DEBT IS SOMETIMES depicted as evil. That’s silly: Without borrowed money, many of us would struggle to pay for college, we’d find it tough to buy our first car and—if we were compelled to pay cash—we probably couldn’t afford to own a home until we were in our 40s or 50s.

Debt allows us to purchase items we can’t currently afford, thus smoothing out consumption over our lifetime. Indeed, borrowing in our early adult years should be viewed as a rational strategy. With decades of paychecks ahead of us, we should have plenty of time to pay off any loans before we quit the workforce, so we can retire debt-free.

That, at least, is the theory. In practice, many folks end up borrowing too much. The vast majority of American households have some form of debt. While overall household debt is barely above its 2008 peak, many observers have recently sounded the alarm about student loans. It’s crucial to avoid borrowing more than you can comfortably handle.

It’s also crucial to hold down your borrowing costs. You can do that by regularly checking your credit reports for errors, maintaining good credit scores, favoring secured loans, considering taxes, refinancing when the opportunity arises and paying down debt when it makes sense. Ridding yourself of all debt by retirement can make a ton of sense, both because it eliminates a major expense and because it can help you avoid the “tax torpedo,” a nasty retirement tax trap described in the tax chapter. Got too much debt? We offer some strategies at the end of this chapter.

An organizational note: Here, we discuss all kinds of borrowing—except education loans. Because education loans are an integral part of college financial aid packages, it made more sense to include them in the college chapter. There, you’ll also find some tips on how to trim your monthly loan payments if you have already graduated.

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