Financial traps and scams can cost you a lot of money if you don’t know what they are. It is not easy to spot one because there are so many ways they can appear and it can sometimes take time for people to realize that something fishy is going on. I’ve been there, so this is why I want to teach you how to avoid one!
For example, there was a scam recently where someone claimed they could help you lose weight fast by giving you “magic pills”. In reality, these were just normal pills but with a different label. You would be surprised at how easy it is to fall for such a scam.
There are many financial traps and scams in everyday’s life. In this article we will go through some of the most common ones and explain exactly how to avoid them as well as some other things you need to keep an eye out for.
Examples Of Financial Traps And Scams
The best way to start off your understanding about financial traps and scams is to look at some real life examples. A good place to start is the news.
One of the most widespread scams today is phishing (also known as email fraud). This happens when hackers send emails posing as banks or other companies asking you to login using your bank details. If you do this, you’ll end up handing over your personal information which can then be used to steal money from you.
Another example of a scam is fake job offers. These come usually via social media sites like Facebook and LinkedIn. They might be about a new position at a company that you’ve never heard of before or a high paying job opportunity.
The only problem is that the person who sends the message doesn’t exist. As soon as you reply, they disappear and your money disappears too.
These are just two examples of scams that have hit the headlines recently. There are plenty more out there. More examples can be found on official consumer financial institution about typical scams. Highly recommend you to read them!
How We Can Avoid These Financial Scams
If you’re worried about falling victim to any of these types of scams, it is important to remember that none of us are immune to them. However, there are various measures that you can take to reduce your risk of being scammed.
First of all, make sure you only deal with legitimate businesses.
Secondly, be careful about what you sign up to. Make sure that the company has been around for a while, has a reputable reputation and that you can reach them easily.
Thirdly, always check that the website has a valid SSL certificate. This means that the site uses encryption technology to protect your data. If it doesn’t have one, it may be a sign that the site is fraudulent.
Fourthly, remember that there are always a number of ways to contact a business. For example, you can call them instead of sending an email. Or you can use video calls or chat apps like Skype instead of text messaging. This makes it harder for criminals to steal your information.
Finally, look out for signs of a scam. For example, if a company asks for payment upfront, it should include a warning about its legitimacy.
You also want to pay attention to the language of a business or service. Many scams are written in broken English. If they don’t sound right, question whether they are genuine.
As part of your research, it is worth checking out forums, review websites and social media pages. This gives you the chance to read about experiences of others who have fallen victim to scams. Also, check my proper risk management tips if you are interested.
How To Manage Our Risks Properly In Finance
It is vital to understand that no matter how much effort you put into avoiding scams and traps, you cannot completely eliminate the risk of losing money through investing.
However, by managing your risks properly, you can significantly reduce them. Here are some tips how to do this:
– Never invest more than you can afford to lose. Even though it’s tempting to think that “this time I’m going to be rich”, if you invest too much money, there will almost certainly be a point where you can’t cover your losses.
– When investing, choose quality over quantity. It is tempting to buy shares or bonds in large amounts because it seems like a safe investment. But what actually matters is what percentage of your portfolio is invested in each type of investment. Choose low-risk options and diversify your portfolio.
– Consider your time horizon. Some investments are suitable for short periods while others require long term commitment. For example, stocks are great if you have short-term goals but bonds are better suited to long-term investments.
– Always consider the fees involved. Be aware of how much you are paying for every transaction and don’t allow the price to get above a reasonable level.
– Don’t chase returns. There is nothing wrong with chasing high returns but make sure that your investments are diversified so that you aren’t putting all your eggs in one basket.
– Understand what “noise” is and how to filter it. Noise is the small amount of information that is irrelevant to your decision making process. Noise comes from everything except the underlying fundamentals that drive your financial decisions.
In summary, financial scams and traps are not limited to online activities. You can find them anywhere. By taking simple precautions, you can avoid getting caught out by them.