I don’t usually speak much on the subject of finances. This is also not my area of expertise and in the past I have honestly been pretty bad at it. I was never interested in money and even now I only take it as a kind of ‘feedback’ on how well I am playing. I think this is the best way to understand my motivation. I want to improve my game every day by small increases that sometimes go unrecognized but are there and accumulate.
The snowball to increase net worth every month
This is something fundamental that I learned through this exercise:
- Strengthen the part of the game where I can score points with reasonable effort.
- Reduce those games that don’t add but subtract.
- Invest in areas that will help me grow in the medium and long term.
Net worth is like a snowball. At first you don’t have a downhill slope so you have to push and add snow to make it grow. Over time, you’ve gotten to a point where there’s a little bit of incline and you don’t have to push that much. You keep adding new snow to make it grow. From a certain point, tilting down does all the work. You decide if you want to add more snow but the effect on growth is no longer as great as it was at the beginning because the mass it has done most of the work just to keep growing.
The one who did not understand my comparison. Snow is equal to capital (money).
my little exercise
You will find that this is a small exercise and requires a little work, but not too much. It is one of those important but not urgent tasks that allows you to reap the rewards when you do it over a long period of time. This reflects my philosophy of life of making small daily efforts to achieve meaningful, long-term improvements. I apply it in sports, in business, in learning, in the education of my children, etc.
Add up all the assets:
- Real estate value.
- Inventory value (eg Lego, Pokémon, etc.).
- Let’s stop P2P.
- Others (car, furniture, etc.).
Subtract all liabilities:
- Real estate mortgages.
- Pending invoices (e.g. purchase of products with payment within 30 days)
- Bank credit lines (in case of drawdown).
- Investor loans (in this case my brothers with their investment in Lego).
I try to be careful in my calculations and set a market price or lower. I am not adding any value per se for the companies but I am only taking the liquidation value. I think this is the best way to do it so as not to make a mistake. You also need to be disciplined about disposing of assets if they are unlikely to be converted into cash. Last month, for example, I removed the value of a stock in a company from my calculations, which meant that there had been no increase in equity. It gets you hungry, but in the end you can’t see it in the short term.
You will see that what I am doing is simple. I believe this was one of the keys to achieving the financial situation I have today.