Get Your House in Order

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Get Your House in Order

A friend of mine was walking down the Strand, that stretch of concrete that runs along the beach in the South Bay. Apparently, his hair was disheveled. His shirt un-tucked. The fly of his pants down, unbeknownst to him. A blacked-out night that evidently led to a rough morning. And, as he stumbled north, headed back to his car, an older man passed him by and said, in that clipped and wizened way that you’d like an old man to speak: “Son, you better get your house in order.”

The story has attained a level of mythology among this particular group of guy friends, probably because it signals all the ways in which they live on the brink of catastrophe…which is great for those of us who like good stories. But this phrase, “get your house in order,” comes back to me often, severed from the context of this early morning drunken stumble. Get your house in order! It’s a recommendation. It’s an admonishment. It’s a command. I mean, God pretty much said the same thing to Abraham before he sent him on his sacrificial way, so a bedraggled house is clearly no joke. And I, for one, can’t help but think of all the ways in which my house is not in order.

And what do you do when a quick dose of renovation is needed to pull into place whatever existential disarray there is? In those moments, I do what I do best. I take a class. And this time, I opted for the most concrete thing I could think of: personal finance. So last week, the lesson veered around to the subject of credit, and eventually, we lit on the topic of the FICO score, that infamous three digit number that determines whether you will get that new house, that car, that boat, that state-of-the-art thing that you just can’t live without, or whether it’s austerity measures for you, my friend. In other words, FICO scores matter mainly because they matter to people that (might or might not) lend you money. And these people, these institutions, use your FICO score to decide whether you get the financing you so desperately want, and, more importantly, what it will cost you—and you, specifically—to borrow that money.

Now, if you were raised with the particular constellation of neuroses that I was, you were taught to fear debt. Debt meant that you were beholden to someone, and usually, when the nature of that liability was financial, you paid a high price for it in the form of interest. So the goal was to pay everything off. All the time. Let them see you use your cards, but don’t linger out there like a sitting duck. Ratchet up your bills and then pay them off. Totally and completely. And until that debt was paid off, you existed in a state of somewhat-managed anxiety.

And this has pretty much been my frenetic spending policy for the entirety of my adult life. Spend, repay, spend, repay, spend, repay. So, imagine my panic when I learned last week that being debt-free is not necessarily the safest way to be. As it turns out, what you want to be is not safe, but desirable. Desirable to whom? To the institutions that lend you money. Now, this is slightly counterintuitive, because you’d think that your FICO score would only improve, the closer your balance got to zero, meaning, you owe nothing and are in the clear. But this isn’t exactly the way it works. While it’s certainly better to have no debt than to have tons of it, surprisingly, having a little bit of debt is better than having none at all. It seems that, in the end, what you want to communicate to the banks is that you’re not such a total disaster they’d be fools to bet on you, but also that you’re not so prudish that you can’t stand a little risk in your life. Put simply, this means, you don’t demonstrate total financial irresponsibility, but also—and here’s the rub—you don’t clean your slate entirely. Because if you hold onto at least some of your debt, it means someone out there is making money off you in the form of interest. And let’s be honest, the banks aren’t lending you money out of the kindness of their hearts.

Now, this should be said with a caveat or two. While you must hold onto some debt, it should be proportional to your maximum credit limit (the much-hyped debt utilization ratio). General rule of thumb: keep your debt to under one-quarter of your limit…which is also why it’s not wise to go around closing your un-used credit cards. Those credit cards keep up your maximum limit, so when you incur debt, the ratio remains lower if you have those cards open. Use them sometimes, just to keep them active. On the flip side, you want to be aware of spending too much to look desirable to the banks. Because even if you intend to pay much of it off by the end of the month, you don’t know when exactly the three credit bureaus that measure your score—Equifax, Experian, and TransUnion—tally it up, and it could be right before you’ve had a chance to pay down your debt. This hurts you, too.

Maybe the best way to put it is this: your FICO score reveals how well you manage debt, how well you handle it, not how quickly you eradicate it. It’s a bit like looking for a good romance. You don’t want someone totally reckless, but you also don’t want someone who’s afraid to live with a little danger. You want someone who handles risk well, someone who can roll with a situation. Maybe your FICO score really measures your ability to tolerate a bit of chaos without totally collapsing into it and without running from it in fear. Somehow, you seem less risky when you’ve shown that you can live with a certain amount of risk. So, maybe getting your house in order is really about maintaining a small degree of disorder. An occasional drunken stumble. Shirt untucked, fly down. Toeing the line between command and a little bit of neglect, just enough so that you get that loan, earn that mortgage, and can finally claim all that disorder as your very own.

-Jacqueline Abrams

8 Comments On This Topic
  1. Emily posted
    October 10, 2012 at 9:35 am

    Well put!! I’ve never known a person who is a happy in a relationship where the two parties never argue about anything. A little (healthy) drama is necessary to make one appreciate the times when it’s absent! And, a little reckless abandon gives a person the necessary periods of release and reprieve to help prepare him for the situations during which he will inevitably need to show strength and restraint.

    • Jacqueline Abrams posted
      October 10, 2012 at 5:58 pm

      Nice application to relationships. You can pretty much use this handy analogy for anything. Ha!

  2. Sara posted
    October 10, 2012 at 4:17 pm

    This post made me want to go out and take a finance class, but hopefully I will be able to get the Cliff’s Notes if I continue to follow this blog :)
    I never really stopped to think about FICO scores and what I should be striving for with mine. Very helpful post.

  3. Crystal posted
    October 10, 2012 at 5:20 pm

    Somehow, you seem less risky when you’ve shown that you can live with a certain amount of risk – Exactly! What personal finance class are you taking? I could use one too. I think my credit score is in order, but now I have ‘savings’ to sort out. And my savings are like a drunken dude who stumbled upon a nice park bench to sleep on. He knows he should exert the energy to walk home because he will get a better return there, but his pass-out-culator says this bench will do just fine for now.

    • Jacqueline Abrams posted
      October 10, 2012 at 5:56 pm

      Ha! Well put! Will certainly report back when we get to the “savings” discussion. For now, leave his drunk ass on the bench.

  4. Becky posted
    October 11, 2012 at 2:18 pm

    I enjoyed this post, especially considering my own precarious financial state.

    Reflecting on your opening anecdote. To me that statement has always felt a bit eerie, as I think of “getting your house in order” as something you do before you die. I believe there is a bible verse that says something like, “Put your house in order, for you shall die”. It’s so easy to put off financial planning, investing, etc.. until we have to deal with it. But we’d probably all do better getting our shit together on a regular basis! I hope your disheveled friend took those words to heart!

    • Jacqueline Abrams posted
      October 11, 2012 at 2:32 pm

      Good point! Totally ominous undertones to “get your house in order.” No denying the weight of that kind of claim.

  5. Shebreh Kalantari-Johnson posted
    October 16, 2012 at 11:39 am

    Well you certainly made me rethink of how I think of debt and credit…growing up in house where even owning a credit card was scary…you just pay for everything with cash! Brian is going to love this post…he is going to mostly love telling me that I was wrong.

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