Top Four Financial Scams and How to Avoid Them

As the economy has evolved over the last few years, the financial world has changed a great deal. The evolution of a world economy brings about many positive changes. On the other hand, the evolution of the economy does bring about some unwanted problems. One of the foremost issues in today's financial world is the increasing "smarts" of scammers. The technology and innovation that make the world a better place overall can also help those who prey on others much more powerful. Scammers prey on consumers in many different areas, but the financial world is their single largest target. Here is a look at four common financial scams and some ways to avoid them.

Four Common Financial Scams and How to Avoid Them

1. Affinity Fraud- This is one of the oldest ones in the book, but it still works extremely often. Affinity fraud occurs when a scammer becomes a part of an organization such as a religious group or a cultural group and then uses that affiliation to scam an unsuspecting consumer. The consumer is vulnerable in this spot because they tend to assume a person in this type of group is trustworthy.

Avoidance Tip: As cold as it may seem, you should never trust anyone more because of a certain affiliation. Check into their background and ask a lot of questions before committing to anything.

2. Tax Phishing Scams- There are many tax related scams that occur frequently, but tax phishing scams are on the rise in a big way. The scammer often uses a fake tax help service to get consumers to download a malware infested file. This allows scammers to get your most private financial information.

Avoidance Tip: Be very wary of tax software that isn't a brand name you've heard about before. H&R Block and Quicken both offer major programs that help with taxes, but many online scammers use catchy tax help titles to lure in taxpayers.

3. Work at Home Scams- In a difficult economy there is always going to be many people looking for a way to make extra money. Scammers are taking advantage of this by offering fake work at home opportunities that are designed to make you believe you can become rich through a simple task such as envelope stuffing or medical billing. These work at home scams make you pay a fee of some kind to get started, and then you never really end up getting started at all.

Avoidance Tip: Never pay any kind of fee for a job opportunity. There are plenty of legitimate online work at home opportunities, but they won't force you to pay a fee to get started.

4. Securities Fraud by Unlicensed Individuals- This is a classic case of the scammer preying on consumers who are looking to cash in on the newest fad in investing. In this type of fraud, the scammer will promise ridiculous results. These scammers are not licensed to sell any type of securities, but they will jump on the hottest security fad and sell their phony business as a long-term moneymaker.

Avoidance Tip- Does it sound too good to be true? Those sales promises that look or sound too good to be true often are precisely that, too good to be true. Keep your investment expectations in check and laugh off these phony sales pitches.

These are just four of the most common financial scams out there. The single best tip to avoid financial scams is to always do your homework and avoid making rushed decisions. Don't let a scammer get their hands on your hard earned money!

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