4 Timeless Money Rules From Jim Cramer for Long‑Term Financial Health
When financial personality and "Mad Money" host Jim Cramer gives financial advice, people tend to listen. Although his stock-picking record could be better, his general money management and wisdom are often sound.
Here are four recommendations Jim Cramer has made through the years for your money that can improve your financial well-being.
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1. Start Investing Early
Cramer's most important advice is to start investing early. He's said this is the only way you're going to be able to achieve financial freedom.
To understand why that's true, it's important to understand that the U.S. stock market has delivered long-term returns that outpace inflation from a historical perspective, making early investing one of the most powerful wealth-building tools. Over time, these gains add up to a sizable increase in your wealth. The earlier you start, the earlier you can take advantage of this growth.
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2. Pay Off High-Interest Credit Card Debt
Cramer joins money experts like Dave Ramsey in stressing the importance of prioritizing paying off credit card debt, and has recommended paying off any credit card debt you have before you start investing. The reason behind this is that credit cards tend to have extremely high interest rates, so your balance goes up faster over time. As it does, you'll incur interest at a faster pace, locking you into a vicious cycle.
Even though Cramer has said we should always be investing in our future, that doesn't necessarily mean putting funds into the stock market right away. Paying off high-interest debt now will likely be a better use of your funds.
3. Have a Clear Plan Before You Invest
Cramer has noted that if you plan to pick stocks, it's vital to ensure you have a clear plan of action. Before committing money, know why you’re buying, what would make you sell, and how much risk you’re willing to tolerate.
If you don't have a clear plan of action when trading, you'll be subject to whims and emotions when making decisions. That's a surefire way to delay financial independence.
4. Adjust Your Risk as You Age
As you grow older, Cramer has insisted that your risk tolerance should change. Instead of investing most or all of your money into the market, you may want to consider holding assets with less downside, such as bonds.
The logic here is the same as the logic for why young investors can afford to take more risk. The older you get, the more difficult it becomes to replace sizable losses without impacting your retirement date. As such, investors typically shift some money toward more stable, income-producing assets as retirement approaches.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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