a few missteps along the way.
“We’ve borrowed against my retirement fund three or four times to pay off debt or fix our home,” admits Gloria. “Like a lot of people, we lived paycheck to paycheck, and to some extent, we still do. We’d use the credit card for a few frivolous things, and then an emergency would happen or we would see something too good to pass up, so we’d charge the expenses. After a few years of that, we were under so much debt that we no longer felt like we could do anything.”
The Path to a Financial Fix
For the Hochs, consolidating their debt was the answer to their years-long credit card problem. When Paul mentioned SoFi to his parents in 2015, after researching lenders for himself, they applied for and received a personal loan with a low-interest rate from SoFi. The $400 monthly payment to that loan, which they plan to pay off in five years, is less than all of their previous minimum credit card payments combined. All told, consolidating their credit card debt with SoFi saves them about $100 each month.
Peter, who works as a botanist at the Missouri Botanical Garden, admits that while financial decisions are made jointly, Gloria handles the day-to-day aspects because she’s embraced the digital age more effectively than he has. But together, they’ve learned that while credit cards can be lifesavers in certain situations, it’s important to be very cautious. They now know that a solid credit card strategy boils down to never putting more on your card than you can afford to pay off each month.
“It’s way too easy to whip out a card to buy something you don’t need,” Gloria says. “It’s also easy for that debt to get out of control and lower your credit score, which can really hurt when you want to buy a house or a car”
While they still hold other outside debts, including a car loan and a second mortgage, they plan to pay those off next year. They also plan to pay off their mortgage in 2022.
The Golden Road Ahead
Gloria and Peter have lots to look forward to. They’re keeping new credit card debt at bay and are optimistic about their financial future. They plan to retire in 2022, the same year that their home will be fully paid off.
“I will be about 67 when I retire, and Peter will be around 72 when he retires,” Gloria says. “We’re lucky—we’re both healthy and on a great track.”
Peter agrees. “Things are looking good. While retirement is still a few years away, at least we’re thinking seriously about it now. We’ll continue to do some volunteer work in retirement, and hope to have the means and good health to see more of the world. And we’ll certainly continue to see, play, and travel with our sons and grandchild — creating more and more memories you can’t quite put a price on.”