Don’t fall for an easy money scam

I heard a story not long ago about a couple who had been scammed out of their life savings by someone they regarded as a friend. The scam was a classic Ponzi scheme and all the ‘friend’ had to do was take a little time to bond with the couple, establish some trust and then gradually introduce the couple to the idea that she and her business partner could provide them with returns on their money way beyond anything anyone else could deliver. It’s amazing how convincing people can be with a computer and an Excel spreadsheet.

The scam artist suggested that she could provide a return of 3% per month, which with compounding would deliver a return in excess of 40% per annum. That return is unbelievable of course but people believe what they want to believe, which is something scam artists know only too well. With the trap baited, avarice does the rest of the work.

So the couple parted with their life savings, which amounted to over £350,000. If they assumed that their friend could deliver these returns then that would convert their saving into a capital sum in excess of £2 million within five years. It’s easy to see how big that temptation might have been and how much they really wanted to believe it was true. Sadly they’re unlikely to see any of that money ever again.

Whilst you have to feel sorry for the couple who got scammed, I have to say that the old saying is true, “Fools and their money are easily parted.”

How could they possibly believe that someone could consistently deliver a return in excess of 40% per annum in the present financial climate? Even the legendary investor Warren Buffett isn’t that good. There are so many clichés that spring to mind here:-

  • If it seems too good to be true then almost certainly it is!
  • Don’t put all your eggs in one basket!
  • Risk and reward go hand in hand!

Just because all these sayings have become clichés doesn’t make them any less valid. They’re valid because they’re based on bitter experience.

Remember: The higher the potential return on offer the greater the risk you’re taking. That is a fact. And by definition risk means the probability of you ending up with an outcome you really don’t want.

A scam works because as human beings we are greedy. Someone dangles a very big carrot and we just can’t resist the temptation. We believe what we’re told because we want to believe it. The idea that we’ll become very rich with little or no effort of our part can be beguiling. Maybe it’s because we want to leave a financial legacy for our children. Perhaps it’s because we want the lifestyle that goes with having plenty of money.

Whatever the reason, falling for a scam means you’re unlikely to see any of your money again. Even if the perpetrators are caught, it’s not often that all of the money is recovered, if any at all. That’s usually because the perpetrators have spent the proceeds of the scam living the good life themselves.

So please don’t fall for an obvious easy money scam. It’ll always end in tears.

Before you invest in anything, ask yourself some very searching questions. The obvious ones being, “How can I be confident that what I am being told is true?” and “How can I be confident that the money I would be investing will be safe?” And never, ever get greedy.

Seek a fair return of course but don’t expect excessive returns to be delivered consistently. It’s not possible. If it was that easy then everyone would be doing it and everyone would be rich.

There is no such thing as easy money but making money and building wealth is easier than you might imagine. So start by educating yourself on all things money and personal finance. With a better understanding of money at least you’ll be less likely to fall for an easy money scam.

You’ll find plenty of good books on all things money and personal finance on Amazon if you just CLICK HERE. So go on start your own small personal finance reference library right NOW.

Please don’t die poor through ignorance in matters of money. Decide today that you’ll educate yourself. You won’t regret it.

© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.

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