12 Ways To Avoid Risky Financial Hacks From Social Media

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One of the exciting things about social media is its ability to make interesting financial advice available to a wide audience, often for free. 

The problem is that some financial hacks promise rewards and outcomes that are not feasible for the average person at best, and may be outright scams at worst.

Matt Brannon, a personal finance expert with Market Watch Guides, offered key ways to identify risky financial hacks on social media before you leap.

Avoid Anything That’s Too Good To Be True

Brannon said that the first red flag of a financial hack is if it sounds too good to be true. 

“If someone is saying there’s an easy way to make a lot of money quickly, then why wouldn’t everybody be doing that? So you have to definitely verify things like that,” he said. 

Be Wary of High-Pressure Tactics

Another red flag is anything that involves high-pressure tactics that suggest you need to do something now, from investing money to buying a product immediately.

“That’s usually a sign that they’re trying to get you not to think about it too much. Anything that is vague in terms of the details, where it sounds maybe like it’s a complicated process involving taxes or something like that, but the source makes it sound very easy and simple, is a flag,” Brannon said.

Identify the Source of the Information

It’s also important to evaluate the source of the information, Brannon said. “Is this person a reputable financial source? Do they have a history of giving people advice on these sorts of things to good results, or are they more of a person who just sort of sprung up and is advocating for one particular thing over and over again?” he explained.

If you can’t verify their expertise or legitimacy, you probably shouldn’t be following their advice, either.

Avoid Changing Your Money Into Other Forms

Another big red flag, Brannon said, is anything that involves changing your money in a strange way. “While foreign currency doesn’t necessarily mean it’s a scam, nor does cryptocurrency, it does increase the likelihood of it being a scam,” he said.

Verify, and check that you won’t also be paying taxes, paying interest or taking a loss in the exchange.

Reconsider Offers To Generate Passive Income

One hack Brannon sees a lot on social media is this idea of generating passive income through becoming a real estate investor. 

“These accounts always make it seem very simple, like it’s free money that you’re leaving on the table by not doing it and you can get your housing paid for and everything,” he said.

He knows several people who are not “financially versed” — and even one in a lot of debt — who are thinking of getting into this as a way to make money quickly.

“That was concerning to hear because a lot of times it is people who might already have some financial difficulties who are more likely to be susceptible to these sorts of things,” he explained.

He said for the average person, a high-yield savings account is likely to reap bigger rewards than trying to break into real estate investing without much money to start with.

“A lot of people underestimate the amount of management that’s going to go on, the complications on your taxes and just trying to follow regulations that are not designed for people with the average amount of financial literacy to be able to follow,” he said.

Ask Who Benefits

According to Brannon, a good way to protect yourself in advance of a risky financial hack is to ask the question, “Who benefits?” 

A TikTok influencer who is selling lesser-known cryptocurrencies, for example, likely has a selfish reason to be doing so, he suggested, such as having bought too much stock in it.

“There are actors out there who are seeking to take advantage of you, and it’s important to consider that as a possibility before you commit to any moves like that,” he said.

Double Check and Verify

When you hear of something that sounds good but also raises your alarms, Brannon urged that you check with well-established sources, like banks or government agencies, first. He even recommended checking online forums dedicated to the topic, particularly reputable ones.

“A lot of times you can get a sense of, has this worked for people before? Has this led to financial horror stories for people who have tried it out?” he said.

Similarly, if you feel like you got a weird message from somebody, Brannon recommended you take it to a second platform and ask, “‘Did you actually send me this?'”

Be Aware of Scams Targeted to Your Demographic

Different types of scams and bad financial advice are often targeted to unique demographics. For example, TikTok is a platform that attracts younger users, so be wary of what you see there.

“Whenever I’m on X (formerly Twitter), I feel like half of the things I see on a page are advertisements for cryptocurrencies, so that’s definitely a troubling one. Also, on Facebook, it’s probably safe to say the demographic is a little bit older than it is on other social media apps,” he said. “So you might tend to see more traditional scams around getting a message from somebody posing as a family member or opposing as a friend and saying that they need some money or trying to sign you up for a pyramid scheme.”

Don’t Engage In Tax Scams

Another financial hack that needs extra scrutiny is tax scams. “The idea that you can spend lavishly on travel and products and then write them off and get some sort of hidden tax advantage people don’t know about,” Brannon said.

While there are definitely cases where some bigger write-offs are legitimate, a lot of times it’s overblown. “It’s oversimplified and you could get in real trouble for these,” he explained.

Rethink Investing In Gold

Another investment that’s often touted as a good idea, and often targeted at older Americans, is investing in gold. It’s often sold alongside catastrophic language about economic crashes and wars on the horizon, Brannon said.

While there’s no harm in adding some gold to your assets, especially if you have reliable information and aren’t using money that you will need to keep liquid, Brannon just urged caution.

Don’t Engage In Outright Fraud

Sometimes with social media, it’s difficult to tell the difference between a hack and outright fraud. A recent social media hack targeted at Chase Bank users was spread online and essentially advocated fraud.

Someone found that if you deposited a fake check you wrote to yourself in Chase bank’s online deposit system, the funds would show up in your account before Chase had time to authorize them, thus people were withdrawing money they did not have, Brannon explained.

“What happens is it takes a little bit of time for Chase to verify that the check is legitimate. But you get caught pretty quickly, and not only could you have the funds in your account frozen, you could face tax penalties, and in some cases you can’t even receive jail time for doing things like this,” he said.

Always Ask These Questions

Brannon summarized the questions you should ask yourself before committing to any financial hack you see online:

• Who is this information coming from? 
• Why might they be trying to persuade me? 
• When do I need to act? (If the answer is soon, there might be a red flag there.)
• What other sources have verified this information? 
• Does this sound too good to be true?

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