It occurred to me as I was assembling my list of good blog articles for yesterday that several dealt with identifying or avoiding scams, either particular scams or the general concept of scams. This makes sense; anytime is the perfect time for nefariously minded individuals to dangle the possibility of huge profits and giant returns to see who nibbles. The only solution is constant vigilance, and understanding of how scammers work, in order to protect yourself. Don’t fall for offers of great returns (although there are some legitimate free money offers out there, although they generally require you to do something to get the money)
In the spirit of informing the public of how to identify and avoid these types of nefarious schemes, here’s a quick primer to help you learn how to protect yourself and your money. These are far from the only ways to reduce the possibility of finding yourself on the wrong end of the scheme, but they are a good start. Follow these simple, largely commonsense suggestions, be careful and cautious, and you’ll be a much tougher target for scammers:
If it seems too good to be true, it probably is: If you can keep this one point in mind, you’ll save yourself an endless amount of scam related trouble. One of the most common tactics used by scammers is promising results well beyond that of other methods, so long as you trust them and give them your money (or personal information). If you know the sort of results you can reasonably expect to get through normal means, you’ll be able to recognize when scammers are promising more than they can possibly deliver. Here’s some advice about ‘normal’ returns to help guide you:
-Investing: The usual figure cited for the long term return offered by a diverse large cap index (like the S&P 500) is 10% annually, including inflation. That’s about the best you can expect from a ‘risk-free’ investment (and even that amount is far from certain in the short term, since the market is volatile). If someone is touting an investment that returns much more than that amount, it’s either significantly riskier (as with things like forex or options) or they are flat out lying. If they toss the word ‘Guarantee’ around as well, like ’140% annual return, GUARANTEED!’, then run, don’t walk, as far away from the investment as possible.
-Employment: When you’ve been out of work for a while, the ads you see like ‘Make $133 an hour from home, no skills required’ start to seem more and more tempting. Keep a few points in mind though. First, the amount you can reasonably expect to get from a starting job is around $10 an hour, at most; anything above that amount is likely physically hard (touting freight onto and off trains), requires special training (computer programming skills or at least a college degree), or is generally unpleasant (handling trash). Second, while work at home jobs do exist (case in point, I’m a blogger), most require you to start your own business (again, see blogging), rather than being offered by major corporations with high starting pay (particularly to people who haven’t ever worked for them). Finally, any place trying to fill a job half that profitable won’t need to resort to paid ads (or pieces of paper on telephone poles); a few days on Monster or CareerBuilder and they would have more applicants then they could ever handle.
-Government Money: Yes, the government does provide money to people. No, it’s unlikely that you’re missing out on any money that information from a late night infomercial will help you to find. Especially since the most famous proponent of ‘Free Money From the Government’ just copied the whole thing, anyway. If you really want to find government money, check online at any number of government websites; a little searching will yield all the information you need, ready and available (and for free, to boot).
Don’t Give Away the Store: Or your personal finance information, at least. If you can keep information about your financial institutions, social security number, and credit cards from falling into the wrong hands, you can foil a lot of scams. Remember, the only time you should even consider providing such information is when you initiate a transaction; if you are approached by an outside source, just say no. Speaking of which…
ALWAYS avoid wiring money to people you’ve never met: Things like Western Union or MoneyGram are a good way to transfer money to family members who are difficult to reach otherwise. But they are untraceable and unrecoverable, making them an ideal way for scammers to separate you from your money. Unless you need to reach people you care about and have no other means of doing so, avoid wiring money.
Recognize (and know how to avoid) the most common scams: I’ve covered many types of schemes in depth previously. For internet users, Advanced Fee schemes are common, convincing people to put up money up front to ensure a job or a share of a windfall. Ponzi Schemes, where proceeds from future victims provide money to fund the returns of current victims and Pyramid Schemes, which depend on an endless amount of future victims, are also common schemes. Be aware that not all sources of investment suggestions are completely benign; some hope to Pump and Dump stocks (especially penny stocks) after convincing you to invest in them.
Don’t Be Greedy: Probably the best advice I can give to help you avoid scams of all types is not to let a lust for wealth get ahead of your common sense. Keep your head, be rational, and ask yourself a few pertinent questions, like ‘Could a company really stay in business and compete effectively if they pay tens of thousands of dollars to someone for glorified email sending?’ or ‘If I knew the secret to doubling my money in the stock market each month, why would I share it?’ That should help to put the crazy scams you read or hear into perspective.
Now, head back out into the world, and avoid those scammers, everyone!
The Federal Trade Commission’s resources for Fighting ID Theft and Fraud
Scambusters: Exactly what it sounds like, a website devoted to busting the most common scams
6 Tips to Avoid Senior Scams: Even if you aren’t a member of AARP, these are still some good suggestions to keep your money safe.