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Originally published December 2012
December in Indiana brings chilly air, a little snow, strands of holiday lights that twinkle at twilight and fraudsters. Yes, you read that right-each and every year during the holidays, swindlers hope that your good will might make them a little extra cash. Don’t let the season’s generosity leave you without holiday cheer or a retirement fund. Protect yourself from these scams that often occur during the holiday season.
Between traveling and buying gifts for family and friends, a lot of us are faced with a cash crunch. Fraudsters prey on this by offering “get-rich-quick” and “year-end, limited time offer” schemes. To protect yourself, create a holiday budget before you start to purchase holiday gifts or plane tickets. If you don’t find yourself in need of extra money, you will be much less vulnerable to investment fraud. If you do decide to invest during the holidays, there are a few things to remember. First, with high reward, comes high risk, so those “get-rick-quick” offers, even if legitimate, are just as likely to cost you everything you put into them as they are to make you rich. Understand the risks involved and then take into consideration whether you can afford to lose the money you would be investing. Any legitimate investment should come with a written prospectus that details the opportunity. Second, the person selling you the investment opportunity should be happy to answer any and all questions you might have about the opportunity. Fraudsters don’t want you asking questions because they don’t want you to find out that their opportunity is a scam! Also, a real offer will still be around tomorrow, do not feel pressured to make a hasty decision; if you are being pressured, just say no, it’s probably not the once in a lifetime opportunity the salesperson is making it out to be. Finally, remember to investigate before you invest. The agent selling an investment opportunity and the opportunity itself should be licensed and registered. To check the status of an agent or an opportunity, check with the Securities Division of the Indiana Secretary of State by using the online searchable database at http://www.indianainvestmentwatch.com/ or by calling 1.800.223.8791.
For many, the holiday season is not only a time to celebrate family and friends but also to help those in need by donating to charities. There are many wonderful reasons to donate including an increased sense of personal happiness, making the world a better place, not to mention a tax deduction. But how do you know if your money is really being used for the cause you have donated to? An unfortunate truth is that fraudsters will take advantage of people in every way possible, including using your altruism to make a profit for themselves. Here are some ways to make sure your money is going to those in need. Donate directly to the charity rather than responding through an email or dropping money into a bucket in front of a store. Emails from charities requesting donations may be legitimate, however, you also run the risk that the link might redirect you to a ‘phishing’ site that collects your personal information, jeopardizing your identity and finances. And yes, the person in front of the store, dressed as Santa, might be collecting for a good cause, or they might be an imposter pocketing a little extra cash. Finally, make sure your charity uses donations for the beneficiaries of its mission and not for farming out work to for-profits or for the ‘betterment’ of its CEO. To do this check the tax exemption status, real charities should be non-profit with a 501(c) (3) tax exemption. Also, legitimate charities will provide you with information like acting Board Members and form 990. Form 990 is a financial statement that all non-profits are required to file annually; however, they are not very easy to navigate. Fortunately there are some websites like Charity Navigator or GuideStar that analyze charities on things like program expenses, administration expenses, fundraising expenses, etc. When you do make a donation to a legitimate charity, don’t forget to get a receipt or ‘thank you’ so that you can claim it on your taxes!
Let the holiday’s be full of good will and cheer by protecting yourself from the heightened threats of investment fraud and charity scams. Knowledge is your best defense, so investigate an investment opportunity before you invest and research a charity before you donate.