Many people run into financial problems like excessive debt because they haven’t made any concrete financial plans in their lives. Simply by setting a strong budget or using personal finance programs, people would be able to avoid financial blunders. Setting a budget is about putting all of your financial information down on a computer screen or a piece of paper so that there’s no subjectivity to it.

By having the hard numbers in front of you, major financial blunders can be avoided through some objective, prudent moves. So what are three common financial blunders caused by FTB? Let’s examine.

Mistake #1: Poor reactions to unexpected expenses.

Strong budgets will include some flexibility for unexpected expenses, such as unforeseen taxes or medical costs. Without a budget, it’s easy to use the credit card - which often should really be a last resort - to cover these expenses. This racks up more debt that might include high interest rates. Bad move. Budgeting should give you the flexibility and hopefully the savings you need to cover unexpected expenses.

Mistake #2: Living in the Clouds, Leaving your Bank Account in the Rain

Probably the most frequent personal finance mistake people make these days is simple: living above their means. With the accessibility of credit cards, this is an easy thing to do, which is precisely how it lends itself to some long-term problems like credit card debt.

Setting a budget will help you not only live within your means, but to adjust your means for the long-term so that instead of dealing with debt at an advanced age, you are reaping the benefits of financial freedom.

Mistake #3: Spending too much.

Budgets allow you to have goals, and these goals usually help you set spending limits for yourself. Without a budget, even if you live within your means, you might be spending too much money on unnecessary items that don’t really help your situation much. Instead, keeping track of your spending will help you understand your habits so that you can change them and alter them if necessary.