What you think you have, and what you really have

Try something, right now, before you read on.

Without opening anything — not your bank account, not an app, not a spreadsheet — write down on a piece of paper how much you think you have. Everything you own minus everything you owe. A single number.

Done?

Keep it there. We'll come back to it shortly.

That number is almost certainly wrong. Not your fault: it happens to nearly everyone. And in the vast majority of cases it's wrong in one particular direction — too high.

Between that number written from memory and the real one there's a distance. Let's call it what it is: the gap between what you believe you have and what you actually have.

It's the fourth coordinate of your fix — and the strangest of the four, because it's the only one the app doesn't calculate for you. It's also the most underrated thing in personal finance, and it's worth pausing on.

One thing to be clear about right away, because it's the heart of it all: this gap is not something an app measures. It can't be — half the figure, how much you think you have, lives only in your head, and no software can read it. What Cashfulness measures is the other half: how much you actually have. Its job is to show it to you so clearly that the gap simply closes. You notice it yourself, the moment the real numbers appear on screen next to the one you had in mind.

A distance that lives in your head

The first three coordinates of the fix — your net worth, how many months you'd last with no income, how much of your wealth is working for you — look at reality. They're numbers that describe how you're actually doing.

The fourth, this gap, looks elsewhere. It looks at the distance between your head and your accounts.

What you think you have − what you actually have.

If you think you have 100,000 and you have 100,000, the gap is zero. Your eyes are on the right coordinate.

If you think you have 100,000 and you have 70,000, the gap is 30,000. And you're living convinced of a solidity that, in part, isn't there.

And here's something that repeats with surprising consistency: when someone tries to estimate their net worth from memory and then actually writes it down, the difference is almost always large. Not a few percentage points: often a quarter, a third of the total. And almost always in the same direction, too high.

A distance like that isn't a detail. On wealth you believe to be 200,000, a third means living as if you had 60,000 euros that, when it comes to it, aren't there.

It's not a matter of intelligence. It's a matter of how the mind works when it has to add up things that aren't built to be added up from memory.

Why we overestimate (almost always)

There are three mechanisms, and we all run them.

First: we count twice.

The house is the classic example. It's worth 250,000 euros, it's yours, it feels yours. In your head it goes in at 250,000.

But there's still a mortgage of 140,000 on top of it. The part that's truly yours, today, is 110,000. The other 140,000 belongs to the bank, until you pay it back.

Almost no one, from memory, subtracts the mortgage from the value of the house. They keep it in a separate drawer, as if it were a different problem. It isn't. It's the same wealth, seen from only one side.

Second: we forget the small liabilities.

The big debt — the mortgage — we remember. It's the small ones that vanish.

The car loan. The three remaining installments on the new sofa. The interest-free one on the appliance, which interest-free or not is still a debt. The temporary overdraft on the card.

Taken one by one they look like nothing. Added up, they're often several thousand euros the mind never records.

Third: we live on the feeling of the month.

This one is the subtlest.

If the month went well — salary in, spending under control, a balance that breathes — the feeling becomes: I'm doing fine. And it spreads beyond the month, until it becomes a judgment on your entire wealth, built on a snapshot of thirty lucky days.

But the end-of-month balance isn't your net worth. It's only the most visible point of a much wider picture, one that holds assets you never look at and debts you'd rather not.

The feeling of the month is this week's wind. It isn't the position of the boat.

Let's run the real numbers

Pick up the number you wrote at the start.

Now an example, to see how the gap forms in practice. The numbers are made up; they only serve to show the mechanism.

Giulia, asked point-blank how much she has, answers "about 180,000." It's the figure she carries in her head, the one she makes decisions with.

Let's count for real.

She has 15,000 euros liquid in her account. An investment fund worth 40,000 today. A house worth 230,000 on the market. A car bought three years ago for 28,000, realistically worth 16,000 today — not 28,000, because a car loses value every year (on this, and on what it means to count an asset at its residual value, see Your fix).

Let's add up what she has: 15 + 40 + 230 + 16 = 301,000 euros.

Now what she owes. Mortgage: 150,000. Car loan still open: 9,000. A personal loan she'd almost forgotten: 6,000.

Total debt: 165,000 euros.

Giulia's real net worth is 301,000 − 165,000 = 136,000 euros.

She thought 180,000. Reality is 136,000.

The gap between what she believed and what she has is 44,000 euros. Almost a quarter less than she thought.

Giulia isn't careless or incapable. She just did what we all do: she counted the whole house and forgot the mortgage, overvalued the car, erased two small debts. Three honest mistakes that, added up, come to 44,000 euros less reality.

And every important decision — buying a second home, helping a child, leaving a job — she makes starting from 180,000 that aren't there.

Why overestimating costs more

You might think: of the two errors, better to overestimate. Feeling richer is more pleasant than feeling poorer.

The opposite is true.

Overestimating leads you to commit resources you think you have and don't. You take on a commitment sized for 180,000 — a big expense, a loan to someone — when the real base is 136,000. The imbalance doesn't show up right away. It shows up months later, when the accounts come to collect.

Whoever underestimates makes the opposite mistake: they deprive themselves. They live tighter than necessary, give up things they could have afforded, because they believe they have less than they do.

Two errors, two different prices. But they share the most important thing: both consume calm.

Between a person and their money there's a fog. And fog, at sea as in finance, is what generates the most anxiety of all: you don't know where you are, and you move by guesswork.

Closing that distance isn't an exercise in accounting precision. It's clearing the fog.

How to close the gap

The good news is that this gap, unlike everything else, you can zero out in one move. You can't decide to have more net worth as of tomorrow. You can decide to stop being wrong about how much you have.

And it closes in only one way: by measuring for real, once, everything together. Then keeping the figure updated on its own, without ever redoing the exercise from memory.

The first step is the reckoning: putting down, all at once, every asset at its real value today and every debt at its true remaining balance. It's the moment when Giulia goes from "about 180,000" to "136,000 exactly." It's almost always a slightly unsettling moment — and then, right after, surprisingly freeing. The real number, even when it's lower, weighs less than the fog.

In Cashfulness this first reckoning is guided; it's part of your first contact with the app: it walks you through laying down every piece of your wealth until the real coordinate appears on screen. And here it's worth being precise about who does what. It isn't the app that tells you "you were off by 44,000 euros": the app simply shows you the real number. It's you who, seeing it next to the one in your head, realize how far off you were. You discover the gap yourself — the app only gives you reality, sharp, to work from.

But a reckoning done once, on its own, isn't enough. In six months reality has already moved: you've paid more mortgage installments, the car has dropped further, a new charge has landed. If the figure doesn't update, the fog slowly forms again.

This is where the engine underneath all of Cashfulness comes in: double-entry.

Why double-entry keeps the fog away

Double-entry is an accounting technique businesses have used for more than five hundred years — since 1494. The idea is simple: every movement of money is recorded twice, on two sides that balance. They're called Debit and Credit.

They're not real debts or credits, despite the names. They're just the labels for the two sides of the same entry: where the money comes from and where it ends up. The two sides must always come to the same total. If it balances, everything's fine. If it doesn't, there's an error somewhere — and you see it.

What does this have to do with the gap? Everything. Because in double-entry nothing can disappear.

When you record a movement you can't note only the outflow and forget where it went: you have to state both, always. The car loan can't evaporate. You pay an installment, on one side money goes out, on the other the remaining debt drops. Both sides stay in the picture.

It's the opposite of how the mind works, keeping the nice part — the whole house — and letting the awkward part fall away: the mortgage, the small installments, the forgotten loan.

Double-entry doesn't forget because it isn't allowed to. Every transaction you record updates your net worth from both sides, and the coordinate stays anchored to reality.

You do the reckoning once, lay down the complete picture, and from there the figure keeps itself current as you live and record. The gap, once closed, tends to stay closed — instead of reopening every time memory tries to guess.

The fog, not the number

It's worth pausing on one thing, because it's the real point of all this.

This gap isn't a judgment. A high number doesn't mean you've managed your money badly: it only means that, until today, you were moving with a slightly blurred map. It happens to almost everyone, before they've done the math for real.

And it isn't a warning light to keep an eye on either. The other three coordinates — how much you're worth, how many months you'd last, how much of your wealth is working for you — you look at whenever you want: they move, they tell a story. This gap, instead, isn't on the dashboard: it isn't a number the app updates. It's something you close once, by doing the math for real, and that stays closed as long as you keep the figure up to date.

Think back to the number you wrote at the start, on that piece of paper.

Maybe it was right. In that case, well done: your eyes are already on the coordinate, and that's half the work.

Maybe it was optimistic, like Giulia's. In that case it's not bad news. It's just the invitation to do, once and for real, the true sum.

Money is a tool for buying time and freedom — not a dream to chase, nor an enemy to fight. But to use it well you have to know how much of it you have. Not how much you think you have.

Closing that distance is the most underrated move in personal finance, because it doesn't add a single euro to your wealth.

It adds something worth more: the certainty of knowing where you are.

And from there, every course you plot stops being a guess.

— Vittorio