The memories that we retain can serve many functions. They guide our future actions, form a scaffold for constructing the self, and continue to shape both the self and the way we perceive the world. Although most memories we acquire each day are forgotten, those integrated within the structure of multiple prior memories tend to endure. A rapidly growing body of research is steadily elucidating how the consolidation of memories depends on their reactivation during sleep. Processing memories during sleep not only helps counteract their weakening but also supports problem solving, creativity, and emotional regulation. Yet, sleep-based processing might become maladaptive, such as when worries are excessively revisited. Advances in research on memory and sleep can thus shed light on how this processing influences our waking life, which can further inspire the development of novel strategies for decreasing detrimental rumination-like activity during sleep and for promoting beneficial sleep cognition.