Counting home value in net worth

[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.

This has to be one of the dumbest things I've ever read. Is this why people pay financial advisors for advice from Google?

[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.

I just don’t care what my net worth is if it includes assets like my home, which I do not plan to liquidate to fund my lifestyle. So I don’t really bother tracking it. The metric I think is useful is the value of my investments, both taxable and in retirement accounts. Technically we’re worth more than I think we are, possibly significantly more, but so what?

[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.

I don’t know why this board continues to struggle with this concept. Most respondents end up giving their personal definitions of net worth as the definitive one.

[Anonymous]

Anonymous wrote:

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.

I just don’t care what my net worth is if it includes assets like my home, which I do not plan to liquidate to fund my lifestyle. So I don’t really bother tracking it. The metric I think is useful is the value of my investments, both taxable and in retirement accounts. Technically we’re worth more than I think we are, possibly significantly more, but so what?

No one's forcing you to care. But it doesn't change the definition. Do you understand?

[Anonymous]

Anonymous wrote:

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.

I don’t know why this board continues to struggle with this concept. Most respondents end up giving their personal definitions of net worth as the definitive one.

I agree, net worth should include home value.

That said, I asked my financial advisor to deduct the projected tax liabilities from the value of my 401K and deferred comp accounts when calculating net worth. That is a significant amount of money considering we are in the highest tax bracket and will continue to be based on our projected income over the next ten years as recent retirees.

[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?

Obviously yes. Having 10M in property or 10M in stock is not all that different. You owe taxes on sale, you might not be able to liquidate it due to trading windows (HOA rules) or trading volume (RE market). None of that matters though, it's all NW and it all makes you rich. Worst case you can take out a loan against it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

I just don’t care what my net worth is if it includes assets like my home, which I do not plan to liquidate to fund my lifestyle. So I don’t really bother tracking it. The metric I think is useful is the value of my investments, both taxable and in retirement accounts. Technically we’re worth more than I think we are, possibly significantly more, but so what?

No one's forcing you to care. But it doesn't change the definition. Do you understand?

I didn’t say it changed the definition. I specifically said I don’t track my net worth because it includes assets I don’t think are relevant to my understanding of how much money I have. This thread is people talking past each other — no one is asking what the literal definition of net worth means, the meta question here is whether net worth is a meaningful or helpful data point for people.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

I just don’t care what my net worth is if it includes assets like my home, which I do not plan to liquidate to fund my lifestyle. So I don’t really bother tracking it. The metric I think is useful is the value of my investments, both taxable and in retirement accounts. Technically we’re worth more than I think we are, possibly significantly more, but so what?

No one's forcing you to care. But it doesn't change the definition. Do you understand?

So does everyone here also add up all the value of their furniture, cars, clothes, electronics, etc? I certainly don't but those are technically assets.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

I just don’t care what my net worth is if it includes assets like my home, which I do not plan to liquidate to fund my lifestyle. So I don’t really bother tracking it. The metric I think is useful is the value of my investments, both taxable and in retirement accounts. Technically we’re worth more than I think we are, possibly significantly more, but so what?

No one's forcing you to care. But it doesn't change the definition. Do you understand?

So does everyone here also add up all the value of their furniture, cars, clothes, electronics, etc? I certainly don't but those are technically assets.

They are part of your net worth, but generally not counted explicitly because most are de minimis assets. But it obviously depends. People who have significant vehicle assets, like car collections, of course those have value to the household. And many of these have financial costs. For example, if you have debt on a car, it makes zero sense to exclude the value of the car from your net worth. I mean, how stupid would that be?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

I just don’t care what my net worth is if it includes assets like my home, which I do not plan to liquidate to fund my lifestyle. So I don’t really bother tracking it. The metric I think is useful is the value of my investments, both taxable and in retirement accounts. Technically we’re worth more than I think we are, possibly significantly more, but so what?

No one's forcing you to care. But it doesn't change the definition. Do you understand?

I didn’t say it changed the definition. I specifically said I don’t track my net worth because it includes assets I don’t think are relevant to my understanding of how much money I have. This thread is people talking past each other — no one is asking what the literal definition of net worth means, the meta question here is whether net worth is a meaningful or helpful data point for people.

The literal original question was regarding the definition of net worth, and whether to include home values.

[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?

No she is not. Her net worth is 0. Home equities can’t be included into NW.

[Anonymous]

Anonymous wrote:

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.

I just don’t care what my net worth is if it includes assets like my home, which I do not plan to liquidate to fund my lifestyle. So I don’t really bother tracking it. The metric I think is useful is the value of my investments, both taxable and in retirement accounts. Technically we’re worth more than I think we are, possibly significantly more, but so what?

It's not just about whether you care.

Funding your lifestyle in retirement isn't the only reason why your net worth is calculated,

Insurance companies will require your net worth, which must include the equity in your home. Financial advisors will also need to consider your home equity to accurately calculate your net worth for financial planning.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

I just don’t care what my net worth is if it includes assets like my home, which I do not plan to liquidate to fund my lifestyle. So I don’t really bother tracking it. The metric I think is useful is the value of my investments, both taxable and in retirement accounts. Technically we’re worth more than I think we are, possibly significantly more, but so what?

It's not just about whether you care.

Funding your lifestyle in retirement isn't the only reason why your net worth is calculated,

Insurance companies will require your net worth, which must include the equity in your home. Financial advisors will also need to consider your home equity to accurately calculate your net worth for financial planning.

It is just about whether I care. Insurance companies don’t care what my net worth is, they care whether I pay the premium for the insurance I buy. And my financial adviser plans for my finances the way I ask them to, so if I tell them not to consider my home equity in assessing whether I have enough money, they won’t.

[Anonymous]

Anonymous wrote:

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?

No she is not. Her net worth is 0. Home equities can’t be included into NW.

Yes, she is rich. Her equity in the brownstones are included in her net worth. If she needs cash, she can sell a brownstone. It’s the same as if she had everything in stocks. She would sell stock to raise cash. The brownstones not being as liquid as the stocks don’t mean they’re not part of her net worth.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

I just don’t care what my net worth is if it includes assets like my home, which I do not plan to liquidate to fund my lifestyle. So I don’t really bother tracking it. The metric I think is useful is the value of my investments, both taxable and in retirement accounts. Technically we’re worth more than I think we are, possibly significantly more, but so what?

It's not just about whether you care.

Funding your lifestyle in retirement isn't the only reason why your net worth is calculated,

Insurance companies will require your net worth, which must include the equity in your home. Financial advisors will also need to consider your home equity to accurately calculate your net worth for financial planning.

It is just about whether I care. Insurance companies don’t care what my net worth is, they care whether I pay the premium for the insurance I buy. And my financial adviser plans for my finances the way I ask them to, so if I tell them not to consider my home equity in assessing whether I have enough money, they won’t.

You don’t know how insurance works. Insurers need to make sure you aren’t a fraud. No insurance company will approve a high value policy if you don’t have a net worth that justifies it.