"mad money" starts now. so 150. hey i'm cramer. welcome to "mad money." welcome to cramerica. friends, i'm trying to make you my job is to educate, teach, and explain daysike 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 onene part of building the wheel. there's some people can mak 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

your life. truth is before you start investing in stocks there's a lot of other things you have to 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 theoundation for long term wealth before hand. you can make 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 ts more often.

about managing your finances, personalinance mad money stuff. especially because i know many of you crave this kind of education. you ask for it every day. so i'm done ignoriri 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 piecec. 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,

loan shark, now loan shark blanch, the late great tone jay ytoprano, they won't niekneecap you. lili 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.

to live, even though i was in hawk to a bunch of companies, 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 o o them and their easier plan made it easy

i worked on a famous trial and almost every pen jayi went to those credit card companies. 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 great investor won't matter if you have burdened with credit card debt, could be paying up to 15 5 30% interest. if stock portfolio racks up 20% annual return that's a darn good

balance on the cards, will be sucked down the drain. nothing you can do about it. 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 i i health insurance. shouldn't invest in the market until you have health insurance. you either buy it or pay a fine and stilhave no health care insurance. the penalties get bigger over time.

know people do, it is idiotic to pay a fine and have no insurance.e. medical emergencies are the single biggest cause of bankruptcy. i'veeen 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. oneillness 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

all the gains? the stock market all the gains in the stock 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

gentleman bother. 1y5 bother why 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.

let's go to mike in new york. >> caller: hey mr. cramer. i've been a retired police 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

coming up i'll tell you when it makes sense to add an ira to the mix. 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.

first national bank or 401 k or 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.

repeated so much it is not worth calling advice any more. yes you should save but how 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 ung moneyo make more money and came to this gig later in life.

money manager like me could you go about preen forg retirement. 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

pie. why? in "mad money" terms, every 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 sayhe beginning of 2013 more current, your entire portfolio was in bond to yielding stock -year-olds go lower, bond price go up, which

stocks with big dividends but in spring 2013 interest rates began to rise and the return to get om 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.

lose-lose. i had a show called real money and got a lot of calls telling 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 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 t it. you t 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

for. like the company i buy isn't put one-fifth ofof capital in any one e 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 wellthxfor 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.

time, jim, but thank you, thank you, thank you, so much. >> 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, happyy 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...

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wants to get rich quick, except for some hippy types who don't believe in currency,, w wt to 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

it is possible in this era of low interest rate it's, which seems to go on a long time, that you could be too cautious, too prudenenand too risk-a verse. when you are managing your money there's a point could become like wrecklessneks. you could see this when people save for retirement. i say invest don't save. because saving sounds like socking the moneyway like a lolo fund, something no one would invest in, but somehow feel you will be fine. that's not how it works. not these days. not this age. most peoeoe when theyy 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,

unlike bondnd but if you believe there's less chance for down side that's not intelligent. i ll 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 yourself by the plan you retire. qf 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'sll it wilil be. it's not enough to get a low-single digit return low below 00% low yielding treasury.

be a suicide pact. you need to use your money to make more money,y,erhaps a lot more money. let's not forget bonds are not safe. there's moment it's bonds couldld 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 retirent moneyeyn 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

how about one of the most popular 401 k investments out there, stable value nds. it's just a type of funds that gives slightly better return than money market fundd and bond fund. although bond fund have insurance factors to protect you. but smaller return from stable value funds the definition of 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 invnvting account put money in bonds or funds you are saying i'm not going to use it to generate more wealth i

can't have it both ways. if you cling to safety and what time to retire don't have enough cash or higher returns that will enable you to retire happier, ing 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 pguins 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 gogornment bonds.

and verizon likely better to reinvestmeme in common stock dif 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 qlity 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 percrctage 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

when you want to. high yielding stocks should be 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 that was coined in previous times and you will need the upside from s scks whehe 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.

question is investing in ira, i'm 25, recently out of law school i have maxed out my ira 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 to an aggressive mutual fund for quarter or half that money, looking at aggressive growth, ten years from now if we're having the same conversationn 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

>> i say h can you hold them ifif next year they'y' not consistent. i seen it with technology stocks, digital equipment kept doing it and doing it and one day disappeared, these are all companies i remember that define that what you just mention, and then one day they miss and then they miss and thth they miss and then they miss.. can't have that happen. go easy, go near. the best is yet to come. make your money work for you. therers more "mad money" ahead. taking things up a notch. when is it is right to double down on your retirement plan. plus there's othth ways to make sure you don't have to work until your last breath, we'll lay out your tions. us your tweet just ahead. stick with cramer. >> cramer! you are super.

>> your show is the best. i'm so glad you're on tv. >> 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 tisfaction 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 easy way to draw attention perfect point liner smudge with sponge-tip to create a smokin' kitten eye lash blaststascara

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most important step is t@ set yourself up for retirement. so indndidual retirements and 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 think 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. i'm not one of them. because times your market takes a big hit.

i think you should capitalize on that. would you really want to invest the same amount of money when the market is n nring the top as when it nears the bottom? no absolutely not. here's how you take advantage of decline in the market especially when you have stock market pull backs are opportunity to rise not wipe and moanx when you get a climbn 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 e tire year. if the market stays down you might want 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

tell you it does. if you embrace this you will make more money than if you passively contribute same amount month after month into your 401 k. to make sure we're clear invest yo 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 c cdingly of accocoingly.

you get 10% decline in the s&p 500 you can double down and invest twice as much that month. take advantag think of it as a sale, no different from a sale at youou locacadepartment store, that's the right way to manage your retirement portfolio. "m money" is back after this. >> m m cramer absolutely love the show. >> we really appreciate you out there. >> boo-yah to our kids the learning so much from you. >> boo-yah mr. cramer. >> i know youear 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,

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to.to. while we're on the subnfct of long-term wealth building, i need too tell you a aut 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 ands and don'ts. i'm the first to say set yourself up fofo wealtlt retirement but don't max out on your 401 k contributeions every year, that would be $18,000, no,

plenty of down side. high management fees, no question about it eats away at 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 individuaua retirement account, it lets you invest your money the way you want to making it superior vehicle for your

has the same great tax deferred statuses as 401 k your employer $% would mch at leasassome pepeentage up to some point, that's free money, would be a fool not to take it. there's usuly a cap how much you can contribute, so contribute as much as needed to get the full company match and stop right there, don't put another penny into your 1 k until you maxed your ira contributions, after you get the full match of 401 k put t t rest in eye retirement account. whether to use regular ira or roth ira, pick up "stay mad for life" gives much more detail on the stuff, it's the book i

you pay no taxes on any gains in the ira, those will compound year to year, tax free. withdrawals taxed as regular income s sll 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 only contribute as much as it takes to get thehe fulll matchch from your employer after that all retirement saving into an individual retirement account for more more flexible. if your 401 k doeoe't have

maxing out ira, 5500 a y50er7 maxing out ira, $555500 a year or $6500 if you'rever 50. (cell phone rings) where are e u? 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,

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. where are you? it's very loud there. are you taking a zumba class? ugh! heartbubu! no one burns on my watch! try alka-seltzer heartburn reliefchews. they work fast and don't taste chalky. mmm...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`jt 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.

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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 stocksks bonds and money markets, age. if you are younger, i don't want to see bonds in the ira. just compopod it 3%? i want to see stocks, stocks, when you get older, stocks with dividends, when you get older, then with bonds. mama 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. next. pay off the car. house. mortgage may be low. may get return from divididd stocks and gettet mortgage money. that's a no-brainer. next tweet. at ctv 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

believe how much money i was able to save. up next a tweet from little feet farm. how manytocks is too many too few to own. we are the professionals. for you amateur no more than ten it's too hard you d@n't have the time. let's go to the next one. says lock student loans less than 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 foryou. next. it says how much tinkering with retirement account too much.

first of all do not change 26 times a week, that makes no sense. what you have to do is do the homework. 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 been on fights representing people with $100,000 and d'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 puntin but it's not because herwise you're not going to

so needed, all right. stick with cramer. >> mr. cramer absolutely love the e ow. >> w wreally appreciate 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 e rket. >> 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 over70. 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 young... it's what you do. you make me feel

i like to say there's always