Why I Include My Home In My Net Worth

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.


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14 thoughts on “Why I Include My Home In My Net Worth

  1. Andrew@LivingRichCheaply

    Still haven’t bought a house yet but if I do, I’d include it in my net worth. Living in NYC, the place whether it’s a condo/co-op/house, it’ll be expensive so if I didn’t count it in my net worth, my net worth would probably be negative…way too depressing. And it’s an asset, why shouldn’t I count it?
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    1. No WasteNo Waste Post author

      NYC real estate is such an island, it will always go up, up, up. You should DEFINITELY count it in your net worth.

  2. GamingYourFinances

    We include our home in our net worth. Our reasoning is that we currently live in an expensive city but don’t plan on staying here long term. Once we reach financial independence we plan on moving closer to family and friends who live in a nearby town. This town happens to have real estate that is close to 1/2 the cost. So once we move we’ll be able to unlock a good portion of our equity to help create more passive income.
    GamingYourFinances recently posted…Net Worth UpdateMy Profile

    1. No WasteNo Waste Post author

      I agree that being able to unlock equity is an important consideration. Ultimately, the home will have value at some point though, just a matter of when.

  3. Brad @ RichmondSavers.com

    I absolutely include my home equity (market value less mortgage balance) in my net worth and I can’t come up with a reason to exclude it.

    I look at net worth as this: If I’m moving to Tahiti in three months and I have to sell everything, then what’s left in the bank/investment accounts at the end of the day is my net worth. To exclude your home equity (and the value of your cars and anything significant like an engagement ring for that matter) seems awful silly to me.

    If we’re getting technical, the people who often want to exclude their home equity from net worth don’t seem to make a distinction between their pre-tax 401k/IRA and their post-tax Roth-IRA and regular savings and investments when there’s a HUGE difference. If we’re really trying to get our net worth, we have to take into account the tax impact on these pre-tax accounts. I know that’s almost impossible since there are so many variables, but I’m really just trying to point out something major that most people conveniently miss…
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    1. No WasteNo Waste Post author

      I agree with all of that – there really is a sizable contingent that argues against it, but I just don’t see how you can exclude it.

      It may not be the most liquid asset, but it’s an asset.

  4. Funny about Money

    I can’t imagine why you wouldn’t include the equity in real estate as part of your net worth. The amount outstanding on the loan then gets counted in among the liabilities. Hence the term “net.” ;-)

    Once the shack is paid off, consider: the amount of the mortgage (or rent on a comparable roof over your head) that you now DON’T have to pay is your return on investment. In my case, that’s about $1200 a month that I don’t have to draw out of my retirement savings, now that I’m old and unemployable.
    Funny about Money recently posted…Dogs That BiteMy Profile

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