Reply to FYI: Don't include home equity in net worth

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]This thread really just underscores the point that net worth is a fundamentally meaningless measure for most people — personally, I'd like to be able to plan not to have to sell my house in retirement (for instance), so I want my net worth to be whatever I need to retire on without calculating home equity at all.

Since it's also not a measure you ever really have to report to any official body in any way, it doesn't really matter whether you do or don't count your home equity in your planning.

It does seem pretty well beyond dispute that the definition of net worth includes your home equity. [b]But it's also true that the value of your home really only exists on paper until you sell it, so it's inherently a bit arbitrary.[/b][/quote]

Even the value of your 401k only exists on paper until you sell your investments.
Does that mean you shouldn’t include your 401k in your planning?

[/quote]

It's a lot easier to sell the assets in your 401(k) at basically the value they're listed at whenever you're looking at it than it is to do the same with your house, though. Even though I can't access my 401(k) at my current age without paying a tax penalty, if I wanted to lock in its current value, I could liquidate all the funds and just have it as cash. The current prices aren't an estimate, they're an actual price. If I wanted to do the same with my house, there's no way of knowing whether I'd be able to sell it for what I think it's worth, and it wouldn't exactly be an instantaneous transaction, either.[/quote]

Whether or not an asset is liquid doesn't change whether you should include it in your net worth. [/quote]

"Should" is sort of a meaningless concept with net worth, since it's not like you ever have to report that to anyone. If you want to count your net worth as only half of what it actually is, so what?

I agree with various posters about the DEFINITION of net worth, which is just the sum total of your assets minus your liabilities. I also agree with various posters who say they find it useful to think of their overall financial picture using different metrics.[/quote]

Exactly!

For example, you will always need someplace to live and some mode of transportation.  However, you can always sell that $2M home and choose to rent.  You can also rent/own in a city with good public transportation and choose to sell your vehicle (or one of them) and rely on public transportation. That is up to your individual situation.  But fact is you do NOT have to own a home or a car.

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