Financial mismanagement is management that, deliberately or not, is handled in a way that can be characterized as "wrong, bad, careless, inefficient or incompetent" and that will reflect negatively upon the financial standing of a business or individual. There are many ways of how financial mismanagement is carried out. For example, the wrong distribution of responsibility, to be remiss with payments, bills and taxes and neglecting responsibility, financial problems and economical standing can cause great financial mismanagement and further on devastate your economy. By looking to various cases where the financial management has gone wrong we will be able to comprehend the effect financial mismanagement can have and how crucial it is for an economy's success to carry out well working financial management.

History

Financial management has always been key to a successful business, and is crucial for an economy to function. There are not only companies and individuals that have economies that rely on financial management but also entire societies and countries.

Examples

Throughout the years there have been infinite companies, persons and also countries that have been declared bankrupt, caused by financial mismanagement. By taking a look at some of the world's largest economies we can find cases where the financial management has somehow gone wrong and will depict how severe the effect of financial mismanagement can actually lead out to be. There are numerous examples of where finances are not managed right and where companies, individuals and even countries are liquidated, and even more examples where there has been episodes of financial mismanagement but the situation was still able to be escaped.

Consequences

The consequences of financial mismanagement can be severe, and can affect individuals, businesses, and governments alike.

Governments

Governments that mismanage their finances can experience a decline in their economic growth and may be unable to provide important public services. This can lead to unrest among the citizens, and can ultimately cause social and political instability. Additionally, governments that are unable to manage their finances properly may be forced to take drastic measures, such as increasing taxes or reducing spending, in order to balance their budget.

Individuals

Individuals who mismanage their finances can incur substantial debts and may be unable to meet their financial obligations. This can lead to legal action, such as debt collection or even bankruptcy. Additionally, individuals may experience difficulty in obtaining credit or loans in the future.

Businesses

Businesses that mismanage their finances may experience a decline in their sales, decreased profits, and a decrease in their ability to attract new customers or clients. Poor financial management can also cause a business to incur substantial debts, which can lead to legal action or bankruptcy.

Prevention

Financial mismanagement will always be a possible problem, for businesses, individuals and also entire countries.