How To Spot a ‘Get Rich Quick’ Scheme Before You Fall Into a Financial Trap
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.
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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 money scam.
When It Sounds Too Good To Be True
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.'”
Advice From Influencers
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.”
Secrets Are Involved
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.”
Too Much Urgency
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.”
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Transparency Is Missing
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.”
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.”
Payment Is Required Upfront
If you have to pay money to get a job, it is probably a scam, said Jay Zigmont, Ph.D., CFP, and founder of the Childfree Wealth 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.”
No Experience or Expertise Required
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.
100% Success Rate
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.
Clickbait Headlines
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.”
Appeal To the Vulnerable
The desperate and weak are the main targets of “get rich quick” schemes. Even the shadiest job postings seem enticing if they promise a substantial amount of money for little to no experience. Don’t fall for it, though. These scams frequently promise an exorbitant sum of money for an industry that isn’t viable, is scientifically dubious, or is brand new.
Pyramid Scheme Signs
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.
Unlicensed Businesses
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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This article originally appeared on GOBankingRates.com: How To Spot a ‘Get Rich Quick’ Scheme Before You Fall Into a Financial Trap
