Money cannot buy you happiness. But then, not having any money doesn’t put us on an automatic path to happiness. Going beyond clichés, money does play a helpful role in our happiness and if we are robbed of it, will bring immense grief. So, let us discuss today on a few points that can make us part way with our money. Because “Free cheese is found only in the mouse trap”. There is perhaps a thrill in making some quick bucks without putting in much of effort or taking any risk. This is basic human instinct and there are many who make their living playing on these instincts.

Pyramid Schemes or Multi-Level Marketing (MLM)

Any marketing scheme where you are expected to pay a high membership fee and/or you make money by convincing others to be members should raise your hackles. In pyramid schemes, there is either no actual product being sold or even if they do, it will have to be way overpriced simply because there are a number of folks who need to be paid without putting any effort. In simple words – A victim has to pull in more victims in order to make money.

GoldQuest, Speak Asia Online, Amway are few examples. Amway probably has the advantage of being first in the market.
First, they all run out of steam when people stop buying them or find some other fancy MLM product.
Secondly, if every victim pulls in 5 more victims, we will exceed the world population just within 15 levels. So, it all depends in which level you are to begin with.

The Ponzi Schemes (Any high return unregulated business PSCL, VinVik enterprises etc)

Offering high returns by using money from new investors to pay off earlier investors. As a rule, in ponzi schemes, the moment you don’t have enough new investors signing up, the scheme runs out of money and goes bust.

The initial members are paid very high returns or paid through other means, like taken on expensive holidays. These are not paid for by any profits that the company makes but instead paid for by the money taken from the investors who join later. Often, even the initial members who have tasted blood end up investing lot more money than they made originally. End of it all, just a single person makes money. A recent one in China offered guaranteed returns just a few percentages above bank FD returns to make it look less suspicious.

Internet / Phishing Scams

Internet scams are too many to mention them all. It could be a Nigerian prince wanting to transfer his entire wealth to your bank account or someone stealing your personal info so as to impersonate you.

A click on a link/pic that looks just the thing that would interest you cannot just screw your laptop, but hijack it and demand a ransom! A call from someone whom you think is from your bank/insurance company could potentially clean up your money.

Get-Rich-Quick Scams

In the 80s, you could buy a share of teak plantation, equity advisers manipulating penny stocks in the 90s, emu farming in 2000s to crypto currency sellers these days. If we are ever promised “risk-free” returns above the bank FD interest rates, be rest assured that those trying to pull you into that scheme, will sell you the Taj Mahal if you drop in a word that you are interested to buy it. Nowadays, folks have become smarter and they tend to promise just 4-6% above the corporate bond rates just make investors feel it is genuine. So, while corporate bonds can give more than 9%, if someone can promise you 15% returns then they need to be able to make 20% returns in order to make some profits of their own after deducting expenses. Someone so smart as to consistently make 20% returns on a long term really wouldn’t need our money, so back out!