Why would you not count your house in net worth calculation?

[Anonymous]

I often hear people calculate their net worth and refuse to use their equity in their home in the equation. This makes no sense to me considering it is real money that you can calculate.

[Anonymous]

It's not a liquid asset. Even stocks and mutual funds are much more liquid. Also, you need to live somewhere -- so if you sell it, you will have housing expenses.

[Anonymous]

It still counts to net worth.

Assets minus liabilities.

[Anonymous]

Anonymous wrote:It's not a liquid asset. Even stocks and mutual funds are much more liquid. Also, you need to live somewhere -- so if you sell it, you will have housing expenses.

If you sell it, you'll have wealth that you can use to pay your housing expenses. It's part your net worth.

[Anonymous]

Because you have to live somewhere so you'll always have some type of housing expense. Plus it's hard to say what it's really worth if you're not currently listing it. You can look at comps and that gives you a good idea but it's only really worth xyz when you have an actual buyer on hand.

[Anonymous]

I think too many people try to feel better about their finances by including (an often inflated idea of) home equity in their net worth. Unless you're actually willing to sell your house to pay off student loans/cc debt, you're kidding yourself.

[Anonymous]

Ours is paid for so yes, it is included in our net worth.

[Anonymous]

Anonymous wrote:Because you have to live somewhere so you'll always have some type of housing expense. Plus it's hard to say what it's really worth if you're not currently listing it. You can look at comps and that gives you a good idea but it's only really worth xyz when you have an actual buyer on hand.

The point is you won't necessarily have this house. What if you go from living in a million dollar house with 1.5 million in cash to living in a half a million dollar house with 2 million (minus transaction costs) in cash? Instant wealth?

[Anonymous]

Anonymous wrote:It still counts to net worth.

Assets minus liabilities.

This.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It still counts to net worth.

Assets minus liabilities.

This.

+1. Until you own it outright, the value isn't yours. Even then market value is unstable.

[Anonymous]

Because including it would make would make you sound "richer" than you want to present yourself as. We all like to be middle class.
Of course, we all remember that time when all of the houses in McLean plunged in value by 50% for a decade.

[Anonymous]

Right, but like any business, you make an estimate of the worth in order to establish an evaluation.

Housing value counts. I wouldn't feel great if my home equity was 80% of my net worth, but it counts none the less. Just knowing where you stand is powerful and everyone should take the time to add everything up. Without it, you don't have a plan.

It is no different than looking out ten years and trying to predict a return in the market. It is a guess but at least you are creating a model.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It still counts to net worth.

Assets minus liabilities.

This.

+1. Until you own it outright, the value isn't yours. Even then market value is unstable.

Whose is it?

[Anonymous]

I had never heard that you were not "supposed to" consider this in calculating your net worth. I consider it. I also subtract the amount I owe on my federal backed student loans, even though they would be forgiven if I died. To me the purpose of the calculation is to say - if I had to cash out today - how much cash would I walk away with.

[Anonymous]

It's part of your net worth, but not part of your "capital."

Capital to income ratio should be 12:1 at age 65.