From Here to Financial Happiness

Day Sixty Nine Borrowed Time

Debt isn't necessarily bad. Without it, many of us could never pay for college, buy our first car, or purchase a house. But while debt can help us launch our financial lives, we should be careful not to take on more debt than we can comfortably handle – and we may want to pay off our debts faster than the lender requires.

This is clearly the case with credit card debt, which can charge an outrageous interest rate. But what about other debts? On day 44, you calculated your net worth, which included listing all the debts you have. Below, list those debts again – but this time add the interest rate you're paying:

Debt	Interest Rate

In a few instances, your true cost may be less than the stated interest rate, because the interest is tax‐deductible. That can be the case with mortgages, student loans and the interest charged on a margin account at a brokerage firm. You can deduct your mortgage and margin interest if you itemize your deductions on your federal tax return, rather than taking the standard deduction. Meanwhile, you can deduct your student loan interest as long as your income isn't too high.

If any of this interest is deductible – and that's a big if – you might save 12 or 22 cents in taxes for every $1 you pay in interest. The precise amount will depend on your marginal income tax bracket. ...