I’ve seen a hundred articles on whether or not you should include your home in you net worth and the Samurai already had one locked and loaded, because he just fired one off himself. I’m not here to tell you why you should or shouldn’t, I’m just going to talk about why I choose to include it.
I’ve pointed out that we own our home outright, but I don’t think the exact amount of equity held in your primary residence matters. Rather, I think it’s a principal of current versus future value and an end game strategy.
I evaluate my net worth monthly for two reasons: identify how close I am to being financially independent and see if I’m moving in the right direction. I see no value in the number, beyond being able to ultimately cut the corporate cord and do what I wanna do when I wanna do it.
Although the value at any given moment is difficult to nail down, being subject to the hems and haws of a bajillion independent factors, it’s not too hard to identify a conservative estimate of what I’d walk away with if we sold our house.
Maybe I’m morbid or desensitized from too many video games as a kid, but I throw that number into my overall portfolio because I freely recognize that I, indeed, will one day grow old. At least I hope to, as the alternative seems far worse. There will almost certainly will come a time when my Wife and I can’t care for ourselves and need in-home or assisted living care.
And the burden of that care is something I will not let fall on my kids. We brought them into this world to share our lives with, not be our support system when they’re busy enjoying their own families.
That kind of care will not be cheap, but I see a natural transition from living in your own home to relocating to an assisted living facility. Just as we start and end in diapers, I believe we start and end by renting.
So cashing out of your home, when that time comes, provides the kind of instant liquidity that should fund quite a bit of assisted living or nursing home care. Well, at least fund some of it.
And that’s where the end game strategy of net worth evaluation enters. No, of course people aren’t going to tap into their home equity to buy jet skis and timeshares when their young and healthy. That’s just insane!
What’s that? People were doing that? Oh.
Well, I know you wouldn’t do that. And neither would I. The real financial value of my home won’t be unlocked until I convert it into my next home, complete with Bingo on Thursdays and Ice Cream Socials on Fridays.
In the meantime, my home is a roof with four walls that I share with my family. No more, no less. Oh, that’s not to say that a home isn’t a wonderful investment, because it actually is. But while its impact on my financial future is very real, it’ll stay neatly tucked away for decades, waiting patiently until I call on it to take me away to a land of tapioca pudding and shuffleboard.
What about you guys, is your home a part of your net worth?
Oh yeah, I just bought a house so life is about to get chaotic, to say the least. I may never write again.