5 Steps to Protect Your Finances from Fraud

If there is anything that can turn a smile upside down, it's the sound of money leaving you. If you want this to get worse, it's when money leaves without any purpose at all, or when you feel stupid after losing money. This is exactly what a scam makes you feel.

Scams and fraud schemes have been around for quite some time, but being under lockdown and in need of money has made scams much more plentiful. Today we will look at what fraud or scam is, why people get caught up in them, and how to protect your finances from fraud.


 

What exactly is fraud?

Fraud can be defined as a situation where a person uses a deceptive means to get information on another person, to the perpetrator's benefit or to the loss of the victim. Scams are often considered synonymous with fraud.

There are so many types of fraud, including tax fraud, online scamming, identity theft, pyramid schemes, phishing and the like.

The word "fraud" isn't new, and people have heard it over and over again. Why do people keep falling for obvious fraud schemes and scams?

 

Why do people fall victim to scams?

Many times, people that aren't victims of fraud look at victims and ask, "How did you fall for that?" Often, when the scam is past, victims look back and feel foolish about the whole incident. Yet most of the time, as we have seen in the case of Ponzi schemes, the same set of people fall victim again and again. Why do they do it then?

 

1. Greed

The problem for many people who fall victim to fraud is plain greed. Their lack of contentment makes them chase after every shiny new object. More often than not, they get themselves into trouble. Greed is quite dangerous as it forces people to ignore the red flags and focus on illusory financial gains. At the end of the day, greedy people get scammed and defrauded by other greedy conmen.

2. Ignorance

Lack of knowledge is a huge factor as to why many fall victim to scams and fraudulent activities. Many fraudsters pose as legitimate enterprises, and when laymen do not carry out their own deep research, they can easily fall prey to these tactics. The pyramid schemes, for example, pose as real businesses, deceiving their victims to opt into a sort of business model. At the end of the day, it becomes a cycle that leaves the people at the bottom in shame.

3. Fear Of Missing Out (FOMO)

Often, fraudulent schemes become so popular that they begin to seem legit. A case in point would be when the popular MMM Ponzi scheme swept across the country. Many people joined in, not because they were sure of what they were getting into, but because a friend had gotten into it. In the end, its crash brought a lot of people’s finances down.

 
Reciprocate Kindness

A lot of psychological research has found that when someone does something small for you, you will most likely feel obligated to reciprocate this act. While in itself, this principle isn't harmful, coupled with someone with a negative intention, it could be quite deadly. Often, fraudsters pose as people who offer help and, in return, rope in their prospects.

 
Fear of failure.

Have you ever noticed how most fraudulent schemes are posed? The perpetrators often make it sound like you would not have a future if you failed to opt-into their scheme. They especially twist copywriting techniques to guilt-trip unsuspecting people into their schemes.

 
5 steps to preventing financial fraud

 
1- Be careful how you share personal details.

Don't give out your personal information carelessly.There are schemes where all they need is your identity, your essential details, ID cards, etc. Secure files and documents you don't need to always have on you in a safe, and be careful where you enter your private information both online and offline. If the website is not secure (HTTPS), then don't enter your private details.

 
2- Monitor your account transactions.

With most banks, receiving alerts via SMS is a staple. This has its benefits, especially when it is effective. There is a need to monitor your inflow and outflow of cash from your bank. You can easily know and monitor what goes in and out of your account. When you notice strange reflecting transactions in your account, you should inform your bank branch immediately. It might seem small at first, but monitoring these little changes can help safeguard your finances down the line.

 
3- Do not isolate yourself from friends.

This might not seem directly like financial advice, but as human beings we tend to get support from our fellows. One thing most fraudulent schemes encourage is seclusion from your established circle. Often, you are drawn out of safety and are unable to fact-check a lot of things being thrown at you.

Do not put yourself in such a vulnerable position. Communicate actively with a group of friends or a confidant about financial decisions you take.

 
4- Create and update your passwords.

Almost all online accounts require a password. Always make sure to create one that is difficult to guess or break. Make sure your passwords across-the-board are unique and actively change your passwords when it comes to accounts with vital information or ones you use regularly.

Some applications now offer two-factor authentication; make sure to use this whenever it is offered. If you do not trust your smart devices, take extra security measures with your password and write them down in a book.

 

5- Learn about the various scams around.

Education and constant learning are very important. As we already mentioned, there are certain types of scams that thrive on the ignorance of the victims. The more you know the less likely you are to fall for obvious deceptions. Try to check out what latest scam just got busted or what latest trend is being followed. Read up on older fraud events and occurrences, and learn to connect the dots. It would be easier to walk away when someone comes with a fishy proposition.

 
What should be your takeaways?

The truth is being a victim of financial fraud can be very painful, with the loss of money and the feeling of being played. But you can better prepare to avoid falling for scams in the future when you can identify why you fall for them, and how you can safeguard yourself against them.