Financial crises can hit anyone—individuals, families, even businesses. Whether the result of job loss, mounting debt, unexpected medical expenses, or external events like economic downturns, how you respond can determine how quickly you recover—or how deeply you fall into financial distress. While some decisions can help you stay afloat, others can make a bad situation worse. In this article, we’ll explore some smart moves to make when facing financial hardship, as well as common mistakes that can add to the damage.
Smart Move: Take Control of Your Finances Early
One of the worst things you can do in a financial crisis is to ignore it. Denial may feel comfortable in the short term, but it only worsens the long-term consequences. If your income has dropped or your expenses have ballooned, take immediate action: review your budget, cut non-essential spending, and contact creditors before falling behind.
For business owners, a financial crisis is not the time to guess your way through problems. Whether it’s poor inventory management or unplanned expansions, unchecked spending can sink a company fast. Transparency, even when things look bleak, is critical. Mismanaging company finances or blurring personal and business accounts can lead to legal trouble. Embezzlement is one type of white collar crime. In this crime, an individual mismanages financial assets that they are in charge of, and uses these assets in an unauthorized way. Even if done out of desperation, mishandling funds is a line that should never be crossed.
Instead, keep records clean, speak with an accountant, and consider hiring a financial advisor. There are almost always legal and strategic ways to reduce debt or restructure operations without compromising your integrity—or your freedom.
Costly Mistake: Filing for Bankruptcy Without Guidance
If debt becomes overwhelming, bankruptcy might be an option—but it’s not a step to take lightly or without proper knowledge. According to Forbes, there are two primary types of consumer bankruptcies—Chapter 7 and Chapter 13—and selecting the appropriate one depends on your financial circumstances. Chapter 7 involves liquidating assets to pay off creditors, while Chapter 13 allows you to create a repayment plan over several years.
The same principle applies to businesses. Chapter 11 bankruptcy, for example, can allow a company to restructure and stay afloat rather than shutting down entirely. But whether personal or business-related, bankruptcy can affect your credit, your reputation, and your ability to borrow in the future. That’s why seeking legal advice is essential.
Avoid “DIY” bankruptcy filings unless you are absolutely confident in your legal knowledge. A mistake in paperwork or an overlooked asset could cost you more than just money. A financial crisis is already stressful—don’t add legal trouble on top of it.
Smart Move: Learn the Rules and Deadlines That Protect You
When facing a financial crisis tied to a medical emergency or accident, many people miss out on benefits simply because they don’t understand the rules. According to the NYS Department of Financial Services, the state’s no-fault system requires you to apply for benefits with your insurer within 30 days of an accident. If you don’t apply, you run the risk of losing the right to coverage for medical treatment.
Deadlines, forms, and legal fine print might feel overwhelming when you’re already struggling—but they’re not optional. Missing even a single date can cost you thousands in lost benefits. Whether you’re applying for unemployment, health insurance subsidies, or small business grants, always confirm the deadlines and paperwork requirements.
This also applies to business owners facing financial challenges after events like natural disasters or supply chain disruptions. Many government programs exist to provide relief, but you have to apply correctly and on time to receive help. Don’t assume someone else will notify you—take initiative, keep records, and follow up.
Conclusion
Financial crises test not only our wallets but also our decision-making and resilience. Whether you’re an individual trying to keep your home or a business navigating a sharp drop in revenue, the choices you make now can shape your financial future for years to come.
Smart moves—like addressing problems early, seeking professional advice, and understanding your rights—can help you recover. Meanwhile, mistakes like ignoring the issue, mishandling funds, or missing key deadlines can make a bad situation worse.
No one is immune to financial hardship, but with the right approach, you can weather the storm—and even come out stronger on the other side. If you’re unsure what to do, don’t go it alone. Help is out there for both individuals and businesses—it’s up to you to make the call.