When you work hard to save your money for your goals, you want to hang on to every last penny. Developing some frugal new habits will help, and you can always try to earn some extra money on the side to get to financial nirvana even faster. Sometimes when you’re in the middle of a big push to boost your savings, though, it’s easy to be swayed by promises of quick cash.
And that’s when you can leave yourself open to scams.
Everyone thinks they’re too smart to fall for scammers, but that’s part of how the con artists end up being successful. One minute you’re trying to maximize your bottom line and the next you’re out several hundred — or even thousand — dollars.
Scams can happen to anyone, so it’s a good idea to pay attention to local news warnings about illegal activity in your area (think phone and email scams). You’ll also want to be on the lookout for these shady deals that don’t turn out to be “deals” at all.
- IRS Scams
Tax time is a big season for financial scams, and for good reason. You’re probably preoccupied with getting all those forms filled out, so you might not be as alert to a fishy-sounding deal or strange email as you would normally be. You could also be feeling the pinch if you end up owing money, or freaking out about the possibility of being audited. There are several scams that happen around tax time, and you should be on high alert about all of them:
- Telephone Impersonators: Between February and April, there’s usually a big increase in phone scammers pretending to be representatives from the IRS. They’ll often pretend to be collecting money for taxes you owe or inquiring about an audit. They’ll try to get your social security number or credit card number in the process.
- Email Phishing: Likewise, scammers will send emails that claim you owe money to the federal government or need to update something on your tax forms. They’ll ask for sensitive information online or send you to a fake website to complete a tax form as a way to steal your information.
- Filing False Tax Forms: One way identity thieves cash in is by gathering just enough of your personal information to put together a convincing tax return. They’ll file it in your name and have the refund sent to them. When you go to file, you’ll find out about the bogus claim and have to jump through a whole lot of hoops to sort it all out.
To protect yourself from these scams, remember that the IRS will always send a bill in the mail first — you won’t be told you owe money over the phone. Likewise, you won’t be requested for information via email, so don’t fall for online schemes. Keep your sensitive information close to your vest.
Pro Tip: If you’re not sure if a call from the IRS is real, hang up and call the number on their website to make sure it’s all legit.
- Student Loan Scams
This one is particularly nasty because it preys on hardworking young people who are struggling to keep up with record levels of student debt. Scammers will email you or place an ad online (the kind you might click while reading a blog or taking a quiz) — a lot of times it’s called the “Obama Student Loan Forgiveness Program.” They offer to cancel your loans and claim to work with the U.S. Department of Education.
They don’t. What they’ll try to do instead is get you to pay an upfront fee to get your loans refinanced or forgiven — It’s all a lie. You’ll still have your debt and be out whatever fee you agreed to pay them. Some loans are eligible for forgiveness if you work in a public service job in a high-need area, so you might consider that as an option. You can also work to accelerate your student loan debt payoff with the same strategies that will get you out of any debt faster.
Pro Tip: When researching student loan forgiveness and consolidation, start at .gov websites to make sure you’re getting accurate information — there are loads of fake websites out there.
- Multi-Level Marketing Schemes
While multi-level marketing schemes (MLMs) aren’t a scam in the sense that they are perfectly legal in the United States, they are pyramid schemes in which the majority of participants can’t make money in any sustainable — in fact, 99.71 percent of participants lose money. (That rounds up to 100 percent!) MLMs are also known as direct sales businesses, and you’ve probably seen them explode on social media. Rodan + Fields, LuLaRoe and Herbalife are some of the big new players, but these businesses have been around for a long time — think Mary Kay, Avon and Amway.
The trouble with the model is that to get started, you often have to put up a major investment — meaning that you have to buy inventory up front. If you can’t unload it, you’re stuck with it. You also have to pay commissions to the person who onboarded you, who in turns pays a commission on their profits and yours to the person above them, and so on. Not a bad deal if you’re at the top, but most people aren’t.
Pro Tip: There are plenty of side gigs out there to earn extra money that don’t involve any upfront investment. Cut your entrepreneurial teeth on these before getting involved in a bigger venture.
There are always people out there who want to make a quick — dishonest! — buck by scamming you. Don’t fall for it! You know the old saying that if something seems to good to be true, it probably is? That’s solid-gold advice. Treat any money-making or money-saving offers with skepticism and do your research before diving in. Sometimes a simple Google search is all it takes to tell you if you’ve been touched by a scammer or if you’re onto something good.