Excess of Income over Expenses is called SAVINGS. Similarly, excess of Expenses over Income is called LOANS.

Money keeps telling us: "Please save me today and I will save you tomorrow", but we dont listen to it. Nobody has unlimited resources. Not even Jeff Bezos or Mukesh Ambani. I have seen many successful professionals and business people taking a pride in stating that they dont have time to bother about such small and trivial matter like "Personal Finances". No one should take pride in being "Financial Illiterate".

Here are some of the mistakes through which we are destroying our personal finances, and sometimes even our personal lives. Whatever wealth we may have, household disputes are often centered around understanding of personal finances or rather lack of it.

1. Buying insurance policies for investment purpose- We invest our money in insurance plans to get big returns. How is this possible? For life insurance, please go for Term Insurance Plans ONLY. Do not link Life Insurance with investment. Go for the Mediclaim Policies also. As almost all financial emergencies are centered around medical, please keep some reasonable balance in your savings account which you can draw through net banking or ATM when emergencies arise. No need to keep cash at home. You are inviting trouble. Your household help knows more about your "hidden" cash than you yourself.

Create a Nominee for Each of Your Accounts: current, savings, locker or insurance policies.

2. Make Full Payment of Credit Card Dues and ON OR BEFORE DUE DATE- By paying just the minimum amount due, you keep getting into a Credit Card Trap. On the other side, very few people really enjoy the card points, lounge access or offered concessions related to Credit Cards.

3. Compounding of Interest- If you understand it, you can tame it, if you don't, it will enslave you. To tame it, start saving early and tame the power of compounding. Borrow only when needed and NEVER GO FOR FLAT RATES OF INTERESTS.

If someone has to pay to you, never allow such dues to slip beyond 90 days. After 90 days, better write off that amount.

4. Not Doing Research. Buying Shares Only on Tips- Actually more educated you are, more you are likely to lose your money by accepting other people's TIPS. You have an excuse that you are TOO BUSY to DO YOUR OWN RESEARCH.

5. Inviting Lifestyle Inflation- Moving from a "smaller" to a "bigger" house just because you have surplus money. Or, going for a luxury car because you have earned in stock markets are impulsive decisions creating lifestyle inflation. Create assets which have real resale value. Large houses and Fancy Luxury cars have'nt got much resale value.

6. Rushing to wherever you see "SALE" sign. Rushing to grab the American culture. From Amazon's "Great Indian Sale" to Flipkart's "The Big Billion Days", everyone is wanting to buy things in quantity that we don't need. We store large quantities of unused goods in our houses and as a result provide rent free accommodation to the sellers. That too after paying them. Please don't be a hoarder.

7. Go for the vacation to Experience Newness and not to Splurge on New Goods- Dont rush for a vacation just because some Friend put a post on FB / Instagram. Evaluate it whether you will really get that peace of mind which you are looking for or you will just reduce yourself to be part of the crowd of that destination always haggling for right accommodation, food, travel at the right price. Dont make holiday plans under impulse.

8. Know Your Income Sources and Their Timing (known as Cash Flows): Dont be one of those who take pride in telling the world that they are poor in number crunching and that they can't keep a track of cash flow. Very few people keep a track of their expenses. Most of them just don't know where the money is gone because they do not match it with their income.

9. Make A Financial Plan- Trust me, it brings couples and families together. It creates a common goal and hence, generates a bond. Try to stick to your plans. Let more of your financial assets be in the "Liquid" category. Any asset which can't be converted into cash within 48 hours is illiquid. However, we also require illiquid assets such as our own home, office, car. Keep a balance. 60% liquidity assets are good enough.

Remember, money has only one purpose: to bring happiness to us humans. There are two sets of unhappy people, one those who have no money and the other are those who have money. Only an intelligent use of money can make one happy. It is very hard to earn money. Once earned, wise people make their money earn even more money, ordinary people barely maintain its level and unfortunate people let it slowly go away.

Please always be in the first category.