Spammers who try to get your financial information by sending fake emails pretending to be from banks. Fund-raisers from fake charities. Hit-and-run roofers, landscapers, or driveway resurfacers who do poor work with inferior materials and then leave town. Salespeople who promise their schemes will make you rich. And, of course, all those people from Nigeria who need your bank account number so they can share a million dollars with you.
These are all financial predators. Just like predators in the wild, they stalk the vulnerable and unwary.
We tend to think of scammers and con artists taking advantage of the poor, the elderly, and the uneducated. To some extent, this is certainly true. But while financial predators might be unscrupulous and evil, they aren’t stupid. In order to make money from their schemes, they need to target people with enough money to be worth preying on.
The most important vulnerability these predators exploit is ignorance. And the poor don’t have a monopoly on financial ignorance. We often assume that the ability to earn a lot of money and the ability to manage money wisely go together. This isn’t necessarily the case. Bernie Madoff cheated some very wealthy people and sophisticated investors out of millions.
Some of the qualities that make us vulnerable to financial predators come from our worst selves. Most of us, deep down, have a touch of human flaws like greed and laziness, and we’d all like faster, easier ways to make a lot of money or save a lot of money.
Some of our vulnerability, though, comes from our best selves. Financial predators exploit our willingness to trust, our desire to help others, and even the integrity that can lead us to assume others are as honest as we are.
Protecting yourself from financial predators requires being honest with yourself about both the flaws and higher qualities that make you vulnerable.
1. Don’t be your own worst enemy. Be willing to ask for advice. If your own greed is tempting you to say yes, remind yourself that if it sounds too good to be true, it probably is. I also like to ask whether salespeople have invested a significant sum of their own money in the product or scheme they are promoting. What’s been their return? Has it gained them financial independence? If so, why are they still working so hard selling the product rather than enjoying the beach in Maui?
2. Listen to your own feelings. Any time you’re feeling pressured by a salesperson, you aren’t given a chance to ask questions or read the fine print, or you get an unsolicited offer that sounds too good to be true, you probably know at some level that something doesn’t feel right. Say you’ll make a decision after you’ve done some research, or just say no and walk away.
3. Don’t trust blindly. People who are trying to sell you something are working for themselves, not for you. This doesn’t necessarily mean they are trying to cheat you, but it does mean it’s your job, not theirs, to look out for your best interests.
4. Educate yourself. The more you know, the more protected you are. Use the vast resources available through books, classes, and online information to learn about investing, business, and managing money. Ask for advice from someone you know you can trust. This may be someone at your local bank, a knowledgeable friend or family member, or a fee-only financial planner.
Financial predators can be lurking in the bushes anywhere. Educate yourself, learn to trust your own knowledge and instincts, and they won’t find you easy prey.