Jim Cramer, host of CNBC’s “Mad Money,” follows up his popular book Mad Money with his latest offering, Stay Mad for Life. As he puts it, this is his “401k book” and Mad Money was his “how-to-pick-stocks book.” Cramer is responding to criticism that in the past he has only written about his experience as a hedge fund manager, or about his stock-picking prowess when starting up TheStreet.com. In Stay Mad for Life, Jim Cramer lays out his plan for building wealth, and serves up several great nuggets related to personal finance.
Create a long-term budget along with your normal, monthly budget. Long term budgets should be used to plan expenses five to ten years down the road. Good examples might be the purchase of a new car, or a down payment on a home. Estimate the cost of those items in today’s dollars and plan accordingly, making the necessary deposits to a savings or investment account, depending on you time line.
Do not invest all of your cash earmarked for investing. This sounds a little counter-intuitive at first. Basically, Cramer advises keeping some cash on the sidelines to take advantage of market corrections. With a nice cash position you will be able to snap up some good, cheap stocks that have been beaten down as part of a broader market retreat. If all of your cash is already invested you may not be able liquidate other positions fast enough to take advantage. This is sort of like spending all your money at one of the mall and then finding a great sale on your way out the door. If you had held on to a little bit of cash you could still take advantage of the discount.
Get your kids interested in investing by buying a share or two of their favorite company. A half dozen stocks were referenced as good stocks to purchase for kids, because they appealed to younger people and they had solid growth rates. I took Cramer’s advice here, and purchased some shares of Disney (DIS) for my daughter through Sharebuilder. I plan to split any future cash gifts she receives between her 529 College Savings account and this custodial investment account.
If you aren’t going to select single stocks, stick with index mutual funds. Cramer provides a few of his recommended mutual funds, but throughout the book he advocates using [tag]index funds[/tag]. Their low turnover and typically low fee structure offer a low-cost investment for those investing outside of a retirement account. Actually, they are a good investment inside a retirement account too, because many actively managed funds fail to beat the average market indices over a long time period.
Rating: 4 out of 5 stars (”Buy-Buy-Buy!”). I enjoyed reading Stay Mad for Life, and it actually whetted my appetite for other personal finance books. Generally, if I select a lousy read in the personal finance genre I’m anxious to move on to another subject for my next book. Not so in this case. Jim Cramer does an excellent job of outlining the steps to wealth by providing solid investment principles for the next couple decades, and timeless family finance advice to navigate retirement, college savings and paying for life’s big purchases.