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Who doesn’t like the idea of getting rich quickly? The American Dream is built upon such hopes, and yet, wealth building is a slow process without guarantees. In this digital age, though, it’s often hard to discern a legitimate opportunity from a scam. Here, experts provide some red flags to look for that will prevent you from falling for a financial trick.
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If it sounds too good to be true, it probably is, according to Scott Alan Turner, CFP, a financial planner and consumer advocate with Rock Star Financial Planning. “Common sense isn’t always common practice. The stock market has a proven track record of 100 years, with returns that average 10%. Anything above a 12% return should be questioned. Especially when it’s followed with the word ‘guaranteed.’”
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If you’re looking to build true wealth, you need to turn to reliable, trusted sources. Turner recommends against taking advice from YouTube, TikTok or Instagram influencers on how to build wealth. “More often than not, these people are trying to sell products and courses.”
The word ‘secret’ in any advertisement should be a red flag, Turner shared. “There are no secrets to building wealth. Secret systems, secret insider information, secret hot tips — these are ways people quickly get separated from their hard-earned money. It isn’t because they aren’t smart. It’s because scammers are smarter.”
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If you’re being pressured to take advantage of an opportunity “urgently,” something is probably off, said Martin Boonzaayer, CEO of The Trusted Home Buyer. “Most schemes are mobile because they can be illegal. Therefore, the schemers will make it feel like their opportunity is a once-in-a-lifetime opportunity and it will only be around for a few days.”
Additionally, if the business model or profit sharing details are not clear, it’s probably a scam, said Andrei Kurtuy, co-founder and CCO of Novorésumé. “Investors should understand how the company model generates profit and how that profit is split among investors or how you will earn your part of profitability before making any investment.” Kurtuy added,
“To be on the safe side, never believe anyone who claims that their company’s business plan is too hard to grasp and that you should simply put your faith in them instead. An investment isn’t worthwhile if you don’t know what you’re getting yourself into.”
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Make sure you ask for a “working model with data,” added Tim Connon, founder of ParamountQuote Insurance Advisors. “If they do not provide anything like this, it is very likely some sort of scam.”
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If you have to pay money to get a job, it is probably a scam, said Jay Zigmont, PhD, CFP, and founder of the Live, Learn, Plan financial planning firm. “It may be phrased as a ‘buy-in’ or an orientation fee, but it’s really an opportunity to get your money. Jobs pay you, you don’t pay them.”
Another telltale sign of a scheme is that they let anyone join, and don’t require any experience or hard work, said Matthew Robbs, the founder of Smart Saving Advice. “In reality, any real business opportunity or side hustle will take both expertise and a lot of hard work,” he said.
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Be especially wary of promises that guarantee a high level of success. “Anything that claims to have a 100% success rate or says everyone can make money doing something is a certain scam. There is nothing in life with a 100% success rate,” Robbs explained.
Get rich quick schemes try to hook you quickly by grabbing your attention and interest with enticing claims, snazzy headlines and other empty promises, said Stephen Curry, CEO of CocoSign. These include working from home without any special skills, being your own boss, earning six figures working part-time, etc.
“You must be careful with that new enticing investment opportunity before you fall into a get-rich-quick scheme trap. It is vital to arm yourself to identify these fraudsters in advance.”
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Get rich quick schemes prey on the vulnerable and the desperate, said Amanda Sullivan, Research Analyst at CreditDonkey. “If you’re finding a job and in need of a huge amount of money with little to no experience, even the most sketchy job postings shine before your eyes. But don’t be fooled. These schemes often offer an absurd amount of money for a field that isn’t lucrative, [is] scientifically inaccurate, [or] new and unheard of.”
Pyramid schemes will ask you to resell goods and recruit others, said Ezra Cabrera, financial consultant and content marketing manager of SMB Compass. “Recruiters in a pyramid scheme would send you products and have you recruit other people to sell goods. The thing is, this won’t benefit you; it only benefits the people who are at the top of the chain.” They may also require you to put up a sizable investment up front that you will probably never get back.
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Any legitimate business venture will always require some kind of registration with state and federal agencies such as the US Federal Trade Commission (FTC), US Securities & Exchange Commission (SEC), and local government offices before it can begin operations, said Brian Meiggs, founder of Smarts, a personal finance website. “Making an income from selling products without first registering the business is illegal. Always make sure to check that the business is licensed before investing your money.”
“If it is not easy to find the information you need, this may signify that they are trying to deceive you,” he added.
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Jordan Rosenfeld is a freelance writer and author of nine books. She holds a B.A. from Sonoma State University and an MFA from Bennington College. Her articles and essays about finances and other topics has appeared in a wide range of publications and clients, including The Atlantic, The Billfold, Good Magazine, GoBanking Rates, Daily Worth, Quartz, Medical Economics, The New York Times, Ozy, Paypal, The Washington Post and for numerous business clients. As someone who had to learn many of her lessons about money the hard way, she enjoys writing about personal finance to empower and educate people on how to make the most of what they have and live a better quality of life.
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