Unless you're writing in the Christian Young Adult genre (and even that's up for debate), it would be unrealistic to write a novel or short story wherein one of the characters didn't swear at some point. Our lives have become much more fast-paced and frustrating, and a result of that frustration is that people swear more now than they did, say, back in the days of Booth Tarkington's Magnificent Ambersons.
However (you knew that was coming, didn't you?), there is a difference between the way people swear in real life and how they should swear in fiction.
I know a guy who would have a full one-third -- if not half -- his vocabulary hacked off at the knees if he were unable to say "fuck". My girlfriend talks in her sleep; though she strives to be polite in her speech, her most common nocturnal utterances are some combination of "christ", "shit", "fuck", and "what?" I've passed strangers' conversations wherein I picked up at least nine different profanities before they were out of earshot.
I remember one instance, while reading Skipp & Spector's The Light At The End, where in a single line of dialog, one character used eleven profanities -- including all of the Biggies -- in one sentence; it was rather impressive ... but it was also way too much.
Yeah, I have no doubt that there are people out there in the real world who do speak like that, but if you overuse profanity in your dialog you rob it of its most important function.
Profanity, at its core, is best used as violence without action.
It should be employed in fiction to either foreshadow or replace violence. If you follow this suggested guideline, you'll not only use less of it your writing, but what you do use will be so well-placed that it will have ten times the impact of an endless string of curses.
For example, in the novel In Silent Graves, there is a sequence where the main character (who's just lost his wife and newborn child) encounters two guys on a city bus who are swearing and cursing and spewing the most unbelievable filth (Andrew Dice Clay wouldn't say some of the things these two guys do). Their language is upsetting a young woman who's sitting near the main character, and as the intensity of the profanity and filth builds, so does the main character's frustration and anger. It's the only time in the book that profanity of this level is used, and that was deliberate: it's supposed to be as shocking to the reader as it is to the main character, because the increased intensity of the filth that comes out of their mouths foreshadows the violence that ends the scene.