But for the vast majority of americans, that paycheck is not enough. You need to work with it. And if you keep watching, im going to tell you how to do that, for the rest of your life. Now, usually i come in here and tell you what i think of the market and what themes are best, the stocks that best fit those themes. But before you even start investing in stocks, there are other things you have to do if you want the payoff to mean something later on in life when you most need the money. Its fruitless to think you can get rich in stocks if you havent laid down a foundation for building longterm wealth. What do i mean . Simple. You can make a fortune in the market. But if youve hemorrhaging money everywhere else, a healthy portfolio isnt going to do much for you. If you had planned things better, it might have let you become wealthy. There are three things that you must take care of before you i dont usually address these subjects, i assume you have this taken care of. But here on mad money, i feel like im being remiss in not mentioning them more often. Very few colleges teach you a thing how to manage your finances. I know from your phone calls, emails and twitter that many of you really crave this kind of education. You just ask for it every day. So im done ignoring it, it ends tonight. What are the three things you must do before you can own stocks . First, youve heard it a million times, it just sucks the fun out of everything. But you have to, have to, have to pay off all that Credit Card Debt. Ive got to nag you on the ublt is. Im not one of those that believe credit cards are evil. But i acknowledge the facts and the facts are these. If you have Credit Card Debt, you are paying a high Interest Rate on that debt. Were talking rates that are loan shark rates. To be fair to the credit card industry, they wont break your kneecaps if you dont pay them back. Like many aspects of personal finance, i have brushed up against the down side of credit cards. In between college and law school, i owed a huge amount to various creditors, so i had very little left to live on. Initially because of a bad break, i ended up living in my car. I still managed to put a few bucks away into a retirement account i created. Once i had a permanent address, once i knew where i was going to live, even though i was in hock to a bunch of companies, the credit card issuing Companies Found me, and i took a bunch of them down. I pretty much everyone who offed me the plastic. I figured you could pay the minimum and string everybody out. But the credit issuers never seemed to mind. I remember i was paying the minimum and i got an offer for one more. I said why not . But when i added up the minimum payments and charges, i realized they amounted to my biggest experience after my rent. I wanted to default on them, but feared the consequences. These guys are like a posse. And their payment plan gave me just enough breathing room to get by until i went back to law school. There i was able to get some legal work, and even though the hourly rate was good, almost every penny went to the credit cards. What a relief when i paid them off. In the end, i couldnt stomach opening the mail. Not everyone will be as fortunate as i was snagging a job that took me out of the credit card wilderness. But i am realistic when i say theres no way you can make enough money away from these card issuers to save in any meaningful way. Even if youre a great investor, a one in a million trader, it wont matter. Still be paying 15 annual interest. If your stock portfolio racks up a 20 annual return, thats a darn good year, but if you have a big balance on your credit cards, all of your gain also be sucked down the drain by the Interest Rates. If you go into Credit Card Debt, stocks are just going to be a hobby. Stocks cant be the wealth generating machine they should be. All the wealth will be canceled out by the welt destroying powers of Credit Card Debt. Sz the house of pain. There are three things you need before buying stocks. The second is health insurance. You might think the Affordable Care act makes this a nonissue, but now you have to buy it or pay a fine. So there isnt any choice here. Dont be a moron about this stuff. Even if you object to obamacare politically, its idiotic to pay a fine. Plus, there are all kinds of subsidies to make the costs more bearable. Honestly, you shouldnt need legislation. Medical emergencies are the single biggest cause of bankruptcy in this country. I had no Health Care Plan and had to drive hours to see a doctor. Even then i couldnt get the care i needed. The younger demo of the audience can feel invulnerable, but youre not. One illness, a couple hospital visits, it can crush all the capital youve built over the years. Its cheaper to buy insurance before you get sick, and you need health care eventually at some point. Everybody does. Last but not least, you need Disability Insurance. The rational for this is simple. Without these two insurances, you can get wiped out. All the precious gains youve racked up in the stock market will be for nothing. Insure, you have to pay off your Credit Card Debt, get health and Disability Insurance. So you have no excuse not to get them if you can afford to own stocks. These are essential elements in your strategy for capital preservation. Remember, we talk about capital appreciation. Thats where you grow your investments using your money to make more money. But capital preservation comes first, because you need that to protect your money in the present, if you want to grow it in the future. Heres the bottom line. Pay off your Credit Card Debt and getting health and Disability Insurance are the three most important things. Without them, investing doesnt make sense. Why bother . With heavy Credit Card Debt and without health care and disability, Building Wealth can be futile, even if youre one 06 the best investors in the world. So take care of these issues starting tomorrow, then create the portfolio that makes sense for you. Zaidi in connecticut, how are you . I love the show and thank you for calling me back. I quit my job two years ago. 57 years old now and i have 400,000 and a 401 k . We have a selfdirect brokerage, did pretty well. Stick with it. I like what youve got. Some people are locked in. Lets go to mike in new york. Hey, mr. Cramer, how are you doing . All right, how are you . Doing fine. I just have a question concerning city pensions. Ive been a retired Police Officer for two years. Ive been in the city pension for over 20. What is the difference between a 457 plan and a roth i. R. A. And what are the pros and cons between the two . Im going to have to ask you to check with your people at your pension plan, because the 457 deferred plan, i am not quite sure how that works and i cant come up with something here. It is too important, im very sorry, but thats a personal decision to you, and i dont feel comfortable offering advice on that particular situation. Before you can think about investing in stocks, make sure you build a foundation. Pay off Credit Card Debt, get health and Disability Insurance. On mad money tonight, you know i want you to be diversified and the same applies for your 401 k . Should you ever tinker with your contribution level, dont miss my take. Plus, the 401 k isnt the only game in town. Ill tell you when it makes sense to add an i. R. A. To the mix. Mad money will be right back. Dont miss a second of mad money. Follow jimcramer on twitter. Send jim an email, or give us a go to the website. Bsite. Americans. We try to live healthy. But many of us dont know there are nutrients that can help support our metabolism. Take new one a day healthy metabolism support multivitamin with chromium to help use carbs from food and bvitamins to helpconvert food to fuel. One a day. Kelloggs frosted miniwheats. 8 layers of wheat. And one thats sweet. For the adult and kid in all of us. Kelloggs frosted miniwheats feed your inner kidult heart healths important. So you may take an omega3 supplement. But its the ingredients inside that really matter for heart health. Bayer pro ultra omega3 has two times the concentration of epa and dha as the leading omega3 supplement. Bayer pro ultra omega3. Mary gets her bounce on. Wow mary, is like, every mom from the neighborhood here . Look at them all. judgie. See . You are looking good using bounce dryer sheets is paying off. Your clothes have fewer wrinkles, and static cling. Aint bringing you down. Oh and look, its that ms. Brookethinksshesallthat andabagofchips. Good thing you brought your agame. Your agame. Bounce, the 4 in 1 dryer sheet. A subject we dont spend enough time on in the business meeting. If youre serious about getting rich and more important, staying that way, then i recommend two things. First, go to amazon or your local bookstore, by the jim cramer catalog. The second thing you should do to prepare for retirement, even if youre in the early 20s and youre only just started working is youve got to start saving now. Notice i didnt say save for retirement, i said prepare, because youre just stuffing your money in the First National bank, stuffing it into your mattress, or saving it in a 401 k , they might not be enough to prepare for retirement. You should take an active hand in setting yourself up for retirement, getting involved with your money. Getting your hands dirty, especially with the traditional vehicle for so many retirements. With that minimum reward with fixed incomes, not worth the risk thats what im here to help you do. Young people, youve got to do this too. If theres anyone that can make the process interesting, its me. You need to learn how to do this sometime, wouldnt you rather learn from a guy thats been around for ages . Before i get going, i want to make you a promise. I promise to give you some useful advice that you cant just find on the internet. So many of these have been repeated ad nauseam, its not should you put money into an individual i. R. A. . Yes. People say things like, pay your bills on time, dont spend more than you make. All great pieces of advice that Everybody Knows, but people will tell you just those points. And assume its enough to help you get ahead. I say its not. Basic financial responsibility is just a jumping off point. Diet and exercise, please. Im the guy who tells you where to go from there. Because i didnt make a career out of giving people money advice. I made a career out of using money to make even more money and i came to this gig later in life. So how from the perspective of a money manager like me should you go about preparing for retirement . What useful advice can i give you beyond just that you should use your 401 k plan, if you have one, and your i. R. A. , which dont pay taxes and you dont pay any taxes on the gains inside of them. How about some advice on what you should not do with your 401 k . The conventional wisdom says put money in, but leaves you on your own at the beginning of a highly confusing process. So what should you not do with your contributions . First and foremost, dont use much of your 401 k money to buy stock in the company you work for. Im far from the first person to say this. Company stock is still the most popular 401 k investment out there. More people put their retirement dough into the stock of their employer than any other investment. I cant stress enough how misguided that is. It must be only one part of a much larger pie. Why . Let me put it in mad money terms. Diversified . When it comes to investing, diversification, i tell you in the first gospel according to cramer, is the only free lunch out there. Regular viewers know if you expose too much of your portfolio to the same sector, you are running an enormous risk. Suppose you had all your money in tech stocks before the dotcom stocks, you would have been wiped out. Say in 2013, your portfolio was in higher dividend yielding stocks. Bond yields were so low, which meant that investors looking for income had no choice but to buy stocks with big dividends. But then in the spring of 2013 we had an Interest Rate scare. Rates began to rise violently. And the return you should get these high yielding stocks got crushed, because they finally had some real Interest Rate competition from the bond market. So if all of your portfolio was made up of these high yielders, you lost a lot of money, even though the first half of 2013 was fabulous for the market at a whole. Were going to get more Interest Rate spikes. Youve got to diversify. By that logic, your 401 k , do you want to invest in the same company thats paying your salary . That would mean youre putting your savings in the same basket as your paycheck. What if you worked for enron or Eastman Kodak for less unsavory examples or any other company that goes under . You lose your job and Retirement Savings. Its loselose. Do you think its conjecture . I used to have a radio show and i got a lot of calls telling me to stop bashing enron. Why . Stock in the company. I explained perhaps they needed to diversify away from enron. Each time i heard how they got discounts or how such a Great Company was too terrific to tell or that it was down so much, they couldnt sell. Then one day it was gone. But many people have made this argument before and the Company Stock is still the number one investment. You probably feel like you understand the company you work for. Im telling you, that doesnt cut it. You have to cut back. Just cut it back tomorrow. Diversification comes before Everything Else when youre investing, whether its in your discretionary portfolio or investing, so never put more than 1 5th of your money into the stock of the company you work for. Remember, youre doubling down. Stick with cramer if you want to know more about how to manage your retirement money, so you can build lasting wealth for you and your family. Theres much more mad money ahead. Americans are living longer these days, and yes, that could change the way you prepare for retirement. And sometimes your 401 k Company Match just doesnt cut it. Dont miss my take on going above the normal contribution. Stick with cramer. Cramer, you are super, you are awesome im a firsttime investor. You are inspiring me to get in the game. Your show is the best. Thank you, cramer. Your clever moves wont stop the cold and flu. But disinfecting with lysol can. Because lysol wipes and spray are approved to kill more types of germs than clorox. Including those that can make you sick. For a healthy home this cold and flu season. Lysol that. Were all familiar with this, axe daily fragrances. But what you wouldnt have seen is this, axe dry spray antiperspirant. Why are you touching your armpit . I was just checking to see if its dry. Dont, thats weird. The first ever dry spray antiperspirant from axe. Kelloggs frosted miniwheats. 8 layers of wheat. And one thats sweet. For the adult and kid in all of us. Kelloggs frosted miniwheats feed your inner kidult ah come on lets hide in the attic. No. In the basement. Why cant we just get in the running car . Are you crazy . Lets hide behind the chainsaws. Smart. Yeah. Ok. If youre in a horror movie, you make poor decisions. Its what you do. This was a good idea. Shhhh. Be quiet. Im being quiet. Youre breathing on me if you want to save fifteen percent or more on car insurance, you switch to geico. Its what you do. Everybody in this country wants to get rich quick, except perhaps for some hippie types that dont believe in currency, who live off the grid. Anyone who tells you hes got a way to make obscene amounts of money overnight is doing something very illegal. How about the meth operation in breaking bad. I love when Bryan Cranston came on mad money and talked about his product being like apples. That meth sold itself. But that get rich quick scheme ended bad. The best way to make your money grow is to do it slowly, which is why tonight were talking about longterm wealth building. Its critical when youre investing for retirement. I know retirement money should have little risk taken. But its possible in this era of very low Interest Rates, which seems like it could go on for a long time, that you could be too cautious, too prudent and too risk adverse. When youre managing your money, theres a point where all of your prudence can become like recklessness. And this is something you particularly see with people who want to save for retirement. I like to say you investor retirement, dont save. Like you sock the money away in maybe a longterm bond fund. Most people, when theyre putting money away for retirement, feel like they shouldnt take on too much risk, that their Retirement Savings are too important to jeopardize by investing in stocks. I understand why many of you feel this way. If you shun stocks and cling to bonds because you believe that theres less chance for down side, thats not being all that intelligent right now. Investing none of your 401 k in stocks is far more likely to jeopardize your Retirement Savings in the long run than investing everything in stocks would be. Why . Okay, when youre investing for retirement, youre in a race against time. You need to generate enough to support yourself for the rest of your life. If you are too risk adverse, meaning if you load up on bonds in your 20s, 30s, and 40s, avoiding stocks because of the risk, you will never generate enough money to retire comfortably. The money you have will probably be safe, but thats all it will be. Its not enough to get a low single digit return, below 4 from 30year treasuries. Because that low rate, youre barely going to outpace inflation. You also have to factor in the need for capital appreciation. Using your money to make more money, perhaps a lot more. Lets not forget that bonds arent always the epitome of safety either. In an environment where Interest Rates are rising, bond price also fall. Something that will t