MLM will kill your pursuit of wealth
June 6th, 2021 by Erica Altman
“Hey [insert endearing name here]! I’ve joined this company that has amazing products and life-changing opportunities that I’d like to share with you,” says the classmate from high school who you haven’t heard from in about a decade. It all sounds so vague, and they probably won’t even reveal the company name. Nevertheless, they won’t stop spewing the following claims:
“This company is funding my $76 grocery trip.”
“You’re on your smart phone all the time anyways, so why not get PAID for it?”
“Most of you will spend $100 at Target without blinking an eye, but spending $100 to start your own business is too much?”
“What you put into it is what you get out of it. You just have to break out of your comfort zone and stop caring about what other people think.”
“If you make a small investment of $XX, you can be a CEO very quickly. Don’t you want to be a CEO?”
If this sounds sketchy to you, then your instincts are right, as this is typical lingo within Multi-Level Marketing (MLM) or Network Marketing. This business model makes money through independent consultants who sell their products and recruit other consultants (or victims, as we call them) for a commission percentage. Here's the Oxford Dictionary's sample sentence for the definition of these ventures: "MLMs are designed to make sure that the sales representative's expenses exceed commissions." You heard that right: MLMs are a fancy word for pyramid schemes. Several writers at the Wealthy Idiots feel so strongly about this topic that they have teamed up in writing this article. Buckle up, we’re about to get dirty!
STORY 1: Erica’s underwhelming MLM experience
I was stuck at a job that I didn’t care about with a boss whom I hated, so when I was approached with a job opportunity on LinkedIn, I desperately thought, “Why not?” The recruiter kept talking about how the role “bridges the gap between finance and healthcare” - two things I’m passionate about. But that’s where the positives ended. He refused to disclose the name of the company, dodged most of my questions and kept calling this opportunity huge and incredible. He brought his mentor into the process, who supposedly made $300k/year (in other words, she’s at the top of the pyramid scheme), and of course he saw that same potential in me (based on what, I’m not sure).
Predictably so, his mentor’s presentation left my eyes filled with dollar signs. There were apparently eight different ways to make money in this business, and all licensing fees would be reimbursed. They even emotionally manipulated me, saying the business could have saved my uncle who died of cancer. It all sounded too good to be true – and it was. But unfortunately I realized this too late.
I paid the $100 fee to join (big mistake), and I quickly realized that it was just a crappy life insurance job with living benefits. They also failed to tell me that the reimbursement was contingent on making an unattainable number of recruits and/or sales in a short period of time. I quit while I was behind, and looking back on it, I’m grateful I only lost $100 – too many victims lose so much more.
STORY 2: When D.C. stepped in a trap he couldn’t escape
What was supposed to be a harmless, innocent party at a family friend’s house turned into an inescapable sales pitch. I was enticed to attend the get-together because of some “big news” that I would be the first to hear about. Once I arrived, they greeted me with drinks and appetizers, graciously took my coat and led me to the back patio, where about 30 chairs were set up in front of a large TV. I didn’t see it coming, but I couldn’t escape.I spent the next hour and a half listening to all the reasons why I should invest in timeshares, scented candles, essential oils, health supplements or the best makeup money can buy.
I didn’t walk out because I was among friends and family, but I kept politely saying “no,” or “I’ll need more time to think about it” to escape the party after the conclusion of the sales pitch.
My best advice? Get out of the house ASAP after the pitch! You don’t want to allow for any additional time to convince you that it’s a sound investment – because it’s not. The success of their investment hinges on convincing you to make the same investment. And by the way, they funded this entire party out of their own pocket to convince you to come aboard.
Here’s the deal...
If someone is presenting you with an “opportunity” to start your own business, but it requires money to join and no knowledge of the industry or products, that’s a huge red flag. No matter what they tell you, you’re not going to be your own boss or CEO just because you bought a starter kit to join someone else’s company, sell their products and recruit other reps for said company.
Real jobs don’t cost money to join. Real jobs provide benefits instead of material items and incentives. They don’t force you to harass your friends and family to join their company or spend money out of guilt for not “supporting” you, when really it’s the company they don’t want to support. Lastly, those with real jobs don’t announce to the world how much they made in their last paycheck… they just don’t.
Well, what else can I do as a side hustle?
Anything else, literally, anything! I know an Instagram influencer who works a full-time job and is a mom. One of my friends has started a small business selling a beard balm and several friends operate small landscaping businesses after work. These are legitimate side hustles. Bonus: you don’t have to sell your friends and family a scammy product. You could also start the best website on the internet, that’s what we did here at The Wealthy Idiots. Again, there is a world full of possibilities. Just keep your eye out for the bad ones!
From a young age, Erica’s grandfather taught her the importance of savings and compound interest. She’s had a savings account since she was 12, and contributed 10% of her income into it as she was taught to do. During college, she began investing an additional 10% of her income into the stock market. As she watched it grow over the past 6 years, she started to dig deeper into the personal finance world and realized these skills and concepts weren’t inherently taught to us. Knowing this, she’s become passionate about helping others succeed with their personal finances and breaking it down in a way that is motivating and makes sense.