Counting home value in net worth

[Anonymous]

How is home and personal property insurance potential payouts part of net worth? It would only pay if the underlying asset is destroyed or subject to injury?

The insurance listed on the previous post seem silly as part of net worth. Term life and Ad&d only become money when someone dies or is injured.

Completely agree that house, retirement accounts and other assets are part of net worth but counting yourself as being worth 300M when 180M of that is potential insurance proceeds that may never be realized seems like puffery to me.

I don’t count my retirement assets as something I can readily spend but that doesn’t mean it is not part of my net worth.

[Anonymous]

I would count it if I planned on selling it. My wife does not count our home, but she does count our beach condo we never use that is rented out. Cause we can sell that for cash easily.

Kinda like she likes her 401k, but not really cash if I lose my job before 67 as not touching it.

She also does not count RSUs, cars, furniture.

But she is only counting liquid after tax stuff you can sell. As if laid off that is what you live off.

[Anonymous]

Anonymous wrote:

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Anonymous wrote:

Anonymous wrote:Puzzling that people think only assets that throw off income can be included in one's net worth.

What about gold bars, high value artwork, etc.?

When people ask about our NW, we only include our non-earmarked liquid assets. This is the truly meaningful amount and omits anything that provides utility or is set aside for a future expense: functional NW as opposed to technical NW.

In this functional NW number, we exclude our home, cars, personal property, 529 plans, retirement accounts, and HSAs. In our experience, the more affluent people all do the same thing. It is the upper middle class and below that tends to inflate their NW estimates using any means available to keep up with the Joneses.

We’re in our early 40s and have a functional NW – by our practical definition – of about $10M. If we include ALL ASSETS and ALL LIABILITIES, our technical NW is closer to $300M.

This post is so funny I had to read it to DH . . . he made me read it to him twice.

Why so funny?

For our functional NW, we have $10M in checking, HYSA, taxable brokerage, and other liquid funds.

For our technical NW, we have an extra $290M distributed as follows:
- HSAs: $1M
- 529 Plans: $2M
- Cars: $3M
- Primary Home: $48M
- Home Furnishings and Art: $16M
- Retirement Accounts: $40M
- Term Life Insurance Policies: $50M
- Home and PP Insurance: $70M
- AD&D Insurance: $60M

If we suddenly passed away and had to pass everything on to charity or our kids, we technically have a NW of $300M. This is why we don’t include all these extras in our functional NW. Inflated NW is a silly number that you can only realize when you’re homeless and dead. Oh well, to each their own.

Obviously a joke since it’s impossible to have that much in retirement accounts

That's what I thought reading it, but they're probably inherited.

Imagine living in a $48 M home and telling someone your NW is $10 M. LOL.

My cousin a retired school teacher married to a retired janitor live in a 5 million brownstone in Parkslope. It has low property tax, and a small plot, easy to maintain. She bought it, back in 1977 for 40K in a NYC tax lien sale and it had squaters in the basement apartment. Her garbageman dad helped with downpayment, she paid him back with interest.

She actually has four of them. Between 1982 and 2021 she bought three more. Last one she bought was right after 9/11 in Harlem. By 2002 she was out as too expensive for her.

Is she rich?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Puzzling that people think only assets that throw off income can be included in one's net worth.

What about gold bars, high value artwork, etc.?

When people ask about our NW, we only include our non-earmarked liquid assets. This is the truly meaningful amount and omits anything that provides utility or is set aside for a future expense: functional NW as opposed to technical NW.

In this functional NW number, we exclude our home, cars, personal property, 529 plans, retirement accounts, and HSAs. In our experience, the more affluent people all do the same thing. It is the upper middle class and below that tends to inflate their NW estimates using any means available to keep up with the Joneses.

We’re in our early 40s and have a functional NW – by our practical definition – of about $10M. If we include ALL ASSETS and ALL LIABILITIES, our technical NW is closer to $300M.

This post is so funny I had to read it to DH . . . he made me read it to him twice.

Why so funny?

For our functional NW, we have $10M in checking, HYSA, taxable brokerage, and other liquid funds.

For our technical NW, we have an extra $290M distributed as follows:
- HSAs: $1M
- 529 Plans: $2M
- Cars: $3M
- Primary Home: $48M
- Home Furnishings and Art: $16M
- Retirement Accounts: $40M
- Term Life Insurance Policies: $50M
- Home and PP Insurance: $70M
- AD&D Insurance: $60M

If we suddenly passed away and had to pass everything on to charity or our kids, we technically have a NW of $300M. This is why we don’t include all these extras in our functional NW. Inflated NW is a silly number that you can only realize when you’re homeless and dead. Oh well, to each their own.

Obviously a joke since it’s impossible to have that much in retirement accounts

That's what I thought reading it, but they're probably inherited.

Imagine living in a $48 M home and telling someone your NW is $10 M. LOL.

My cousin a retired school teacher married to a retired janitor live in a 5 million brownstone in Parkslope. It has low property tax, and a small plot, easy to maintain. She bought it, back in 1977 for 40K in a NYC tax lien sale and it had squaters in the basement apartment. Her garbageman dad helped with downpayment, she paid him back with interest.

She actually has four of them. Between 1982 and 2021 she bought three more. Last one she bought was right after 9/11 in Harlem. By 2002 she was out as too expensive for her.

Is she rich?

I don't know, what's her net worth?

[Anonymous]

Anonymous wrote:You count for your ego. But it really shouldn't count unless you sell it and deposit the money in your account.

Fine to calculate something that isn't net worth, but net worth absolutely includes your house value and its associated debt. There is no argument otherwise.

[Anonymous]

Anonymous wrote:I understand that it is part of the definition. But I’m not spending that money during retirement so I don’t count it. The same way I don’t count the 529’s, which are also massive.

This is stupid. 529s are basically money already spent. Home equity is not. You can not count it for retirement planning or whatever, but it's absolutely part of your net worth.

[Anonymous]

We met with a financial advisor at Schwab a few years ago to come up with a retirement funding plan. In the process, they calculated our "net worth." It's very straightforward: assets minus liabilities. We have two homes, together worth about $2.5 million, but have a $600k mortgage on one of them. So the advisor included the $1.9 million we have in equity as part of our net worth.

Then, when coming up with our numbers, the advisor assigned that part of our net worth to "not funding goals."

That's how this works, folks. "Net worth" is a defined financial term -- assets minus liabilities -- and as such it includes the value of your real estate minus mortgages. Whether you use it or not for retirement planning is a separate and irrelevant issue.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I don't count mine but I am a not a high earner, my savings all-in sans house is $1.3m, my house could sell for about $600K and I owe $95K and I am not moving any time soon because I dream of the day I no longer have a mortgage which is just over the horizon.

If you have a $1.3 million dollar house and can afford the property taxes, maintaince and utilities, you are high income and wealthy.

You can't read or add. Probably why you are poor.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Puzzling that people think only assets that throw off income can be included in one's net worth.

What about gold bars, high value artwork, etc.?

When people ask about our NW, we only include our non-earmarked liquid assets. This is the truly meaningful amount and omits anything that provides utility or is set aside for a future expense: functional NW as opposed to technical NW.

In this functional NW number, we exclude our home, cars, personal property, 529 plans, retirement accounts, and HSAs. In our experience, the more affluent people all do the same thing. It is the upper middle class and below that tends to inflate their NW estimates using any means available to keep up with the Joneses.

We’re in our early 40s and have a functional NW – by our practical definition – of about $10M. If we include ALL ASSETS and ALL LIABILITIES, our technical NW is closer to $300M.

This post is so funny I had to read it to DH . . . he made me read it to him twice.

Why so funny?

For our functional NW, we have $10M in checking, HYSA, taxable brokerage, and other liquid funds.

For our technical NW, we have an extra $290M distributed as follows:
- HSAs: $1M
- 529 Plans: $2M
- Cars: $3M
- Primary Home: $48M
- Home Furnishings and Art: $16M
- Retirement Accounts: $40M
- Term Life Insurance Policies: $50M
- Home and PP Insurance: $70M
- AD&D Insurance: $60M

If we suddenly passed away and had to pass everything on to charity or our kids, we technically have a NW of $300M. This is why we don’t include all these extras in our functional NW. Inflated NW is a silly number that you can only realize when you’re homeless and dead. Oh well, to each their own.

Obviously a joke since it’s impossible to have that much in retirement accounts

That's what I thought reading it, but they're probably inherited.

Imagine living in a $48 M home and telling someone your NW is $10 M. LOL.

My cousin a retired school teacher married to a retired janitor live in a 5 million brownstone in Parkslope. It has low property tax, and a small plot, easy to maintain. She bought it, back in 1977 for 40K in a NYC tax lien sale and it had squaters in the basement apartment. Her garbageman dad helped with downpayment, she paid him back with interest.

She actually has four of them. Between 1982 and 2021 she bought three more. Last one she bought was right after 9/11 in Harlem. By 2002 she was out as too expensive for her.

Is she rich?

Yes, she is rich. Because she can sell all of them, likely have $8M+ left after buying a 1 bedroom coop to live in. All she needs to do is stop renting them out and sell them. Same for the $5M brownstone....sell that and live in a cheaper place. So yes she is rich

[Anonymous]

Anonymous wrote:

Anonymous wrote:I understand that it is part of the definition. But I’m not spending that money during retirement so I don’t count it. The same way I don’t count the 529’s, which are also massive.

This is stupid. 529s are basically money already spent. Home equity is not. You can not count it for retirement planning or whatever, but it's absolutely part of your net worth.

Exactly! I don't count 529s because it is money that is for the kid's college, we won't (and can't without a major penalty) touch that money for anything else.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I understand that it is part of the definition. But I’m not spending that money during retirement so I don’t count it. The same way I don’t count the 529’s, which are also massive.

This is stupid. 529s are basically money already spent. Home equity is not. You can not count it for retirement planning or whatever, but it's absolutely part of your net worth.

Exactly! I don't count 529s because it is money that is for the kid's college, we won't (and can't without a major penalty) touch that money for anything else.

This is a preference, it’s an asset you own. When you are filling out a college net price calculator they ask for assets and those include money held in a 529 regardless of whether that is planned for use for a different student than the one that will be att being that college. Just because you have an intended use doesn’t mean it does not exist and does not belong to you.

Sure, it is not assets you would use for daily living, but neither are retirement savings yet. Still part of your net worth.

[Anonymous]

Anonymous wrote:I don’t count it. I need a place to live so it’s not wealth to me.

+1

I am a brown immigrant. So, my home is more than a place for me to live. DMV is my hometown. I have no other small town, LCOL hometown in USA to go back to from DMV. I have friends, family and neighbors who I have connection to here. I have renovated the house in a way that suits my lifestyle. I love whatever DMV offers - art, culture, history, recreation, employment, education, conveniences, infrastructure, health care, opportunities, diversity, the east coast liberal elites...

I did not buy in the most expensive place in DMV. My house is probably only around 800K right now (bought for 250K around 30yrs ago) - I will age in place - at least that is the plan.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I don’t count it. I need a place to live so it’s not wealth to me.

+1

I am a brown immigrant. So, my home is more than a place for me to live. DMV is my hometown. I have no other small town, LCOL hometown in USA to go back to from DMV. I have friends, family and neighbors who I have connection to here. I have renovated the house in a way that suits my lifestyle. I love whatever DMV offers - art, culture, history, recreation, employment, education, conveniences, infrastructure, health care, opportunities, diversity, the east coast liberal elites...

I did not buy in the most expensive place in DMV. My house is probably only around 800K right now (bought for 250K around 30yrs ago) - I will age in place - at least that is the plan.

Your rambling is meaningless.

[Anonymous]

Anonymous wrote:We met with a financial advisor at Schwab a few years ago to come up with a retirement funding plan. In the process, they calculated our "net worth." It's very straightforward: assets minus liabilities. We have two homes, together worth about $2.5 million, but have a $600k mortgage on one of them. So the advisor included the $1.9 million we have in equity as part of our net worth.

Then, when coming up with our numbers, the advisor assigned that part of our net worth to "not funding goals."

That's how this works, folks. "Net worth" is a defined financial term -- assets minus liabilities -- and as such it includes the value of your real estate minus mortgages. Whether you use it or not for retirement planning is a separate and irrelevant issue.

This.

[Anonymous]

Anonymous wrote:I would count it if I planned on selling it. My wife does not count our home, but she does count our beach condo we never use that is rented out. Cause we can sell that for cash easily.

Kinda like she likes her 401k, but not really cash if I lose my job before 67 as not touching it.

She also does not count RSUs, cars, furniture.

But she is only counting liquid after tax stuff you can sell. As if laid off that is what you live off.

Exactly! Your wife knows that even with multiple fully furnished homes, multiple cars, and fat retirement accounts, she has the same net worth as a new graduate living in shared housing because “ShE nEeDs a PlAcE tO lIvE!!!”