Steve Huff

People are always looking for ways to make extra money, especially with the looming threat of 1970s-style inflation. On TikTok and other social media sites, influencers exploit this need and gain followers with tantalizing but often sketchy promises of reaping rewards from a side hustle. The result can sometimes put money in an influencer’s pocket but leave followers holding the bag.

As Business Insider reported Monday, many financial influencers are selling a fantasy of getting easy money via passive income rather than offering tips on saving and investing. And in Gen Z, they’ve found a captive audience. The Business Insider article notes that a survey published in July found that 34% Gen Z consumers look for financial guidance from “finfluencers” on “TikTok and 33% get it from YouTube, while only 24% of this age group seek advice from financial advisors.”

Passive income can be great. Creators, however, will make it seem like a sure thing, and it’s not. Making real money from a side hustle requires dedication and a strategy. So before you buy into the advice of someone in a one-minute video comprised of them looking self-assured and pointing at word bubbles containing advice padded with lots of dollar signs and exclamation points, it’s a good idea to find out what you’re getting into so you don’t end up losing money.

Beware of pay for play

Advertising and e-commerce attorney Robert Freund of Los Angeles-based Robert Freund Law tells dot.LA that avoiding a side hustle scam takes work. “Be sure you can identify and verify who you are doing business with,” Freund says, “and you should perform basic due diligence on them before sending any money.”

Detroit-based Wes Wright, the Director of Mergers and Acquisitions at Crain Communications and the founder and CEO of the outdoor cooking industry media company CookOut News tells dot.LA he sees “all kinds of sketchy side hustles” in business research, and his opinion is that “if you have to pay any kind of fee to be part of the business, be very wary of it.”

Robert Freund adds that if you do “pay for services, whether it's for a business opportunity, coaching, mentorship, or whatever else is popular on social media at the time, be sure to have a written agreement in place before sending any money.”

Research is your friend

“Determine the name of the business entity,” offering the opportunity, Freund continues. Adding that you should know “where it's located—and use free resources like the Secretary of State business search page to ensure that the other party actually exists and is in good standing.”

Wes Wright advises that if it’s “a side hustle that requires selling the same product as everybody else, it likely won't work out.” Also, according to Wright, “anything that smells like an MLM [multi-level marketing, a business model involving direct sales to consumers while also recruiting more sales reps], where there is a pyramid of ‘managers,’ run away from it.”

Don’t get crushed by the MLM pyramid.

While multi-level marketing and pyramid schemes aren’t precisely the same, they’re close enough. Both involve pie-in-the-sky promises of profits and pushing members to recruit more members. The chief difference between them is MLM supposedly involves selling an actual product (often cheap and useless), and pyramid schemes…don’t. Famous examples of MLMs include noted names like Mary Kay Cosmetics and Herbalife.

Wes Wright says, “Always be skeptical of any investment advertised online where the pitch person likely makes their money from pitching their strategy as opposed to actually using it.” He notes, "if it promises giant returns for minimal work, it's a scam.”

Ultimately, Robert Freund advises going with your instincts. “Trust your gut,” he says, “You are probably not going to add six figures in passive income annually with no work. If it seems too good to be true, it is.”