I just read a somewhat provocative article by Liz Pulliam Weston entitled 4 Reasons we get ripped off, and I think you should read it, too.  It’s concise, but points to some actions that consumers can take to avoid falling prey to those who would take advantage of weakness, legal or illegal.

I’ll summarize the reasons here and provide my perspective.

Americans stink at math

No argument here, but this is pretty easily fixable.  The Department of Labor states that 58% of American adults cannot add 60 cents to $1.95 and calculate a 10% tip.  That is startling.  If you fall into this category, I recommend taking a remedial math class.  My guess is that elementary school students would fare a bit better in this survey, because they’re doing these kinds of calculations more frequently.

We don't recognize sociopaths

This reason is kind of depressing and little bit scary, but undoubtedly true.  In fact, I am not sure it is only  sociopaths about whom we should be concerned.  An even bigger concern for me is the number of salespeople who do not act in the best interest of their customers but feel that is the standard way of doing business.  Sometimes the lines are not so clear.  When you buy a car, the salesperson receives a commission, and it’s entirely appropriate for her to be compensated for her effort.  How much compensation is okay?  That’s a blurry line, but too often the answer is “as much as possible”.

In my business, the norm is probably to not act in the best interest of the client.  Most financial “advisors” are simply salespeople who are not obligated to act in their clients' best interests.  In this case, my recommendation – self-serving though it may seem – is to work with an advisor who is a fiduciary and thus is legally required to act in the best interest of the client.

In general, try to understand how a salesperson is compensated and what his or her incentives are.  Do they make more money pushing certain products over others?  Is it obvious what your total cost will be?  If any of this is unclear, ask!  Furthermore, before making a purchase of consequence, develop a plan and stick to it, including a budget for the purchase.  It is much harder to be persuaded to go beyond what makes sense when you’ve established firm boundaries.

Bait-and-switch capitalism is now the norm

This is definitely a problem.  I think it’s important to try to find alternatives whenever possible, including cancelling your service in favor of a more transparent one.  Most importantly, ask about the total cost up front.  You still may get a lie in response (back to the sociopath concern), but at least that will become obvious pretty quickly after the fact and you can take steps to rectify the situation then.

Half the police force has disappeared

There is a lot of debate in our society about the appropriateness of new legislation and the size of government. Certainly, the legislative framework in several areas is imperfect. Nonetheless, I think effective enforcement is a more important consideration at this stage.