Universal Life Won't Make You Rich

Natalie says she went to a seminar about investing and was told to invest in a universal life insurance policy. Dave warns Natalie this is a bad idea.

QUESTION: Natalie in Utah says she went to a seminar about investing and was told to invest in a universal life insurance policy. Dave warns Natalie this is a bad idea.

ANSWER: It’s a big no—like a yelling, screaming no, and I’m trying not to do that.

Here’s the rule. It’s real simple. Any time you save money inside of a life insurance policy, you get ripped off. Any time. It’s always a bad product. Some of them are bigger rip-offs than others.

I don’t know this guy from Adam. I’ve never heard of him before today, so I’m not mad at him, but what he’s selling is crap. He’s trying to get you to stop doing your 401(k) and put your money in a universal life policy. That makes me want to throw up. It’s really, really dumb.

Stay away from those dad gum free investment seminars that are get-rich-quick schemes.

When you read the book The Total Money Makeover, it tells you to stop doing all savings until you’re debt-free except your home and you have a fully funded emergency fund of three to six months of expenses. You need to go back and go through that book again. You’re troubling me that you haven’t actually read it. You bought it and put it on the coffee table. It’s not going to work that way. You’ve got to open it. Learn those steps—detailed—because here’s the thing: You need to put all of your focus on clearing up your debt so that your debt gets cleaned up, and then and only then do you start your 401(k) back up again. So temporarily stop saving until you have your debts gone and build your emergency fund of three to six months of expenses, then restart your investing in your 401(k). When you read through The Total Money Makeover, it’ll show you exactly how to do that, so go back and read it or reread it—whichever one applies in your case.