Episode 3: Why People Fall for Financial Scams
You would want to think that fraud and scams should look obviously foreboding right from the word “Go!”, but that is not always the case.
Surprisingly, many at times people get scammed with their own permission, wittingly or unwittingly.
There are certain traits you exhibit or circumstances around you that expose you to the risk of falling for Financial Scam.
I am going to highlight a few of those things that make you vulnerable.
★1. Greed and Desperation ??
Greed is a selfish or excessive desire for more than is needed or deserved, especially of money, wealth, food, or other possessions.
When you show by your thoughts, words or actions that you are in dire need of money especially, at little or no cost, you become the first target for scam.
How does that happen??
The fraudster will present you with claims that sound too good to be true. He will promise you big returns at little or zero risks within a short period of time.
When someone tells you an investment is 100% guaranteed, you have to raise your “fraud anthennas”. No investment can be 100% guaranteed on it’s own.
In fact, an investment is only as guaranteed as the level of knowledge of the investor.
Don’t allow greed and desperation to control your logical mind. Do your research.
★2. Economic Recession ??
Recession, which is a period of reduced economic activity is also a time when fraudsters work overtime to get people duped.
A recession is associated with high unemployment, high interest rates, slowing gross domestic product, and high inflation.
This is the period that desperation is at the highest. Recession makes things hard for people financially.
If you recall very well, it was at the height of the Nigerian recession in late 2016, that we had the most proliferation of many Ponzi Schemes, fake peer-to-peer donation platforms and online financial scams.
Funny enough, during this period, many people gleefully jumped from one scheme to another. ?
I know people who patronized more than 5 of these schemes at once and were enthusiastically enrolling unsuspecting “potential victims”.
When a scheme shuts down, they would be too ashamed to learn from it. Rather they would be looking for the newest scheme to invest in, in hopes of recouping their losses.
The cycles would continue until they became completely broke and helpless. Yes…. Recession is that bad. ?
★3. Overconfidence ??
Someone made a remark that smart people are often easier to scam than not-so-smart people. Sounds odd, doesn’t it?
Smart people are often blind to their own ignorance, and thus easily fall for the conman’s fantasy story. Whereas not-so-smart people know they don’t know what the would-be scammer is talking about, and are therefore wary.
I know of someone who lost money to a scammer, and sadly, I think it was because he is (thinks he’s) smart.
He was apparently following the faulty logic: “I am very smart. I am too smart to fall for a scam. Therefore, if I am considering investing in this, it cannot be a scam, because I’m too smart to get scammed.”
Also, people who have lots of money to invest, are confident in their ability to make smart money decisions. They are interested in new, risky investment ideas that turn out to be perfect targets for scams, even though they may not realize it.
★4. Fragile Emotional State ??
In 2014, AARP conducted a phone survey of more than 11,741 American adults 18 and older to figure out the risk factors involved with falling for Internet scams.
They found that if you have feelings of isolation, have recently been fired from a job, if you lost a loved one or are more likely to engage in “risky” behavior in real life, you’re more likely to be robbed online.
Therefore, when you are down emotionally, that is not the best time to listen to an investment pitch or search online for “21 Ways of Becoming Rich in 2 hours”. Chances are you will easily fall prey to fraud.
★5. Blind Trust ??
Many of us Christians are guilty of over-trusting people simply because they profess the same faith as ours or because they minister to us spiritually.
Some people would gladly crawl in the mud if the order to do so came from their Pastor or Youth Fellowship leader. They see it as an act of insubordination to question their pastors or any “man of God”.
As a result, it’s sad that the majority of the cases of financial fraud I’ve heard come from people who were duped by “fellow Christians”.
Simply because you attend the same church, mosque or synagogue as someone does not mean that he is qualified to manage your money or has your best interests in mind.
You still have to do your homework before taking any financial advice from someone you trust, no matter the relationship, age or religious standing.
★7. Herd Mentality:
Herd mentality is toxic. When you do something because everyone is doing it or because you feel you are going to be left behind, you are allowing your emotions to take over you.
And when in this state, it is easy to ignore the warning signs trying to dissuade you from falling for a scam.
That’s how far we’re going to go for today. In the next episode, I’m going to write on the many faces of financial fraud.
You will get to learn the various ways fraud is perpetuated so you can learn to avoid them.
Have you any questions or suggestions from today’s lesson? Make use of the comments box below.
If you don’t have any question, just type “Ride on”…..
Time to take the bull of your personal finance by the horns. Have you gotten your sample copy of my book How To Save Like A PRO yet?