There are a lot of aspects to personal finance, many more than I imagined when I started this site back in 2006. There are people trying to get out of debt, people looking to invest for retirement, and many who are living paycheck to paycheck.
One thing that all these people have in common is that they are consumers. We all are. Each of us are spending our money on various products and services. A vast majority of us have limited money, so we have to make decisions on how to spend it. Some purchasing decisions are better than others. That depends on the value we place on the product or service.
Businesses are looking to get your money. That’s not a bad thing, it’s just what they do. Like people, there are some great businesses and some dishonest ones. There are some who use catchy jingles to get you to buy their product and some who will attempt to mislead you about the value of their product. Some of them will even outright lie to you.
Over the last few years, I’ve found some of the most dishonest companies are MLM companies. Some of them have been found to be illegal pyramid schemes (see below). It’s almost impossible for consumers to know if an MLM is an illegal pyramid scheme. In many cases the necessary information isn’t available to everyone. My best advice is to follow the FTC guidelines, “Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.” If you see an MLM where they are touting someone making hundreds of thousands of dollars a year or even millions, it has, in my experience been 100% of the time because they money they made is based on the number of people they recruited and their sales to them. I’ve never seen a case where they had a thousand direct customers who are not distributors (i.e. the public). Years of analysis has lead me to the conclusion that, according to the FTC’s guidelines cited above, every MLM is indeed an illegal pyramid scheme. I’m happy to change my mind if people can send me examples of top MLM distributors who are making the bulk of their money by selling product to customers.
(As a side note, in many cases it is almost impossible for MLMers to make any significant money selling directly to the public, because much of it is available on Ebay for pennies on the dollar. For example, just about any Mary Kay product that you would want is there.)
I’ve found a multitude of problems and exhaustively and meticulously documented with the MLM industry. You’ll see some of that work on the articles on this site.
The FTC has been inconsistent in their aid to consumers. Many people expect the FTC to be everywhere at once, but the truth is that they have an extremely small budget compared to many private companies. They also have to prove their case in a court of law, which gets expensive. The FTC simply can’t proactively shut down companies and have admitted that they need consumers to help them by reporting companies. When a bunch of state attorneys general get involved over the span of a decade, it seems like the FTC is willing to step in as they did in halting the Fortune Hi-Tech Marketing scam. Sadly, by that time, the company “defrauded hundreds of thousands of customers out of hundreds of millions of dollars” according to the FTC.
There are a few other surprising things I’ve found over the last few years. For example, it turns out that Why You Shouldn’t Trust the Better Business Bureau (BBB) – independent journalists found that high grades can be bought by business. The BBB is locally run and the staff in that local can be bribed. For that reason, I agree with personal finance expert Clark Howard, who says to use the BBB as a veto. If you see a bad BBB grade, you should run away, but don’t assume a good grade is reputable.
The whole point here is that you are in charge of your own money. Nobody is going to protect your money for you. By far your strongest defense is having information, being aware, and thinking critically. Many of the articles on this website will give you that information.