The worst ways to make money in 2011

Need to make some extra money? Here's how NOT to do it...

Wouldn’t it be nice if someone told you your pay was going to double from next month? Think of what you could do with all that money. Maybe you’d go on a fancy holiday or simply put the money towards paying off your mortgage and other household bills.

Sadly, however, the chances of your salary doubling next month are likely to be pretty slim. So instead, you might be trying to conjure up other ways to make some extra money this year. Here, I’m going to reveal five ways you shouldn’t try to earn some extra cash in 2011.

1. Pyramid schemes

If you’re strapped for cash, the chance to make some extra money fast is likely to appeal.

Pyramid schemes supposedly do just this. They require you to pay a fee upfront to join a scheme where you’ll be able to earn bags of money by simply recruiting other people into the scheme.

However, in reality, these schemes are illegal and the chances of you making any money are minimal. Although the people at the top of the ‘pyramid’ might make some cash, it won’t be much. And as soon as the pyramid stops growing, there’s no money to be made. So don’t be tempted to join up!

2. Work-at-home schemes

This type of scheme has been around for as long as I can remember. But rising unemployment levels have given the scheme more momentum.

Typically, work-at-home schemes promise a large income for very little work, such as envelope stuffing or craft assembly work (making toys and gifts). You’ll often spot advertisements for this type of work on lampposts, in shop windows, or in magazines and newspapers.

However, what you won’t be told is that you’ll have to pay upfront for supplies to carry out the job or cover hidden costs. And once you’ve completed your work, you may find your ‘employer’ refuses to pay you, claiming your work isn’t up to scratch.

Alternatively, similar to pyramid schemes, you’ll be asked to post advertisements to recruit other people, and you won’t earn any cash until you’ve signed up a certain number of people.

Find out more in Don’t get ripped off by this employment scam.

3. Dodgy loans

Okay, so technically this isn’t a way of making money, but it is a way to get your hands on extra cash.

Payday loans are cash advances on your salary you’re expecting at the end of the month. Typically, you can borrow up to £1,000 and applying for a loan takes no time at all. Usually the cash will be transferred into your bank account the same day. What’s more, no credit checks will be carried out so it can be a very attractive way to get some extra money.

However, the interest rates charged on payday loans are extortionate – we’re talking in the region of 1,737%! It can also be extremely easy to roll over your loan for another month, meaning you can end up having to pay out a hefty sum of money to pay the loan back. So steer clear.

You should also avoid other dodgy loans, such as those offered by loan sharks.

4. Gambling

Gambling might seem like an easy way to make a quick quid or two, but it’s incredibly risky and as a result, you could end up losing thousands and thousands of pounds rather than making any.

Even if you do win money, there will always be the temptation to gamble a little bit more with the hope of winning even more. This could lead you down a very slippery slope – so don’t take the risk.

5. Structured products

To boost your income even further, you might consider a little investing. However, opting for a structured product is unlikely to be the best solution.

That’s because structured products can be very difficult to understand. In theory, they should allow you to benefit from the upside of the stock market, but protect your capital from the downside risk.

However, the guarantee that comes with them isn’t always worth the paper it’s written on - as many savers found out with the collapse of Lehman’s in 2008. Lehman’s had underwritten numerous capital investments sold in the UK, but when it collapsed, thousands of investors lost their money.

So as a rule of thumb, if you’re not exactly sure how these products (or any other investment products for that matter) work, steer clear. For a better way to invest, take a look at our how to guide: Make money from the stock market.

Recent question on this topic

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  I have 100K to invest, what is the best and quickest way to get return on it within the next 5 years?

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There is a better way

Okay, so now you know the worst ways to make some extra cash. But are there any better ways? Here at lovemoney.com, we’ve written several articles about the best ways to boost your income. So make sure you have a read of 10 ways to make money in your lunch hour and Rent your way to a fortune.

And don’t forget to check out our how to guide: Make some extra money.

Finally, don’t forget that the financial products you use can also help you to earn money. So don’t leave your savings languishing in an account paying next to nothing! Earn some interest instead. Interest rates might not be great right now, but earning something is better than earning nothing. Read The best savings accounts for 2011 for some top tips.

Similarly, take advantage of offers from banks such as £100 cash for signing up. Both the First Direct 1st Account and the Santander Preferred In-Credit Rate Account give you £100 if you open either account and pay £1,500 or £1,000 respectively into the account each month. Read more about these accounts in The best current accounts for 2011.

And if you’re always spending on a credit card but you religiously pay off the balance in full each month, make sure you’re being rewarded for your efforts. The American Express Platinum Cashback Credit Card pays 5% cashback for the first three months and up to 1.25% after that! Find out more in The best credit cards for spending.

More: The biggest regrets you’ll have in 2011 | Save £2,011 in 2011