Celsa Moreno-Barker remembers a client who came in to apply for a loan and accidentally revealed 25 credit cards stuffed into his wallet. With average credit card interest rates hovering around 23 percent at that time in 2024, it was a clear case of debt gone wrong.

While debt is an almost inescapable facet of life at one point or another, applying certain methodologies can help us learn how to build and manage it, says Moreno-Barker, vice president, community residential loan officer at Rockland Trust.

She cautions, “the key in finance is the future. You might be thinking about the ‘now’ but you also need to plan how you’re going to pay in the future,” Moreno-Barker says. “We need to be more intentional when we talk about debt.”

Since that initial meeting, her client made commendable progress — cutting his card count from 25 to five and positioning himself to achieve a major goal: homeownership. It’s a testament to how intentional borrowing can lead to long-term rewards.

Debt can be a smart tool when used in a way that supports long-term financial health. It’s not necessarily just how much you owe, but why, when, and at what cost. 

Strategic debt use: Evaluating purpose, timing, and cost

Smart borrowing begins with a clear purpose. Start by evaluating the reason for the loan, suggests Joseph Lamberti, vice president, general sales manager of Residential Lending at Rockland Trust. 

Strategic borrowing, like taking out a mortgage to buy property or a loan to launch or expand a business, can enable you to invest in appreciating assets. Instead of waiting to save the full amount, you’re able to start building equity and long-term value sooner, potentially increasing your net worth over time.

Context is everything in understanding the makeup of debt, says Karl Farmer, vice president and  portfolio manager, Investment Management Group at Rockland Trust. For example, a 15-year mortgage sounds like beneficial debt in theory because borrowers pay less interest overall, but it might become unsustainable if the monthly payments form an uncomfortably large portion of the borrower’s salary. 

It’s important to also look at how debt can impact your taxes. Certain types of borrowing may offer tax-deductible interest, reducing your taxable income. By leveraging low-interest debt instead of liquidating investments (which could trigger capital gains), you can preserve long-term growth while managing your tax liability more effectively.

Debt in context: Aligning borrowing with life stages and income flow

Borrowing should evolve with your financial life. In your early career, debt can help build credit or fund meaningful investments like education or a first home. Later on, access to capital might support real estate moves, business growth, or tax strategies. Nearing retirement? You may be thinking about how to tap equity for liquidity, as long as the repayment terms make sense for your income and goals.

Farmer recommends abiding by the general rule that the total amount of repayments on all debt not comprise more than 30 percent of gross income. That buffer room gives you space to breathe if circumstances change.

“Good debt doesn’t mean you have to borrow a lot of money,” Farmer says. “It just means that you have proven that you are dependable in making payments on time.” This is another case of improving your long-term financial future by taking on debt. If you’re responsible with it and make payments on time, it can result in lower interest rates down the road.

Building a resilient borrowing profile

Rather than avoiding debt altogether, high-net-worth individuals often focus on borrowing well. The following are some helpful tips to follow in doing so:

• Review your finances regularly. At least annually, ask yourself: Are your interest rates still competitive? Have your goals or cash flow changed? Is refinancing or consolidation an opportunity to improve your position?
• Have a repayment plan in place. Maintain a clear view of the structure and timing of your debt obligations — especially in a shifting rate environment. If you’re carrying a lot of debt, categorize them and prioritize decreasing bad debt, Moreno-Barker suggests. “You might have to make sacrifices to get debt in order.” Talk to a financial advisor about your options — consolidating or leveraging assets can often help.
• Maintain liquidity. Aggressive repayment isn’t always the best move, especially in uncertain economic environments.“You might need extra liquidity during such times, which means paying off all debt might cut into your safety net,” says Farmer.
• Use credit to build. Demonstrating you can manage credit for a short period of time can help set a good record. But you shouldn’t exceed 50 percent of the credit limit on a card. “This way if something were to happen, like a flat tire or a leak in the house, you have some wiggle room on the credit card,” he says. This also supports your credit score and preserves flexibility for unexpected needs.
• Stay within your budget. If you buy a house, stick to a budget and make room for reserves, Lamberti advises. Especially in tight housing markets, it’s tempting to exceed planned budgets. But overextending can drain reserves and eliminate room for necessary repairs or future flexibility.  

Not all borrowing tells the same story. When approached the right way, it can be a tool to build toward an optimal financial future. 

Want more tips on aligning debt with your goals? Check out the Rockland Trust debt calculator and other learning center resources.