6 Dividend Ideas for 2018

We are about to pass the main dividend season in Europe and 2018 is poised to be again another record year for investors and shareholders with a massive increase in dividend payouts across the globe. Reason enough to bring the topic up and to discuss a few ideas for dividend-seeking investors.

Dividends

There is an old quote with reference to the stock market which is saying: “Sell in May and go away. But remember, to come back in September.”

Historically there is some correlation to this quote, as markets tend to drop slightly by the end of May or beginning of June and go into correction mode. Then around October, they will usually start to bounce back and get in position for the year-end-rally that produces the largest gains throughout the entire year. Historically speaking.

For dividend investors, the “low season” between May and October is, therefore, the best time to find stocks that have lost some value and to add them to a dividend-income portfolio. Of course, stocks that didn’t drop in value can be still considered if one believes in their long-term success.

One such a stock is Apple (AAPL). I believe there is really no such thing as a wrong time to invest in Apple. The dividend payout seems not very attractive with only 1,56% yield at the moment of writing this article. This means that for every 100 EUR invested, one will receive only 1,56 EUR back each and every year. This does not sound interesting at first. It means that it would take 64 years to receive a return on your investment even before accounting for taxes, hardly any investors dream. But Apple plays both cards well: Stock appreciation and dividend growth. The company is not only one of the most profitable companies in the world, it is also innovating, fostering new technologies and has a huge, wealthy fan-base willing to pay a premium on prices each and every year. This enables Apple to grow its dividend year on year, and one can easily see the dividend double up every few years. In fact, just at the most recent shareholder meeting, it has been declared a new company policy to start prioritizing shareholders and to focus on total returns as the ultimate goal. We might see some influence from Warren Buffet here, who has just recently purchased a large chunk of Apple.

The second stock on my list is Starbucks (SBUX). It seems for now that the market is not convinced about the expansion plans in China and the stock has been trading side-wards for a while now. But you don’t need to be a genius to know that this company will keep paying dividends for a long time to come. I have a hard time finding a “quiet” Starbucks where I could sit down to write on my blog. They are always full of people queuing to pay highly inflated prices. Starbucks has now a yield of 2,09% which is similar to Apple not very high, but Starbucks is growing its dividend almost on a quarterly basis and one can expect it to double up every few years.

No. 3 on my list is Microsoft (MSFT). When I swapped my PC computer to a MacBook back in 2007, I couldn’t be happier and I got to say that at that time I didn’t believe Microsoft would manage to get out of the hole it dug itself. Despite weaker hardware, MacBooks were fast and significantly more stable than any PC I used in the past and there seemed to be no turnaround. And then came the cloud. And everything changed. Microsoft has been truly turned dedicated to improving its product and is now at the forefront of actively developing the cloud business which is successfully being set up as the new computing standard around the globe. The potential gains and growth are tremendous and while the dividend yield of only 1,72% may look also not exciting, I believe that shareholders will be greatly rewarded in the long-run.

What I like about US stocks is that they pay dividends quarterly, so every 3 months there is some movement on the account. But there are also some European stocks that may be worth considering for income-oriented investors with potentially much higher immediate yields.

A little bit speculative but (so far) very rewarding is a German company called Aurelius (AR4.DE). The company is known as a “hospital for companies” due to its business model. It acquires struggling companies which are mismanaged but promise great growth prospect. Then they put their own management team in place, brush the company up and re-sell it at a higher price. It is therefore not a regular BDC (business development company) as it does not only provide loans but actively engages in the acquired business operations in every possible aspect. This has proved extremely successful in the past, not only for the company but also for its shareholders.

If you click on the link above and visit Aurelius profile on Yahoo Finance, you will see a dividend yield of only 2,35%. This information is correct and refers to the base dividend which has been paid out last week in the amount of 1,50 EUR per share. However, every successful sale by Aurelius of one of it’s acquired business generates additional profits. These additional profits are also being distributed on top of the base dividend. Thus, while you may see only the 1,50 EUR per share at first, Aurelius granted this year a bonus dividend of additional 3,50 EUR on top. The final and total dividend of 5 EUR brought up the yield to mouth-watering 8,6%. If you have purchased the stock at lower prices, your yield has easily surpassed the magical 10% margin. Expectations for the next years to come are within similar amounts with a stronger growth of the base dividend and continuous payouts of bonus dividends.

GlaxoSmithKline (GSK) is a UK based health specialist and another idea that one can hardly go wrong with. There are only a handful of companies around the globe that have enough expertise, equipment, and capital to take on the really big challenges that our aging societies are facing and, GlaxoSmithKline is one of them. One of its investors is Bill Gates as he is actively engaged in their work through the Gates Foundation. As he said it during an interview a while back “companies like GlaxoSmithKline can just do things that no one else can do.”. That’s a pretty solid statement and the 6,53% yield in combination with quarterly payments and no withholding tax from UK side make it a very attractive investment.

Last on my list for today is a Dutch REIT (Real Estate Investment Trust) called Wereldhave (WHA.AS). The shopping mall investor went through a rough year and the stock dropped strongly on missing investor expectations and cutting its dividend. However, even after the cut, the yield is more than interesting. For 2017 the quarterly paid dividend summed up to a total annual amount of 3,08 EUR per share. For 2018 the board of directors will propose a dividend of 2,52 EUR per share, so it’s roughly an 18% cut. However, even after the cut at the current share price, the dividend amount will result in 7,58% yield. Shopping malls are not going to disappear and the “Amazon-effect” is in my opinion vastly overstated. If you come to a similar conclusion, then Wereldhave might be the right company for you.

Disclosure: I have a position in all stocks mentioned in this article.

I will give investment ideas every now and then but please note that these are not active recommendations and every investor is encouraged and responsible for his/her own due diligence. Also, when it comes to dividends, please always check about possible tax deductions/withholding tax. For example, I avoid buying Swiss or Swedish stocks due to the high withholding tax and complicated procedures to regain the money, despite the setup of double-tax treaties. Among the 3 discussed European stocks above, Germany has the highest withholding tax of 26,375% which would make any lower yield paying company far less attractive for a dividend income-oriented investor.

Discipline, Patience, ​and Emotions

To reach financial independence, it is important to save, invest and to create alternative sources of income. At the same time, it is also important that we keep our spending routines at bay to ensure that at the end of the month, the account remains positive, all bills have been paid and that there is still money left that can be invested. The basic formula remains as simple as it gets at all times:

Income – Expenses => Money on the bank => Money available for investments

Obviously, most of us won’t be able to set aside and invest large amounts that will immediately show a great relief. Adapting the investor mindset and truly understanding that time is our biggest asset takes a while and requires a lot of patience, but even more so, discipline.

Discipline and patience are key factors to create wealth and are both in my opinion, among the most important attributes of any human being. I might go a little far on this judgment call but I really want to point out the significance of these skills.

I can’t think of almost any situation when a patient person would not be rewarded at some point for their skill, benefitting from a much better risk/reward ratio compared to a person who rushes into things. Of course, there can be a situation where the fastest reaction may give a “winner-takes-it-all” reward. But in the long run, a patient person usually gets to where he or she wants to be in one way or another.

At the same time, nobody would doubt the benefits of a disciplined approach to any job, study or project that any person in any profession around the globe would face at any given time.

Patience

The great news is that both, patience and discipline are skills. It’s not something we are born with, but rather it’s something that can be trained. Some might find it easier or more difficult depending on the way they grew up, but overall, everyone can learn to be patient and disciplined, provided the right training and incentive.

To master patience and discipline, it is all about learning to control our emotions. 

Most of our desires are initially based on our emotions. We smell a fresh banana-pancake on the road, and we want to have it. We see the new iPhone, and we NEED it. Our friends tell us about the new gym and the amazing yoga course, and we want to join it. The sun is shining hot and bright, and we want a cool beer.

There is nothing wrong with all of that, but what we got to learn is to step back before making a decision and be able to evaluate the actual benefit of it – and whether it helps us to reach our target or not. The banana-pancake surely smells and tastes great, but if you are not actually hungry and perhaps on a diet, then you should not buy it. There is a new iPhone coming out every year. Just keep using your old one, nobody really cares and it will do the job for 5 years at least. Unless there is anything wrong in your current gym, there is probably no need to change it. Well, you might consider if it comes cheaper with a promotion. And on any day, a glass of water will refresh you more and serve your body better than a beer.

The true strength of a successful person lies in the ability to evaluate situations and to make decisions that help him or her to reach set goals, even if it goes against his/her own desires and the ideas or expectations of co-workers, families, and friends.

This is easier said than done and you may truly be forced to do some great sacrifices along the way. But at the end of the day, no one said reaching your goals would be easy. In fact, it never is. But with time on our side, setting goals and working towards them with a disciplined routine promises a high chance of success. 

Reaching financial independence quickly is not a simple task and thus not easy at all. In fact, I would say it is one the largest challenges of all times, with billions of people struggling to even think about it. It is not impossible, but in order to reach such an ambitious target, the focus and determination have to be at peak while one’s patience and dedication will truly be put to a test on more than one occasion.

  • I can’t count how many times I have been fighting with my wife about expenses that I was not willing to agree on. I am talking about simple cases, like buying toothpaste. I mean, why would I buy toothpaste if my pack at home is still full? Or buying shirts. I still got 7 perfectly fitting shirts that are less than 4 years old and enough to carry me through the week. Why would I need more?
  • I lost a lot of friends when I left my home country in pursuit of a better career and my personal goal of living abroad, in a low-tax, low-cost country. The logic was simple and turned out to be true, that we can develop better and faster in a developing surrounding. One needs to take some risk into account and accept possibly lower living conditions, but overall the risk/reward ratio is significantly higher compared with staying at home.
  • Most of my colleagues are shaking heads when they see me and my family driving around in the small Mazda 2 while I surely could afford a BMW or a Mercedes – or a second car. But why would I want to spend so much money just on some convenience? Having a car at all is already a luxury factor for me that I would not consider to have if I wouldn’t have a family, so one is more than enough. And the additional costs for gasoline, repairs, insurance, cleaning, etc. are not attractive at all. It is so much cheaper to use public transport and in the event that you really need a car, just to rent it.

This samples may sound extreme, but I want to retire with 45 and that’s only 7 more years down the road. To get to this point, I needed to focus on the main factors:

  • First to have a great career. I am sure I mentioned it before, but let me repeat: your career is your single most important starting point to get on the fast-track to financial independence, and there are more opportunities in developing countries.
  • I need to save 30-50% of my income, but this won’t be possible if I have to give away 30-40% on taxes alone and finally
  • I don’t want to spend another 30-40% of my income on basic living expenses including housing and food.

Following most financial advisors to save approx. 10% of your income is OK, if you plan on working until 65. If not, you need to save significantly more and considering this set of goals, the decision comes very rationally in my opinion. The samples don’t sound extreme to me at all. They rather show commitment to the set target. Without discipline, patience and controlling emotions, making those decisions wouldn’t be possible.

Now, this may not be everyone’s cup of coffee. Many people will say, that they want to enjoy their life and since there is a chance of dying much earlier due to an accident or unexpected medical condition, they want to make sure to make the most of it. But let me show you a very simple and brief overview. Numbers don’t lie so here it goes.

Consider living for 75 years. The first 25 years are devoted to family, school, university. Most of us have only good memories of this time due to the amount of time we spend with friends, families and other relations. Thus, out of this 75 years, 50 are left. Most of us intend to work until 65 when social security kicks in. So, from 25 to 65 are exactly 40 working years to consider.

One year has roughly 52 weeks or 14,560 days over 40 years (it’s actually exactly 14,600 days but the calculation with workweeks makes more sense here) with a 5-day workweek. That’s 260 days of work. The average European has 28 days paid vacation and another 14 days come for public holidays. So we are down to 218 days of work and 146 days off per year. You see there is one day missing out of 365 which is due to the work-week calculation, but it’s negligible in the grand picture.

A person who works 40 years will, therefore, have spent: 
218 x 40 = 8,720 days working and
146 x 40 = 5,840 days not working over the period of 40 years.

For a person who sacrifices and goes all-in to finish with 45, the calculation is as different. From 25 to 45 its 20 years dedicated to working and then he/she is done. For the purpose of a comparison, let’s see how it works to compare the 40 years of work with the same amount of time split in 20 years with, and 20 years without work.

In this case, we will have:
218 x 20 = 4,360 days working and
146 x 20 = 2,920 days not working during those first 20 years, and
52 x 7 x 20 = 7,280 days not working during the other 20 years.
Thus resulting in a total = 10,200 days not working over the period of 40 years.

I specifically calculate in days, not hours and you might be right to dispute this. If you go for a career, you will have usually no way around pushing plenty of overtime but it’s the total timeline that I want to compare.

Thus, in my eyes, there is a possible double-reward here. If you are successful in retiring early, you get to double up your free time and you reduce your total time committed to work by half. Even more so, and not taken into account on this calculation is the fact, that you won’t need to worry beyond the age of 65. Because, seriously, if you think social security will be enough to take care of you, better think again. And what about if you don’t die early, but rather old? What do you intend to do with those additional 20 or 30 years, when you won’t be able to afford going out for lunch without sacrificing payments for your medical expenses?

This is some serious stuff to think about, but no matter what, it’s never the time to get all emotional about it. Rather realize your target, set goals and start working on it. Start investing. Time is your friend. And so is the investor mindset. Stop The Rat Race.

Nobody wants to get rich slowly

When the financially most successful people on the planet are having discussions, it might be not a bad idea to listen. And there is a famous quote from Warren Buffett, which came up during a conversation between him and the currently richest man on earth, Jeff Bezos, the CEO of Amazon.

During this conversation, and those two being longtime friends, Jeff Bezos asked Warren Buffett: “You are the second richest man in the world and yet you have the simplest investment thesis. How come others didn’t follow this?” To which Warren Buffett responded: “Because no one wants to get rich slowly”.

This statement couldn’t be truer

When you think about investing money in the stock market, there is a high probability that you might have a certain picture of investors and stock traders in your mind. Successful individuals, who in your eyes made fortunes overnight. You might think about news articles when some publicly traded company reported amazing success stories with its stock price sky-rocketing by hundreds, or even thousands of percent over a few days, weeks, or months.

I am not saying that those stories aren’t true. There certainly are cases of famous companies which made some investors very rich in a short time. However, that is not really what stock investing is about.

Yes, it is possible to get rich with stocks quickly. It is also possible to lose your hard-earned money even quicker. And this is where the misconception starts because many people who lack financial education see the spectacular rise or fall of companies as something else. They consider investments as just another method of gambling. A quick get-rich-scheme with all its promises and the attached risk to it. Just another lottery. In reality, though, investing money in companies is a partnership and a commitment. And both take time to grow and to develop.

Patience is key to success

When you buy shares of a company, you become a stakeholder and thus, a co-owner. It means that from that moment on some tiny part of this company belongs to you.

If you look at investors from this angle and if you would think or consider becoming an investor, what kind of companies would you, therefore, choose to partner with?

The choice is all yours and you have plenty of diverse opportunities at hand. Would you prefer to take a stake in a new business idea? A company that may disrupt some business and that may someday produce exploding profits? Are the ideas and the team behind that company smart and resilient enough to make this come true? Or would you prefer to partner with an established business, that is growing its reach, revenues, and profits step by step?

For most people who intend to build wealth, the 2nd option will be the preferred one. The simple reason is that we do want to have some sense of security. A reliable, established and steadily growing business offers a promising risk-profit ratio. However, it does require time and patience to fully develop into a compounding source of long-term profits. It’s not a get-rich-quick scheme.

Reduce your risk with an index fund

For the average investor, Warren Buffett recommends also diversifying investments. He advises people not to buy individual stocks, but instead to invest in so-called index funds or ETFs. His preferred index recommendation is the S&P 500 which represents the largest 500 companies in the US.

When you buy this index, you become a co-owner with the 500 companies which are included in this index. The idea is that thanks to the structure of an ETF and the investment being basically split into 500 tiny pieces, your risk ratio becomes diversified and more balanced.

This works, because even if one of those 500 companies should tumble, the other 499 can easily balance out the drop. It’s a simple way for investors who don’t want to think too much about where and how to invest their money. It offers a balanced investment approach in which risks and profits are diversified. It won’t make you rich quickly. But if history is of any lesson, it will generate wealth in the long-run.

Why Dividends rock

Buying stocks is by some people considered more or less a gamble. Especially in Germany where I come from, people tend to be great in avoiding debt (most Germans actually don’t even have credit cards), having large savings accounts and an array of insurance contracts to protect them from anything that might happen. The dream for most is to buy a condo or a house someday, for which they set up specialized savings-contracts that will allow them to get real-estate-bound loans with discounted interest – and still to keep paying back the debt after utilizing the contract until the very day when they reach – or even fulfill (meaning finish) their retirement.

It would be probably very unprofessional to call this boring, but that’s exactly what I feel about it. Not only is it boring, it’s also highly inefficient and while risks are clearly well managed in this scenario, this model also eliminates any kind of opportunities.

In my Good Reads section, you will find a book recommendation from Robert Kiyosaki, who gives a great definition of the two most important terms for any investor: Assets and Liabilities. While I always had doubts about considering a house or a condo an asset, I can say that this book absolutely confirmed my skepticism.

I am not saying that buying a house or a condo is wrong. If you want it, or need it and/or can afford it, then, by all means, go ahead. But as an investment, I prefer stocks for a very simple reason: A house or condo always incurs additional costs and time effort, in the short and especially in the long run. Stocks, don’t. You don’t need a fortune to start investing in stocks and to reap rewards, stocks are easier and faster to buy and sell and there are fewer regulations to follow. For a 100 EUR, you can get a couple of bricks that will do for you… nothing. But for a 100 EUR, you can also get 2 shares of Starbucks, that will instantly start paying you 0,50 EUR each quarter (or 2 EUR a year) as of date today. And not only that, with Starbucks increasing it’s dividend every year, chances are that this 2 EUR will turn into 4 EUR after 3-4 years. And 8 EUR after another 3-4 years. And 16 EUR…. and so on.

Successful companies share their profits with its shareholders.

This is called a dividend. There are plenty of successful companies on the market and most of them are the ones that you are used to supporting in your own, daily life. Starbucks is one example, but so is Apple, or Microsoft, Colgate, Visa, etc.

Every single product, software or service we use and pay for has its origin at some company. If we already support this company for its products and services, why wouldn’t we trust in becoming a shareholder of it and claim the generated profits back in the form of dividends?

I already showed some broad calculations on the concept of dividend returns in the TIME IS YOUR BIGGEST ASSET article. Of course, there is a risk, but calling it a gamble is vastly overstated and the profit potential is exponentially larger than for any house or condo.

To put it into perspective: If you start and invest early enough in a few strong dividend payers who constantly increase their dividend payouts, even a “small” portfolio may have the potential to cover significantly more than your retirement expenses.

Great companies survive market turmoils and keep paying dividends. Once you have such a company in your portfolio, you don’t really worry about a stock crash or political unrest, another election or whatever may cause a disturbance.

What I have done so far is to invest in several companies which pay out dividends in different months. Some companies pay out dividends every single month. This way I have effectively created a stream of income that adds money to my account 4-5 times each and every month of the year. We are not talking big bucks here. It’s 20$ here, 15 EUR there, another 50 EUR then and so on, but it sums up. German companies pay only once a year, so they distribute bigger amounts at one time while US companies split the payouts on a quarterly or monthly basis. UK companies pay mostly twice a year. Dutch companies on a quarterly basis.

I expect these payments to double every 6-7 years and very possibly even earlier, as I am adding more stocks whenever any of the companies I am invested in drops cheaper in price.

Not to sound repetitive, but Warren Buffets investment in Coca-Cola is paying him annually approx. 40-55% of his investment back in form of dividends – year, by year, by year. I really don’t see any reason why anyone of us could not follow his footsteps and reach the same target. And just imagine what this could mean for your retirement: Even only a small amount of 50.000 EUR in your portfolio might have the potential to generate for you annual returns of 20.000-27,500 EUR. This is already more than the minimum pension guaranteed by the German social security system for people without any savings. What if you can double it? Or more?

Disclaimer: I am long Starbucks, Apple, and Microsoft. This means that I owe shares of these companies. 

Frugal living basics

Before we get to the point that we can talk about saving, investing, passive income and ultimately, early retirement, we need to have cash on hand to work with and no matter your circumstances, whether you are a top paid executive or a day-to-day worker: If your expenses are higher than your income, then you got a problem to solve.

One of my first career steps was a vocational education in one of the largest banks in Europe and what I learned early on really astounded me: People with great salaries, expensive cars, amazing apartments or houses were often those with the worst bank accounts. They usually had great salaries, but their monthly expenses would eat up most of the money even before they could have any chance of withdrawing anything.

Therefore, one of the first and most important recommendations for any financial planning is to have a budget. But before we even get to that, today my top 5 recommendations on the most basic tips for a frugal living that require no effort whatsoever except for dedication on follow through. Here we go:

  1. Don’t have cash or credit cards on you. It is really as simple as it gets: You can’t spend money if you don’t have access to it. And vice versa, the easier the access to money, the sooner it’s gone.

    This is in fact not only a personal financial advice but also one that is followed through by many companies. All the rules and regulations that you have at most workplaces set up by your accounting department will make it really difficult to proceed with any kind of payments. They will set up systems that consist of purchase requests, purchase orders, and payment vouchers so everything needs to be double and triple checked before any money goes out from the companies account. While some employees might consider it very annoying and slow (nothing ever gets done), it is, in fact, the most simple and most effective system in the world to control cash flow.

  2. Don’t go to a grocery store when you’re hungry. Not just a fun fact, it is the truth: The hungrier you are when entering a grocery store, the more your basket will be filled up at the cashier counter and the less you will care about it. NOTHING is more important than satisfying our most primal desire of avoiding thirst and hunger and we will seldom feel guilty of spending money on fulfilling this basic need. The guilt will come later, but the money will be gone by then and the fridge filled with plenty of useless stuff that one wouldn’t probably look at under “regular” circumstances.
  3. Don’t shop online. I know, Amazon is very successful, as is Baidoo, LAZADA, and E-Bay. I am not saying that it is not less convenient or that you couldn’t get better bargains on these sites. But it is exactly this comfort and convenience that makes online-shopping so dangerous for the money-savvy individual. As a rule of thumb, one should always remember, that the easier any company makes it for you to spend your hard-earned cash, the less you should utilize its services.

    You might feel like a unicorn first, but especially in Europe, you will quickly discover that you are not alone. A farmers market i.e. is always very popular among all generations. You get great food, often from local farms or manufacturers and you get a real sense of what you are actually doing as opposed to clicking on virtual shopping baskets and waiting for the delivery. The walk to the market, the socializing with local dealers and some human-to-human conversations may also be good for your physical and mental health by the way.

  4. Don’t chase trends, especially in technology-related items. When I was 10 years old, I bought my first computer, a C64. I was very proud as I paid for it with my own, saved cash which I was able to gather by walking to school instead of taking a bus. Day by day after school on the way back home I would stop by the bank and pay-in the saved cash until after almost a year I had enough to get my first computer.
    6 months later, one of my best friends got an AMIGA500 and his dad an AMIGA2000 which made me so jealous that I decided to start saving for a PC (a 486DX33). I cleaned walkways, distributed newspapers, walked to school and was trying to gather cash wherever I could, and my parents go so impressed that they finally supported me to get a 486DX2-66 (the DX33 got already outdated by then).
    Only a year later, I upgraded it for a Pentium, and shortly after for a Pentium 2 while my parents were still paying off the loan they took for the DX2-66.

    Point is: Technology is moving so fast, you can sink a fortune in it and you will still never be on top. Just appreciate what you have and learn to fully utilize it. Trust me, it will do the job just fine as long as you keep investing in quality.

    Having learned all that, I swapped from PC systems to a MacBook back in 2007. I got my first, white MacBook and was very happy with it as a student and beyond until 2012. Then I purchased a MacBook Air and used it for 5 years until 2017. After that, I purchased a MacBook Pro and I intend to keep using it until 2021 or maybe even beyond. 5 years usage-cycle works perfectly for me but I can imagine to extend it even to a 6 or 7-year cycle. And by the way, all my previous MacBooks are still working and being used as I donate them to my sister who continues using them as long as possible.

  5. Learn to say no, to yourself and to your friends and/or family. I could name hundreds of stories when people get into financial trouble just to fulfill expectations of others. In the end, in most cases, no one wins on such occasions and you just keep adding more personal and financial pressure to yourself.

    There is always “something”. A friend gets a job promotion and wants to celebrate. Christmas, New Years, Birthdays, family events, school reunions, the list is endless! And it is really easy to spend money on every single one of these events. The sooner you and your family learn to handle it, the better everyone will be off and there is a high chance that your social circle will actually start to appreciate some adjustments on this front because, while many people may not show it in the beginning, buying things for others all the time and overpaying events on a weekly or monthly basis is no one’s favorite.

One more point that should be on this list but which I will have a separate post about is concerned about loans. There is no rule of thumb and the topic is a little more complicated, but for most parts, taking loans is not a good advise until you learn to use them to your advantage. But more on this point later on.