The previous post on scams looked at some of the cons that are perpetrated by unscrupulous people in the modern world. This week, we will conclude by discussing more schemes used to make us part with our money.

Pump and Dump Schemes

As with seminars, there is legitimate information to be received from forums and newsletters. Nevertheless, this legitimacy makes the job of the scammer easier as it gives them the means to mix bad apples with the existing good ones rather than creating a new basket. With anonymity being an integral component of the Internet, the helpful tipster could be a pump and dump schemer or a company insider hoping to push their agenda. Using aliases and Internet proxies, one person could use a single computer and post several messages from different names and IP addresses to push an unknown or thinly-traded stock and create interest in it.

Online newsletters could be used by companies to promote their stock. Touting a stock is legal as long as there is disclosure about who pays the writer. However, withholding this critical information or lying about it constitutes fraud. Some promoters may reveal insider tips such as upcoming products or soon-to-be signed contracts in newsletters that would not be available to other investors. In retrospect, it could turn out that the insider tips were part of a pump and dump operation. It is essential that such newsletter subscribers do their due diligence and investigate if the analyst is unbiased after all.

Software Scams

Due to the widespread use of computers and the Internet, software scams are a good money-making machine for fraudsters. Typically, these scams begin as a helpful pop-up “Your computer is infected. Please click here to scan your system” (or something similar). When clicked, the scanner may seek payment or, even better, say it is “scanning your system” for a few minutes, and then seek payment to clean your registry/system.

Some programs come with adware and malware that could compromise your computer’s security and serve as a botnet or simply let a hacker steal your personal information. From a user standpoint, some of the the best safeguards include not clicking on links from unknown sources (even if it is on Facebook), scanning and updating your computer regularly, and using only a trusted computer for online transactions.

Cold Calling Scams

Phone scams are still around even though the web has become the primary channel for scammers. These schemes could involve professionals offering unsolicited tips on hot stocks or business opportunities. Sometimes, these fraudsters play with emotions by phoning seniors as their grandchild who is stuck in a foreign land, while on a trip, and asking for monetary help. As incredible as this scam might seem (the first reaction would be to ask why the grandparent would not verify with their son/daughter about where the grandchild is or inquire about this “difficult” situation), people still fall for them.

Most, if not all, scams involve monetary loss and considerable effort and time have to be spent to return one’s life to normalcy. Evidently, the best way out is to avoid these scams by learning about them and protecting our identity. Information about where to report scams can be found here.

What actions have you taken to safeguard yourself and your dear ones from such frauds? Did you learn about a scam the hard way? Was it your gullibility, greed or both that facilitated the con or was the scammer simply too good at their job?

About the Author: Clark works in Saskatchewan and has been working to build his (DIY) investment portfolio, structured for an early retirement. He loves reading (and using the lessons learned) about personal finance, technology and minimalism.  You can read his other articles here.

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The first wave of baby boomers are entering retirement – in 2009 seniors citizens only represented 14% of the population; that figure’s projected to nearly double to 24% in 2036. With nearly a quarter of the Canadian population entering retirement over the next two decades, it’s the perfect time to look at the option of downsizing. .

When I say downsizing I don’t mean “corporate restructuring” – downsizing in this context means scaling back your housing (and lifestyle) and moving to a smaller community. Whether you’re looking to escape the hustle and bustle of the big city or you’re looking at saving money, downsizing is definitely something you should consider.

Pros of Downsizing

• You are no longer paying top dollar to live close to downtown;
• You can unlock equity from your house;
• Housing in outlying towns is traditionally cheaper than in the city;
• There are plenty of decent smaller communities within driving distance of major cities;
• You can select a community where all the amenities (stores, library, bank, hospital) are nearby;
• Less maintenance and upkeep on your property;
• A small community offers a slower pace of life for those getting older;
• Potentially less crime therefore less stress and worry; and
• Property taxes are generally lower in smaller communities

You’ve heard it before: the three most important rules in real estate are location, location, location. If you’re retired and no longer need to commute to work, does it really make sense to pay top dollar to be close to the downtown? By moving to the suburbs or a smaller community within driving distance of the city, you could potentially buy a decent property for a lot less. For example, if you’re consider moving outside Toronto, there are plenty of nice cities and towns within driving distance with all the amenities like Peterborough and London.

The main advantage of downsizing is the ability to unlock equity from your house. If you’re like most Canadians, the majority of your net worth is in your house. That’s alright as long as you have a pension and retirement savings. However, if you’re “house poor,” downsizing is definitely an option to consider – it’s a better option than taking a reverse mortgage on your house if you want to leave something to loved ones. With the extra funds you can top up your RRSP’s and TFSA. With the population living longer, you don’t want to outlive your money.

There are plenty of communities geared towards retirement. If you are less mobile and unable to mow the lawn or shovel the driveway, a smaller community might be what you’re looking for. You might consider hiring a grass cutting and snow removal company to do these tasks for you. One resource that’s worth mentioning is MoneySense.  They do a yearly survey on the best places to retire in Canada based a on number of criteria, such as weather, amenities and crime.

Cons of Downsizing

• You may not save as much as you’d anticipated due to closing costs;
• If you depend on rental income, it can be very difficult to rent in a small town;
• The cost of living can be higher (i.e. gas, groceries, clothing, etc.);
• You may be further from your family and friends and feel isolated; and
• You’ll have to actively invest the money you save from your house to make it last.

With great power comes great responsibility. Before you decide to take the plunge and downsize, there are a number of disadvantages you should consider. A lot of retirees overestimate how much they will save from downsizing. According to the Canadian Mortgage and Housing Corporation (CMHC), closing costs can range from 1.5% to 2.5% of purchase price. If you’re selling your house in the city for $500,000 and you’re buying a house in the suburbs for $350,000, your closing costs could easily add up to over $25,000, walking away with less money than you’d anticipated.

The cost of living can be higher in smaller communities. Everything from groceries to gas may be a few cents more expensive, which can be significant over a number of years. Also, if you aren’t within walking distance to all the amenities, you may have to go out and purchase a new car, which can further eat away at your savings.

Proper research is critical: what is the crime rate? Are property taxes lower than the city? Downsizing to a small town isn’t just a financial decision, it’s a lifestyle decision. If you have family and friends nearby it can be helpful, but moving to a small town solely to save money can leave you feeling isolated and lonely – you may end up living there a couple years and moving back to the city, leaving you in worse financial shape than you started.

Final Thoughts

There are a lot of advantages to moving to a smaller community, but it isn’t a decision to take lightly. If you have concerns, you can always try renting for a few months to see how you like the lifestyle. You’ll want to do a lot of research, speak with family and friends and people that live nearby. Downsizing can let you live the lifestyle you’ve always wanted to in retirement, but it’s important to plan wisely, as the wrong choice can leave can waste your money and time.

About the Author: Sean Cooper is a single, 20-something year old, first time home buyer located in Toronto. He has experience in the financial sector as a Pension Analyst, RESP administrator and Income Tax Preparer. He holds a Bachelor of Commerce in business management from Ryerson University.

Source Links:
Baby boomer statistics: http://www.cbc.ca/news/canada/story/2010/12/30/f-boomers-retire.html

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