This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Jim Cramer's Best Plays in the Playbook: What to Do Before Investing, 401(k) Strategy

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.

NEW YORK (TheStreet) -- Are you looking to become a better investor? Jim Cramer's new segment on his Mad Money show called "Cramer's Playbook" might be just what you're seeking. Today we look back at two recent episodes of the playbook.

These are excerpts from Cramer's 'Mad Money' Recap, originally published on Jan. 11 and Jan. 23, 2014.

Who Should Invest In Stocks?

In his weekly series entitled "Cramer's Playbook," Cramer wants to reverse the trend of failing to teach financial literacy in America. Today's lesson: Who should be investing in the stock market?

Cramer reiterated that he's a huge fan of the stock market for wealth creation, but that doesn't mean stocks are for everyone. He said there are two important prerequisites that all investors must have before they invest because it's pointless to invest in stocks without a solid financial foundation.

So what are the two "must-haves" before you invest in stocks?

Cramer said the first is paying off all your high interest debt, such as credit cards. With average interest hovering around 15%, Cramer said credit cards will gobble up your money a lot faster than the markets' ability to replace it. Having low-interest debt, such as student loans and mortgages, is OK, but your credit cards and other high-interest debt may be paid in full.

Cramer's next must-have before investing in stocks: health insurance. He said that far too many people end up in financial ruin after unexpected medical bills ravage their lives. With Obamacare, there's no excuse not to have health insurance, Cramer said, and it's something everyone needs before they dive into stocks.

Should I Invest In A 401(k) Plan?

For the next installment of "Cramer's Playbook," Cramer's series that hopes to increase everyone's financial literacy, Cramer turned the focus to company-sponsored 401(k) plans, answering the question, "Should I invest in my company's 401(k) plan or put my money to work elsewhere?"

There are many advantages, and disadvantages, to 401(k) plans, Cramer explained. 401(k)s grow tax-deferred and many employers offer a match, which is free money. Using the power of compounding, if you invested $5,000 a year starting at age 30, by the time you turned 60 your $150,000 next egg would have grown to over $511,000 given just a 7% annual return, Cramer explained.

But 401(k) investment options vary widely from employer to employer and many offer high or hidden fees that over time can put a serious dent into your returns. That's why Cramer advocates investing in a 401(k) only up to the employer match and only if the investment choices are acceptable. If not, invest in a self-directed individual IRA, where you're allowed to invest $5,500 per year, Cramer said.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.

-- Written by Scott Rutt in Washington, D.C.

To email Scott about this article, click here: Scott Rutt

Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs