Introduction

If you’re picking up this book, you’re probably concerned about your debts.

If so, you’re in good company. Half of the people surveyed in a recent Harris poll said they were living paycheck to paycheck, which makes it hard to pay down debt or save for the future. One out of four people in a 2011 survey said they were worried about paying the minimums on their credit cards. The Federal Reserve reports that one out of seven families has debt payments that eat up 40% or more of their incomes—a level of debt the feds say is an indicator of “financial distress.”

Some people have good reason to worry. They’ve maxed out their credit cards, or struggle with an unaffordable mortgage, or face repossession of their car. They may have student loans they can’t afford or payday loans that chew through every paycheck. Many have stopped being able to juggle all they owe: One in 10 American families in 2010 was 60 days overdue on at least one bill.

If you’re one of those folks, you’ll find plenty of information in this book to get you back on your feet.

But you don’t need to have overdosed on plastic to be concerned about your debt situation. Most people get little if any education about the right ways to acquire and manage borrowed money. They rely on lenders, family, and friends to tell them which loans are “good” or “bad” and to advise them how much they can afford. Many veer between extremes, thinking debt is evil one minute and the next applying for yet another new department store card to get that 10% discount.

The typical book on debt, meanwhile, focuses almost entirely on how to pay it off and ignores when debt might actually be beneficial to your overall financial life.

In reality, debt can be an enormously helpful financial tool, allowing us to buy homes, get educations, and build businesses. Instead of sucking us dry, it can help give us the cash flow we need to grow our long-term wealth. But we need to know how to get it, when to get it, how much to get, and when it’s time to pay it off.

This book is designed to help you identify which debts are toxic to your financial health and which actually help you get ahead. You’ll learn the smart ways to deal with your debt, including which loans you should pay off and which you should keep. You’ll discover how to manage your finances and your credit so that you’ll be able to borrow all the money you need at the best rates and terms. In short, you’ll be able to craft a sensible, workable plan to achieve your goals and truly deal with your debt.

So let’s get started!