I decided I needed a new savings goal. I mean cash, cold hard cash.

I already contribute the allowable amount to both my wife and I’s Roth IRA, and we both get the full matching contribution to our employers retirement plans. The problem is, that money is slated to be used in 30 years or more.

Some people call this an emergency fund. I already have one of those too.

I’m looking for a non-committed cash reserve. Something that will make me a solid 4-5% return in an Emigrant Direct account, and that will provide some completely passive “luxury” money, or “Mad Money” as my wife calls it.

So how much do I want? Ideally, I’d like to have an extra couple hundred bucks a month that I can not feel guilty about spending. As such, I’d need about $50,000 in an online savings account making 4.5% or so to return that figure monthly. So that’s the goal.

$50,000 in cash in the Emigrant Direct account that will just sit there. It will generate about $200 per month passively, that I won’t feel guilty about spending.

So there you have it. There it is. In the right hand column is the measure of how close I am to this goal. I figure it might take me another year or so to get there from my current $19,000 mark, but I think it will be worth it.

Anyone else have a “Mad Money” fund?

Banking, Goals, Saving emergency fund, Mad Money, slush fund

It seems not everyone loves Jim Cramer. It seems not everyone sees the value in his show, Mad Money.

It seems that Paul Ferrell, in particular, given a stage and a microphone, is more than willing to lob the opening volley that would not only spur an open retort from the mad man himself, but a frothy discussion on boards, blogs, and forums.

In case you missed it, Paul Ferrell’s column appeared on MarketWatch.com last week, and I really didn’t find anywhere in the piece where Ferrell held anything back. I even read between the lines…

“Last week I finally listened to the “Mad Money” show for a full hour. When channel surfing in the past I’d move on after 30 seconds. It’s about as educational as Saturday morning cartoons. What I heard was a manic distraction for addicted personalities.” -Source

While fairly pointed, Ferrell does pose some good points, but I think he ended up throwing the baby out with the bath water. He contends that if you take Cramer’s advice and spend at least an hour per week “doing your homework” on each position, the opportunity cost of doing such research does not offset any realistic gains from investing in Cramer’s stock picks. He goes on to use the following example:

If you’re following Prof. Cramer’s rules and doing your “homework” you’re watching “Mad Money” five hours a week and doing another 10 hours of “homework” on your “positions.” That’s potentially 60 hours of your valuable time each month, on top of your full-time job. Assuming you’re a professional or business executive, let’s say your time’s worth $100 per hour, probably more.

So, bottom line: Your economic “opportunity lost” for 60 hours is at least $6,000 a month or $72,000 a year, playing by “Mad Money” rules. Get it folks? Your time is valuable. If you’re worth a minimum of $100 an hour and you spend 60 hours a week on any activity, you darn well better be earning at least $72,000 a year. And to make that kind of money at, say, 15% a year you’d need more than $400,000 capital at risk. -Source

That’s a cute but rather distracting example. I suspect that the vast majority of Jim Cramer’s audience earns far less than the suggested $100 per hour at their full-time job. In fact, I would wager that the average hourly income of his viewers is less than $30 per hour. My reasoning for this is that the folks who earn $100 per hour at their job know what their time is worth, just as those who earn $20 per hour. The difference is that the guy who earns $100 per hour can most likely pay someone to manage and grow his money, and need not bother with a show like Mad Money.

So I agree with his theory on opportunity cost, however the scale he suggests is not applicable in this scenario, in my opinion, and as such is less influential in the true value of the show than Ferrell suggests.

To his credit, Jim Cramer wrote a fairly civil rebuttal.

While I felt that Farrell’s article was wildly inaccurate, I will admit that it was at least a little bit original. I have never before been criticized for telling investors to research the stocks they buy. If Farrell is to be believed, spending an hour per week researching each of the stocks you own is simply a waste of time. I am glad I didn’t listen to Farrell. I never would have made the hundreds of millions of dollars I made for myself and for my investors before I retired. And I am using the same skill sets now every night on my show. -Source

Honestly I’ve never been a big Jim Cramer fan, although one has to respect his success in the market. I never bought into the hype of the show, and while entertaining, didn’t provide as much substance as I would like.

Perhaps my time is more valuable.

Commentary, Finance, Investing Jim Cramer, Mad Money, Paul Ferrell