No, I Don’t Want to Join Your Pyramid Scheme All Posts / Making Money / Side Hustles

My husband and I are working on paying off six figures of debt in just three short years – on entry-level salaries.  Living frugally only goes so far – we can scrimp like crazy and be frugal weirdos, but at a certain point, it’s impossible to save more.

We can only save so much, but we can always earn more.

Increasing our income is an essential part of our goal of paying off $117,000 of student loan debt in three years.  As such, I’ve been looking into several ways to start “side hustling” and increasing my income.

*This post may contain affiliate links.  Read our full disclosure policy here.

Recently, a friend from high school (who I hadn’t heard from at all in 8 years) sent me a message on Facebook inviting me to her Jamberry party.  For those who aren’t familiar with Jamberry, it’s yet another multi-level marketing company (others include Beachbody, Scentsy, and The Pampered Chef).

MLMC’s often advertise flexible hours, the ability to work from home, and no prior experience needed.  Sounds awesome, right?

Wrong.

MLMC’s often prey on vulnerable individuals, use guilt to drive sales, and mislead recruits with unrealistic promises of wealth and early retirement.

My first experience with a MLM company

When I was in high school, I worked for a local bagel shop on the weekends.  One day, two friendly ladies came in, and instead of ordering a bagel or a coffee, they started chatting with me about their business.  They were selling healthy green smoothies and they offered me one in a small cup.  If someone were to approach me like this today, I would politely decline the offer to drink a beverage being handed to me by a total stranger.  But I was 16 years old and I didn’t want to be rude to a customer.

The green drink tasted awful, but I smiled and pretended it was delicious.  The ladies then started pressuring me to attend a party at one of their houses.  I certainly wasn’t going to agree to go to a stranger’s home, and I told them I would consider it.  They seemed irritated by this and continued to be pushy for several minutes until an actual customer walked in and they finally gave up.

I assumed that it was some kind of scam, and when I went home, I asked my parents what they thought about it.  “It sounds like a pyramid scheme,” they said.

What is a pyramid scheme?

In a multi-level marketing (MLM) strategy, salespeople are compensated not only for the sales of products, but also for the other salespeople that they recruit.  It is often difficult to tell the difference between a multi-level marketing company and a pyramid scheme.  The latter focuses more on recruiting new salespeople over selling the product.  In a pyramid scheme, the company makes more money off of recruiting (salespeople have to pay to join the company or pay for the products they are going to sell) than it makes off of sales of its products.

I’m generally not a fan of either one.  Don’t get me wrong – I don’t have personal experience with EVERY multi-level marketing company out there (and there are tons of them), so it’s entirely possible that there are some MLM companies that are ethical and keep their promises.

Unfortunately, there are also many MLM organizations that behave unethically and mislead their recruits.

Preying on vulnerable individuals

Rich people don’t typically don’t join MLMC’s as entry-level salespeople.  Who does?  People who need to make more money.  People who have student loans.  People with credit card debt.  Parents of young children.

People who are barely scraping by.

These people look for ways to increase their income.  They consider getting a part-time job but wonder if the hours will be too demanding or if a PT job will get in the way of their full-time job.

And then they discover an MLMC.  The MLMC promises limited hours, high sums of cash, and financial freedom.

It almost sounds too good to be true…because it is.

Then the MLMC starts encouraging the person to put money “back into” her business – to buy the products that she will (hopefully) sell.  She has to spend money to make money.  She needs to invest in her business.

Why?

Because the MLMC doesn’t care about you or your financial struggles.  They want to make money off of you.

Guilt-ing your friends and relatives into making purchases

In addition to making money off of you by charging you a fee to join and encouraging you to purchase the MLMC’s products, the MLMC also wants to make money off of your family and friends.  They do this by asking you to host “parties” at your home.  Ever been to a Tupperware, jewelry, or supplement party?  It was probably an MLMC.

Most of your contacts probably aren’t that interested in the product, and those who do attend the parties are probably only doing so out of a sense of obligation or guilt.  Many of them may not even be able to afford the products – MLMC products tend to be quite expensive compared to other similar products that your party guests could buy in a store.

Unrealistic promises of wealth and early retirement

Many MLMC’s lure in recruits by telling them stories of other salespeople who have been able to quit their day jobs and make the MLMC their full-time business.  They neglect to mention that this isn’t common.  A few people make a lot of money working for an MLMC, but the majority of MLMC salespeople only make a little money.  While it’s possible that you could earn a six figure income working for an MLMC, it’s also highly unlikely.

A final note!

Again, I’m not saying that EVERY multi-level marketing company uses misleading advertising and unethical tactics to make money.  But, unfortunately, many MLMC’s do.  Instead of joining an MLMC, why not try earning extra income in one of the following ways?

  • Get a part-time job – the hours will probably be less flexible, but you’ll know exactly how much you are going to be compensated (many MLMC’s have complex commission structures that are difficult to understand).
  • Sell items on eBay or start an Etsy shop
  • Do freelance work or create your own business
  • Rent out your home using AirBnb
  • Walk dogs or pet sit
  • Give plasma
  • Complete surveys or participate in research studies
  • Start a blog – it will take time and effort before you start to earn income from your blog, but you can set your own schedule, work from home, and write articles on something that you’re passionate about.

How do you feel about multi-level marketing companies?

 
Other stuff you might like:

My Personal Finance “Aha” Moment
9 Ways to Get Free Yoga Classes
How to Start a Blog in 5 Easy Steps
Married Couples: Should You File Your Taxes Jointly or Separately?
How to Stop Fighting With Your Spouse About Money

Personal Finance Resources:

Retire Inspired by Chris Hogan
YOLO: The Roadmap to Financial Wellness and a Purposeful Life by Jason Vitug
Smart Women Finish Rich by David Bach
The Millionaire Next Door by Thomas Stanley

Blogging Resources:

How to Blog for Profit Without Selling Your Soul by Ruth Soukup
365 Blog Topic Ideas for the Lifestyle Blogger Who Has Nothing to Write About by Dana Fox
Secrets to Blogging Your Way to a Six Figure Income by ProBlogger


Comments

  1. Yes yes yes to all of this!!! It can really put friends in a tough spot! I’m all about supporting friends in their endeavors but I’m tired of saying no. So many awkward conversations and some don’t know when to quit.

    • I hear you! I want to be a supportive friend, but I don’t want to be involved in something that I feel is a scam. It puts you in a very awkward position.

  2. This had gotten so tricky in my life with invitations to these home sales parties. I finally just started saying, “I am going to decline because I am simplifying my life and I just don’t need any more stuff. But thanks for thinking of me!”

  3. I appreciate this post so much! I am tired of being invited to these types of parties. I hate how relationships are exploited in hopes of earning money. I understand that often the salesperson doesn’t fully realize this is what is happening, but it’s trying nonetheless. And awkward when you have to tell friends no.

  4. I almost entered an MLM but they wanted me to pay $100 for a knife set. I should write about this experience on an upcoming post. Anyway, I asked my mom for the money and she said no and that I need to find something else. I found something else eventually but yea I stay away from them!

    • They always seem to want their salespeople to spend money so they can “invest” in their business…when really they just want to make money off of their salespeople. Such a scam!

  5. I hate MLM companies. Over the years, I’ve had numerous people try to get me to join. When I was younger I fell for one of them. I signed up to sell Noni Juice. I made a whopping $18 with the company. I knew that it wasn’t for me so I quit selling their product in less than two months.

    • It’s frustrating! I’ve been invited to so many parties. I don’t want to offend my friends, but it’s just not for me!

  6. That’s a great article Jen and Yes, you are right… I have come across so many MLMCs and I hate those people tell you the sign-up cost and divides that money among themselves. In all your experience have you ever come across any person who said that this will be your sign-up cost and we make no-money out of it? All this money will go for the registration only.

    Also, I heard that MLM is illegal in America. I looked for some MLM companies and they are shut down in US and some are banned to enter US. Do you know any company that is legally working with the US Govt. and is really helping others, if people are serious about their finances?

    I don’t want to stay frugal all my life (about my living cost, my kids schools, their future education, my family’s unseen health condition). I will work hard to provide for my family but I can’t spend all my time at my job and see my family maximum for couple of hours in a day. That’s not the kind of lifestyle anyone wants. When I was looking for a job my friend said, “We left from our homes hoping to find a job to provide for our family, but now seeing our family has become nothing but a hope”. That really touched my heart.

    • Thank you for the comment. That is so sad what your friend said. I don’t think anyone should have to work nonstop at the expense of ever spending any time with their children. Every situation is different, but my advice would usually be to try to find a higher paying job and/or find a side job with flexible hours. Some examples include: blogging, tutoring, babysitting, pet sitting, and photography. Best of luck!

  7. Yes, yes, yes, I really dislike getting messages from old high school acquaintances who just want me to join in the latest MLMC trend.

    • It’s frustrating, especially when it’s someone you haven’t heard from since high school. No one likes feeling used!

  8. This is great and a lot is so true. Many people think that joining an MLM means you’ll make a lot of money without having to do a lot of work, when basically, you’ll only get out of it what you put in. Work hard and stick with it and yes, you’ll earn money. I do want to point out that earning a commission from sales of people who came in under you isn’t just an MLM pay incentive. Many corporations will pay their sales leaders bonuses or an added commission based on the productivity of their team.

  9. I’ve been thinking about this lately because I’ve been invited to a few of those parties (that I absolutely despite going to). In one way, it’s ag good thing that people want to be entrepreneurial and are trying to get crafty with side hustles. Unfortunately, they are too afraid of risk to go out on their own so they do the easiest one handed to them, which is MLM (because they provide you with all the stuff and set you up). Can’t knock their hustle though. Maybe it’s the first step to finding something that works.

    • That’s a good point. It’s too bad that many people don’t realize that there are ways to side hustle online that aren’t too much of a risk (low overhead costs).

  10. Jen, I absolutely loved this after stumbling on it. It’s the most honest critique of MLMs that I’ve seen without the emotional vitriol.

    I will say that my wife and I are MLM success stories- retiring from our jobs, multiple six figures, freedom, etc…

    But we got that way doing things the RIGHT way. No pressure. Our team is encouraged to SELL, not to buy. We have personally been so blessed by this opportunity that we genuinely want it for the people that join us! So, we DO care about their financial situation and we coach them to better it.

    I think the thing I’ve learned to love most is the unlimited earning POTENTIAL. And I do capitalize that word intentionally, because I’m very aware of statistics. Most people don’t succeed, as you mention, and that’s a truth that people in the business need to be honest about. This isn’t a get rich quick industry by any means- but it really is a ‘hard work pays off’ opportunity (if you choose a credible one).

    Statistically, most people don’t reach their goals going to the gym, either…but we recognize that it isn’t the gym’s fault. We realize those people simply didn’t show up, didn’t do the work, didn’t have the right mindset. I’ve seen and coached people to tremendous success- and I’ve watched people join and do nothing. But each time, the results were dependent on the amount of work the individual actually did- were they coachable? Did they have exciting goals that motivated them to work? Were they able to overcome their limiting beliefs? etc…

    Thanks again. I always appreciate different perspectives, and I loved how fair you were- even throwing in the caveat that you honestly couldn’t cast ALL MLMs into a single net.

    • Thanks for the comment! I’m glad to hear that it’s working well for you and your wife and it’s always interesting to hear other perspectives!

Leave a Reply

Your email address will not be published. Required fields are marked *