Protecting Your Money: A Comprehensive Guide to Avoiding Financial Scams

You work hard for your money, and the last thing you want to happen is to get scammed out of it or lose it to some scheme you didn’t see coming. Unfortunately, financial scams are on the rise, and every year innocent people are losing their life savings to scams and fraud.

It looks like Netflix has started to transition from serial killer content to fraud content. Chances are you’ve seen one of the new releases on fraud or notorious scammers with programs like The Tinder Swindler and Inventing Anna coming out. Fraud is at record levels, and the financial scams won’t disappear soon.

We’re going to look at what you can do to avoid getting scammed out of your money and how you can spot various scams online as you try to avoid financial fraud.

financial fraud prevention

“That could never happen to me.” — every single person after hearing about a financial scam.

The truth is that anyone can be a victim of financial fraud. Here’s the shocking data about romance scams according to this report:

“In 2022, nearly 70,000 Americans lost money to romance scams, up from 56,000 the year before, according to the Federal Trade Commission. People lost a total of $1.3 billion in 2022, broadly in line with the previous year, based on updated data, but up significantly from the $730 million lost in 2020.”

What about Canada? The results are just as terrifying, as Canadians lost about $59 million to romance scams in 2022 and about $530 million to fraud. It’s also estimated that only about 5-10% of romance fraud gets reported, as the victims are too ashamed to say it. To make matters worse, these scammers are now utilizing AI-based tools for generating text and voice simulators to assist them with fraud.

You can’t stroll through social media for more than a few minutes without seeing some advertisement or post promising to show you how to get rich and fit with no effort! Many people will ignore content about legit side hustles because there are so many “get rich quick” schemes.

What you need to know about financial scams.

When I first shared a post on avoiding fraud, many people commented to mock the idea of the message. They mentioned how it was so evident and easy to spot a scam. One of the biggest issues with financial fraud is that victims are often too ashamed to come forward. As the fears of a recession continue, people are more susceptible to falling for some financial fraud as they attempt to get their finances in order.

Here’s what you need to know about financial scams and fraud…

It’s never obvious when it’s happening to you.

When you watch a documentary, it’s so obvious, right? How could these people not know that they were being scammed?

What are examples of financial scams and fraud that seem so obvious from the outside? 

  • A friend gets caught up in some scheme where they’re selling random services and have to bring people into the same scheme. They’re clearly in some pyramid scheme, but they’ve been convinced they’re on the path to riches.
  • Your fit friend starts promoting some supplement brand where nobody seems to understand what’s being sold. They’re promoting supplements that seem shady, and this person is destroying their reputation by sharing this junk.
  • Someone you know thinks they can make it big in cryptocurrency, so they send money to a random wallet.

Here are a few outrageous examples of scams that I found online:

  • A woman sent a man money who wanted to return to Earth.
  • A man acted like a rich art investor to con money from innocent women.

The reality is that a scam is never totally evident when it’s happening to you because you may want to see the best in people, or you have your blinders on.

There are different ways to get scammed out of your money.

Here are a few examples of common financial scams:

  • Government scams. Scammers pretend to be the government and contact you for payment or private information.
  • Email fraud. Someone emails you to blackmail you or pretend to be someone needing help.
  • Buying fake tickets. You think you’re buying tickets to the game or that concert, but you’re getting scammed.
  • Crypto schemes. This involves someone promising you astronomical returns if you send them crypto to a wallet.
  • Celebrities promoting random forms of crypto. The SEC has cracked down on this sector lately as various celebrities were promoting random crypto tokens to their audience in exchange for payment.
  • Phishing scams. The scammer will pretend to be a company to get your personal information.

The scams have become more sophisticated.

The thing with scammers is that they’re usually charming people who try to connect with you on a personal level. The other issue is that scams are becoming pretty sophisticated.

The one Toronto Swindler would ask people to borrow their phone for a quick call. Simple enough, right? How could you not loan someone your cell phone on a date when they have to make an emergency phone call? This con artist would then use the cell phone to transfer money to himself. This is a sophisticated scam that virtually anyone could be a victim of.

Self-proclaimed “gurus” will often promise you the world.

Here’s a common scenario:

You see some random influencer posing in front of an expensive car or some spectacular home. So you figure that this person must hold the secrets to getting rich. You become intrigued by their “passive income system,” and you start to follow them. They start pitching you their services and programs by sliding into your inbox. Next thing you know, you’ve been convinced to send this person thousands of dollars for their secrets.

Spoiler alert: they’re selling you the dream to promote some “investment” or program that will guarantee you riches. There’s a chance that this person either rented the luxury vehicle for the marketing or they’ve just been pulling enough scams to afford this. The secret to their riches is that they sell the secret to riches.

The issue is that it’s easy to fall for this lifestyle-based marketing because you’re likely watching this video while stuck at work or you feel fed up with your situation. So you see that someone is living the life, and you want this to be your reality. The irony is that it’s not even that person’s reality.

How to avoid financial fraud.

Avoiding financial scams

There are a few general rules that you need to follow if you want to avoid financial fraud and do your best to protect yourself.

Here’s what to look out for to avoid financial fraud:

  1. Protect your personal banking information. Do your best to safeguard your bank account details and credit card information. Try not to share either too often online.
  2. Use strong passwords. Create unique passwords and change them often.
  3. Keep an eye out for phishing attempts. You should be skeptical of unsolicited emails, texts, or phone calls requesting your private information.
  4. Review your financial accounts. Try to go over your banking account often to monitor any unauthorized transactions.
  5. Exercise vigilance with unknown sources. Be wary of investment opportunities that promise high returns with low risk, especially from unverified sources. Research and verify the legitimacy of any investment opportunities before investing your money.
  6. Don’t trust any “easy income” stream. There are many legit side hustles like walking dogs with Rover or renting rooms on Airbnb, but they come with work. There are very few “easy” income streams out there.

What are general rules for avoiding financial scams?

Here are the three most important rules for avoiding financial scams:

  1. Nobody can guarantee you high returns risk-free. There’s always a risk involved with investing, and high returns are never guaranteed.
  2. Don’t loan money to strangers, no matter how creative their story is. If you ever loan someone, ensure it’s only money you can afford to lose.
  3. Always look at the source of information. How could someone show you how to get rich if they’re not rich?

Here are some additional tips that will help you avoid financial scams: 

  • Very few people have ever turned $1,000 into a million dollars. Unless you’re starting some online business and have ten years to spare, it isn’t going to happen.
  • If you’re average looking with mediocre charisma, beautiful people on social media aren’t going to start showing interest in you suddenly.
  • Be skeptical of any “government” email or phone call.
  • Don’t send money to people if you don’t know what you’re getting. Support content creators by buying their products, but don’t send money to strangers.
  • If it sounds too good to be true, it always is. Always.
  • Don’t trust anyone posting pictures next to a fancy car.
  • You can’t get rich quickly by selling tea or bringing people into a scheme.

Is everything a scam, then?

“I’m totally screwed.”

I called home from Mexico to mention how I was in a challenging situation. I lost one debit card, and the other card wasn’t working. I needed to pull some cash out to get my laundry and other purchases. I had money in my checking account, and I couldn’t access it. This was frustrating, and what made matters worse was that I hesitated to ask anyone for a loan or cash because I didn’t want to look like a swindler.

I don’t want you to become cynical. The entire world isn’t out to get you. There are many good people in this world. These are just a few swindlers out there.

Everything isn’t a scam; there’s no need to be cynical. I just want you to be prepared so that you don’t fall victim to financial fraud.

Good luck out there.

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