"mad money" starts now. so 150. hey i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends, i'm trying to make you money. my job is to educate, teach, and explain days like today. call me at 1-800-743-cnbc or tweet me @jimcramer. s tonight i want to talk about building wealth in general and not just owning stocks in particular because stocks is one part of building the wheel. there's some people can make enough money from order anywhere yay day to day income to become truly rich. for vast majority of americans that paycheck is not enough. if you keep working i will tell you how to help you the rest of your life. truth is before you start investing in stocks there's a

do if you want the pay off from those investments to mean something later in life when you most need the money. it is fruitless to think you can get rich in stocks if you haven't laid the foundation for long term wealth before hand. you can make a fortunate in the market but if you are hem rajing money portfolio won't do much for you. there are three absolute necessariety etiety etthings you need before owning a stock. here on mad money i feel remiss for not teaching this more often. few colleges teach you a thing about managing your finances,

stuff. especially because i know many of you crave this kind of education. you ask for it every day. so i'm done ignoring it end tonight. three things you must do, first, i know this sounds boring and you heard it a million times, sucks the life out of everything, i need to say it, you need to hear it, you have to, have to pay off all is that credit card debt. i got to nag you on the subject. not that you should cut them up in little pieces. i've seen hand bags, where credit cards are evil. i do acknowledge the facts. the fact is if you have credit card debt you have extraordinary high interest rate, taking rates that may make a loan shark, that's right you're paying a

blanch, the late great tone jay ytoprano, they won't niekneecap you. like many aspects of personal finance, i have brushed up against the down side of credit cards. in between law school i had rotten luck and bad break and ended up living in my car. i put some bucks away investing with peter lynch. his first book "one up on wall street" is the sem inal text ever penned z in that amazon. once i finally knew i was going to live, even though i was in

the credit card companies found me and i took 5i bunch of them down. i figured you could pay the minimum and string everybody out. the credit issuers never seemed to mind. i had four paying the minimum. and i had one more in puerto reeke owe and said why not but whether i when i a added the payments, i ended restructuring my non-credit card debt with collection agency. they are like a posse, they found after i skip on them and their easier plan made it easy to get by until i went to law school. i worked on a famous trial and almost every pen jayi went to

in the end i paid off the bills quickly. what a relief. in the end, i can't stomach opening the mail. not everyone was as fortune at that took me out of the credit card wilderness in several months of work. but there's no way you can make enough money to save in any meaningful way let alone pay rent and put meal on the table. even if you are a great investor won't matter if you have burdened with credit card debt, could be paying up to 15 to 30% interest. if stock portfolio racks up 20% annual return that's a darn good return but if you have a big balance on the cards, will be sucked down the drain.

so, if you go into credit card debt then stocks be a hobby for you, can't be the wealth generating machine, because it will be cancelled out by the amazing wealth destroying powers of credit card debt. i know i probably sound like your parents but your parents are right. three things you need before you can buy stocks, the second is health insurance. shouldn't invest in the market until you have health insurance. you either buy it or pay a fine and still have no health care insurance. the penalties get bigger over time. if you object to obamacare i know people do, it is idiotic to pay a fine and have no insurance.

single biggest cause of bankruptcy. i've been there. hi no health care plan and had to drive hours to get a doctor to care for me and still didn't get the care i needed. don't be vulnerable or be exposed to the huge down side financial risk of not owning down side insurance. one illness could ruin the years you spend in the market. heck of a lot cheaper to buy insurance before you get sick. you will need health care eventually everybody does. before you stasht investing, you need disability insurance. the rationale for these two insurances is simple without them you could be wiped out in a second. all the gains? the stock market

market could be for nothing if you don't have insurance. you have to pay or your credit card debt and get insurance and disability insurance, you have no excuse for not getting them if you also think you could afford it own stocks. these are more than items on a to do list, they are essential for capital preservation. we always acknowledge capital preservation comes first because you need had to protect your money in the present if you want to grow if in the future. paying off your credit card debt and getting insurance investing without it doesn't make any excepts. gentleman bother. 1y5 bother

so take care of it today to save you tomorrow. zady. in connecticut. >> caller: i quit my job two years ago, i have $400,000 many a 401(k) i've been traitingding in that a small cap, had good returns last two years, noup i don't know if i should roll it into an ira. >> do you like your 401(k), you should stick with it, just stick with it, i like what you got. it's a good opportunity. let's go to mike in new york. >> caller: hey mr. cramer.

officer for 22 years. what is the difference between 457 plan and roth ira and the pros and cons between the two plans. >> i have to ask you to check the people at your penguins plan because the 457 deferred plan i'm not sure how it works, it's too important, i'm sorry, that's a personal decision to you and i don't feel comfortable offering advice on that particular situation. before you think of investing in stocks build a foundation for long term dealt. pay off 1y5ur credit card pay off your credit card dead and get health insurance. coming up i'll tell you when it makes sense to add an ira to

mad money will be right back.

wroo ra re.. a subject we don't spend enough time on in the business media, long-term wealth building. if you're serious about getting rich and more important staying that way you must do two things, first go to amazon and by entire jim cramer catalog. and second thing you got to start saving now. i didn't say save for retirement. i say prepare. just stuffing injureyour money in the

ira, great, though may not be enough to prepare for riernlt retirement. you should really get involved with your money, get your hands dirty. especially for fixed income or bonds yielding next to nothing. with that minimum reward not worth the risk. that's what i'm here to help you do. young people you got to do it too. if there's anything to make the process sound interesting it is me. you need to learn how to do it some time wouldn't you rather learn from a guy who has been around for ages, even though he's jumped into trash cans, and has lots of sound effects. i promise to give you useful advice you can't just find on the internet. so much of this has been repeated so much it is not worth calling advice any more.

should you put money in an individual retirement account, ira, yes you should, that's just a fact. yet be make careers out of saying use your ira, cut up your credit cards, pay your bill lz on time, don't spend more money than you make, all great pieces of advice everyone in america already knows yet there are still people who will tell you just those points and assume it is it enough to help you get ahead. i say it's not. basic financial responsibility is just a jumping off point like diet and exercise please. i'm the guy who helps you go from there. i made a career out of using money to make more money and came to this gig later in life. how from a perspective from a money manager like me could you

go about preparing for retirement beyond using your 401(k) or ira because you don't pay taxes the on the money you contribute allowing for years after years of tax recompounding. how about advice what you should not do on your 401(k). you should put money in but it leaves you on your own of a complex and highly confusconfuseing process. don't use your money to buy stock in the money you work for. company stock is still the most popular 401 k investment out there. more people put retirement dough into the stock of their ploy ear than any other investment, that's so misguided, much be only one part of a much larger pie. why?

monday you call me tell me if your portfolio is diversified, meaning money in all five different sectors all different. real money is the only free lunch out there. regular viewers know if you expose too much to the same sector you run an enormous risk. if you had all your money in text stops before the dot com collapse you would be virtually wiped out. or let's say the beginning of 2013 more current, your entire portfolio was in bond to yielding stock -year-olds go lower, bond price go up, which meant no choice but to buy stocks with big dividends but in spring 2013 interest rates began

from bonds increased dramatic dramatically and high yielding stocks got crushed because they had real interest rate competition from the bond market. so if all the portfolio was made up of high yielders you lost a lot of money even though the first part of the year was fabulous as a whole. that's the zarngdanger. you will get hurt. you got to diversify. apply that logic to 401 k. don't put your savings in the same basket as your paycheck. what if you work for enron or kodak. or any other company that goes under. you lose your job you lose your retirement saving, it's lose-lose. i had a show called real money

me to stop bashing enron because the callers had a ton of stock in the company i explained perhaps they need to diversify away from enron each time i did it i heard that such a great company was too terrific too sale or it was down too much they couldn't sell then one day it was gone. many people made this argument before and the company stock is still the number one investment. i'm telling you, the excuse doesn't cut it. you got to cut back. just cut it back tomorrow. bottom line, diversify before everything else. whether to make some mad money or if you have one-fifth retirement never put it in the stock for the company you work for. like the company i buy isn't put

sector. doubling down is okay for no more than that. that's what you are doing, doubling down. it carries risk beyond being diversified so you can build lasting wellth for you and your family. much more "mad money" ahead. americans are living longer so should change the way you prepare for retirement. sometimes your 401(k) company match just doesn't cut it. don't miss my take when it makes sense to go above and beyond your normal contributions, ira 457bd 401(k) i weigh in on both. >> absolutely love your show. >> i know you hear this all the time, jim, but thank you, thank

>> inthis has been my best year in the market. >> i just want to thank you for looking out for the regular guys out there. >> from our family to yours, happy holidays cramerica.relief. delsym has an advanced time release formula that helps silence coughs for a full 12 hours. that's three times longer than the leading cough liquid. all night... or all day. man (sternly): where do you think you're going? mr. mucus: to work, with you. it's taco tuesday. man: you're not coming.

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everybody in this country wants to get rich quick, except for some hippy types who don't

live off the grid, but anyone who tells how to make obscene money overnight is either a scam or doing something illegal, how about late night meth operation in "breaking bad" i loved how when he came on "mad money" talked about his company being apple he said it sold itself. that squik rich squeemcheme ended real bad. the best way is long-term wealth building. a very important rule that is especially critical when investing for your retirement. it is possible in this era of low interest rate it's, which

you could be too cautious, too prudent and too risk-a verse. when you are managing your money there's a point could become like wrecklessness. you could see this when people save for retirement. i say invest don't save. because saving sounds like socking the money away like a long fund, something no one would invest in, but somehow feel you will be fine. that's n n how it works. t these days. not this age. most people when they are putting money away for retirement feel like they shouldn't take on too much risk that their retirement savings are too important to jeopardize by investing them in stock. i understand why many of you feel this week, stocks go down, don't get your money back. unlike bonds. but if you believe there's lesss

i call it wreckless. in fact investing none of your 401(k) money in stocks are more likely to jeopardizing long run savings then investing in stocks. you are racing against time. you need to generate enough money to support yououelf by the plan you retire. if you load up on bonds in 20s, 30s and 40s avoiding stocks because of the risk, you will never generate enough money to retire comfortably. the money will probably be safe but that's all it will be. it's not enough to get a low-single digit return low below 30% low yielding treasury. capital preservation should not be a suicide pact. you need to use your money to make more money, perhaps a lot

let's not forget bonds are not safe. there's moment it's bonds could be risky in an environment like we have rgs, faster rates rise harder those bonds fall. could lose money if rates shoot up. will happen if the federal reserve are not careful. keep your retirement money in bonds meechbans you likely won't generate enough return to reimertire when you want to. they certainly can drop enough to race two or three to raise two or three years of coupon -- how about one of the most

there, stable value funds. it's just a type of funds that gives slightly better return than money markett fund and bond fund. although bond fund have insurance factors to protect you. but smaller return from stable value funds the definition of being so prudent you become irresponsible. my mission is to help you use your money to make more money. even if that requires work and you can't be on auto pilot as so many of you are. when you in your 401 k or ira or discretionary investing account put money in bonds or funds you are saying i'm not going to use it to generate more wealth i want to keep it safe. can't have it both ways. if you cling to safety and what

cash or higher returns that will enable you to retire happier, being broke is a pretty sure way to be miserable. not saying there's no place for bonds in your fort folio, atz you get older have risk-free zone, because you will use that money shortly. but stocks come first different from the old day when penguins were bigger, life expectancy were shorty. european economy with unworthy bonds sending more money here creating absurd demand for bonds. even corporate bonds yeeltds used to be chinsy even for government bonds. -- long term bonds from apple and vereron likely better to

dividends dividends. if you can't pick your own stocks best way to invest is find cheap fund that mimics the s&p 500. the kind of stocks to be the best asset class in any 20-year period. you n can and should take that stock money off the table and put in high quality stock bonds for safety only some. 10 to 20% in bonds in your 30s and in your 40s keep it up to 20 or 30 of your retirement percentage in bond. in that 50s 30% to 40% and there on 50 to 60% bonds it's the best way to retire the way you want to. when you want to.

about third of your portfolio i know that's aggressive but that's what i think is right. nrz is counter to conventional wisdom that says more bonds in your savings but thaha was coined in previous times and you will need the upside from stos when you retire because eventually the safe money in stocks run out. it's a bet against your longevity you want to make that bet? stick with cramer and i will give you more specific tips for making more money with your ira and 401 k. sean. >> caller: i'm hooked on your show. >> that's terrific 1y50 my question is investing in ira, i'm 25, recently out of law

from a summer job, so my question, i have the money invested in broad stock but want to invest more aggressively. >> you got it get into an aggressive mutual fund for quarter or half that money, looking at aggressive growth, ten years from now if we're having the same conversation you can then pull back but this is your chance to risk that money because you got the rest of your life to make it back. dan in florida. >> caller: hi jim, long time, first time. >> yes! >> caller: jim i would like to hear your thoughts on companies with consisted kpounldcompounded annual growth of over 10% a year for over ten years. >> i say how can you hold them if next year they're not consistent.

stocks, digital equipment kept doing it and doing it and one day disappeared, these are all mpanies i remember that define that what you just mention, and then one day they miss and then they miss and then they miss and then they miss. can't have that happen. go easy, go near. the best is yet to come. make your monenework for yoyo there's more "mad money" ahead. taking things up a notch. when is it is right to double down on your retirement plan. plus there's other ways to make sure you don't have to work until your last breath, we'll lay out your options. plus your tweets just ahead. stick with cramer. >> cramer! you are super. you're awesome. >> your show is the best.

>> eye i wanti want you to know you have transformed me. thank you cramer.er. yes. you know, that reminds me of geico's 97% customer satisfaction rating. 97%? helped by geico's fast and friendly claims service. huh... oh yeah, baby. geico's as fast and friendly as it gets. woo! geico. expect great savings and a whole lot more. covergirl is the easasway to draw attention perfect point liner smudge with sponge-tip to create a smokin' kitten eye lash blast mascara adds an instant blast of volume add a pow to your brow! wow! from easy, breezy, beautiful covergirl

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if you are looking to build foundations of long-term prosperity, if you are watching this show i assume that's important to you, unless you just like the sound effects, the most important step is to set yourself up for retirement.

iras i will tell you more about the latter after the braeblg. right now i want to share my favorite piece of 401 k advice. frlz a tip hathat's based on how i manage my 401 k. unless you thinknk i'm a clown i'm not going to get on the floor and spin, you knee whatow this is important. most people know 401 k is out of your paycheck so every month you plow in 1/12th of your contribution. people will tell you to passively pass your money.y. i'm not one of them. because times your market takes a big hit. a nasty hit. i think you should capitalize on that. would you really want to invest

the market is nearing the top as when it nears the bottom? no absolutely not. here's how you take advantage of decline in the market especially whenen you have stock market pull backs are opportunity to rise not wipe and moanx when you get a climb in s&p 500 you got it double down in your contribution put in twice the amount of your normal contribution over the course of the entire year. if the market stays down you mighghwant to do the same thing the next month. beyond that you might want to wait another quarter before you double down again. this is what i do. may not sound it makes a lot of difference in the long run but i tell you it does. if you embrace this you will

passively contribute samee amount month after monon into your 401 k. to make sure we're clear invest your money in low cost s&p 500 fund or manager with long record. probably can't find that in 401 k options. -- will it make a huge difference over four or five years maybe but over 40 or 50 years could mean tens or hundreds of thousands of extra dollars because you took the time to observe what was happening in the market and adjust your 401 k contribution as cordingly of accordingly. pay attention to the market when you get 10% decline in the s&p

invest twice as much that nth. take advantage. think of it as a sale, no different from a sale at your local department store, that's the right way to manage your retirement portfolio. "mad money" is back after this. >> mr. cramer absbsutely love theshow. >> we really apprecicie you out there. >> boo-yah to our kids the learning so much from you. >> boo-yah mr. cramer. >> i know you hear this all the time, jim, but thank you, thank you, thank you so much. >> this has been my best year in the market. >> i want to thank you for looking out to the regular guys out there. >> great to hear your voice and know you are there for us. >> from our family to yourur happy holidays cramerica. strangelove strange highs and strange lows

that's how my love goes strangelove will you give it to me? gucci guilty the fragrancnc for him and for her.

to.to. while we're on the subject of long-term wealth building, i need to tell you about the limits of what many people consider to be the holy grail of retirement saving, your 401 k plan. i've given you the dos andss and don'ts. i'm the first to say set yourself up for wealthy retirement but don't max out on your 401 k contributeions every year, that would be $18,000, no, your 401 k is important but has plenty of down side. high management fefe, no

your capital but for my money worse is lack of control of your money and lack of choice over what you can invest in. i believe the best way to invest is to have diverse portfolio so do your homework so you know when to buy and when to sell. most plans don't give that option. instead get to choose between some for stocks, some for bonds, you could lobby for better offerings but most n is the all that grand. it's why we have the ira, meaning individual retirement account, it lets you invest youou money the way you want to making it superioio vehicle for your environmental investment. has the same great tax deferred

would match at least some percentage up to some point, that's free money, would be a fool not to take it. there's usually a cap how much you can contribute, so contribute as much as needed to get the full company match and stop rightthere, don't put another penny into your 401 k until you maxed your ira contributions, after you get the full match of 401 k put the rest in eye retirement account. whwhher to u u regular ira or roth ira, pick up "stay mad for life" gives much more detail on the stuff, it's the book i wrote. you pay no taxes on any gains in

year to year, tax free. withdrdrals taxed as regular income still a sweet deal. if you are over 50 in that case you can contribute 6500 a year. i say max it out if you can afford to after you milk your employer dry with 401 k if you want to contribute nor fut in your 401 k after maxing out the irea. 401 k onlyp contribute as much as it takes to get the full match from your employer after that all retirement saving into an individual retirement account for more more flexible. if your 401 k doesn't have

maxing outut ira, 5500 a y50er7 maxing out ira, $555500 a year or $6500 if you'u' over 50. (cell phone rings) where are you? well the squirrels are back in the attic. mom? your dad won't call an exterminator... can i call you back, mom? he says it's personal this time... if you're a mom, you call at the worst time. it's what you do. if you want to save fifteen percent or more on car insurance, you switch to geico. it's what you do.

are you taking a zumba class? ugh! heartburn! no one burns on my watch! try alka-seltzer heartburn reliefchews. they work fast and don't taste chalky.. m...amazing. i have heartburn. alka-seltzer heartburn reliefchews. enjoy the relief. i asked my dentist if an electric toothbrush was going to clean better than a manual? he said sure. but don't get just any one. get one inspired by dentists. with a round brush head. go pro with oral-b. oral-b's rounded brush head cups your teeth to break up plaque and rotates to sweep it away. and oral-b delivers a clinically proven superior clean versus sonicare diamondclean. my mouth feels super clean. oral-b know you're getting a superior clean. i'm never going back to a manual brush. janet? cough if you can hear me. don't even think about it. i took mucinex dm for my phlegmy cough. yeah...but what about mike? it works on his cough too. cough! it works on his cough too.

they pile up, we got to get to work, yes, your tweets that you have been senedding me. here you go. our first tweet. asks, how do you take the correlation among not between stocks, bonds and money markets, this is easy, depends on your age. if you are younger, i don't want to see bonds in the ira. just compound it 3%? i want to see stocks, stocks, when you get older, stocks with dividends, when you get older, then with bonds. make money with money. can't do it with the bonldd mark. next.

terrific news letter, dividend stock advisor tells you which deaf dend dividends are smart which aren't. next. pay off the car. house. mortgage may be low. may get return from dividend stocks and gettet mortgage money. that's a no-brainer. next tweet. atctv ateorator. what percent should people save per month. my advice is you should take a look at your descriptioniscretionary money, away from just eating, that's the money i want to see put away, movies, try it, i did it for two years and i can't bebeeve how much money i was

up next a tweet from little feet farm. how many stocks is too many too few to own. we are the professionals. for you amateur no more than ten it's too hard you don't have the time. let's go to the next one. says lock student loans lele than 3 3 lock dividend loans. you're brilliant. max limited partnerships are very good. high yielding utilities are very good. individual iyr in there are excellent real estate investment trust. those are perfect for you. next. it says how much tinkering with retirement account too much. quarter changes too much? first of all do not change 26 times a week, that makes no sense.

if everything is good don't make changes. we only make changes when our thesis isn't panning out and circumstances isn't changed not just making changes for the sake of making changes. next. you follow any advisors. this is the most important advise will you zbaet fromget from me, get a financial advisor. most people are too small for the bigs guys. i have beeee on fights representing people with $100,000 and don't get any treatment at all of any personal touch. so you got to find someone in your orb who has a good person and use that person. i know that sounds like geez i'm punting but it's not because otherwise you're not going to get the personal touch that is so needed, all right. stick with cramer. >> mr. cramer abablutely love the show. >> we really apprereate you out

>> boo-yah to our kids the learning so much from you. >> boo-yah mr. cramer. >> i know you hear this all the time, jim, but thank you, thank you, thank you so much. >> this has been my best year in the market. >> i want to thank you for looking out to the regular guys out there. >> great to hear your voice and know you are there for us. >> from our family to yours, happy holidays cramerica. is is phil! oh no... (under his breath) hey man! hey peter. (unenthusiastic) oh... ha ha ha! joanne? . . it's me... you don't look a day over 70. am i right? jingle jingle. if you're peter pan, you stay young forever. it's what you do. if you want to save fifteen percent or more on car insurance, you switch to geico. you make me feel so y yng... it's what you do. you make me feel

i like to say there's always a bull market somewhere and i pre to try to find it just for you here on "mad money." i'm jim cramer and i'll see you next time. it's so much fun.. i feel like i'm in the '50s. audrina patridge (voiceover): --to an era ruled by a king. my favorite thing about the '80s is me. audrina patridge (voiceover): we're going straight country with grooves from the '70s-- so i hear we're doing the "doctor, doctor" dance.

old cuba in little havana.