Mad Money

Cramer basics: How to save, save, save

Cramer: You'll never get rich from your paycheck

Every once in a while, Jim Cramer likes to go back to the basics. Do you want to be held hostage by your paycheck for the rest of your life? Didn't think so. That is why Professor Cramer is taking a dive into the first item on his syllabus: saving.

He doesn't consider saving as just a way to make sure you have a comfortable future, but it can be fuel for investments in the stock market. Investments that will free you from the shackles of a paycheck—and could even make you filthy rich.

"My ultimate goal on this show is to teach you how to become better at managing your money—not just investment, but every aspect of your financial life," he said.

For many people the reality is that Social Security may not be enough during retirement. However, Cramer recommends that saving and investing money year after year will increase assets.

The first step? Start by saving 15 percent of your paycheck, or 10 percent if that's what you can afford, he said.

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Once the money is saved, the question now becomes where to put the cash. Invest in retirement first, because that is your longevity, the "Mad Money" host advised.

Start by putting half to two-thirds of your savings into a retirement account, such as a 401(k) or individual retirement account (IRA). Those are tax-favored vehicles, and you only pay tax when you withdraw the money at retirement.

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The other portion of your funds should go into a discretionary, or Mad Money, account. This is a normal brokerage account, which Cramer advised is best to use with a cheap online broker with low commissions.

Why have multiple accounts? Technically, you are supposed to take fewer risks with retirement income.

This way you can save for retirement and also take more risks with your income. If you are under 30, Cramer recommends that you can take even more risks with your income since you have the rest of your life ahead of you to make back any losses.

Following these few simple steps will help ensure you have a retirement portfolio to take care of you when you stop working, and you might even have a little fun with your money. Even if it is under neon lights of a cubicle.

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