I don't ever calculate my net worth. Why would I? It's a term people throw around, but I'm not aware of it actually being used for anything. So what's the point?

If what you're asking is do I include it in my walk-away number, or as part of my investable assets - no I don't. But that's a different question.

Anonymous wrote:I understand academically it’s part of our net worth. But when we discuss our “number” (to retire) we don’t include it because we need a place to live and it’s also not throwing off income.

You can always sell it and buy a cheaper place or invest money and live in a studio rental.

Anonymous wrote:

Anonymous wrote:I track my finances fairly closely, and here is how I approach it.

First, for purposes of my calculations (I have a spreadsheet to record my asset values at set intervals), I value my house at roughly 90% of what I anticipate I could sell it at on the open market, informed mostly by an average of Zillow/Redfin/Trulia. I do this to take into account the equity value if I were to sell, as I'd need to cover commission, seller-side transaction taxes, other sale expenses that may arise, and a bit of buffer for sale price.

Second, using that value, I calculate my "net worth"--which is really just the total value of all our assets. Over the years, the categories have grown, and real estate value net of mortgage is one category.

Third, I also calculate where I stand with respect to my retirement-goal "walk-away" number. This number is a sub-set of net worth. It does not include any of our real estate assets, 529s, cars, personal property, etc. Rather, the walk-away number is based on investment + retirement accounts.

While I don't post numbers here often, if I were to post my "net worth," I would include all real estate equity (calculated as above), including principal residence. If I were to post my goal towards my "walk away" number, it would exclude real estate, among other things. So, for me at least, the answer to your question is a bit nuanced.

I'd presume that when most folks post their "NW," they are including home equity.

What do you do with this very precise info?

15 years or so ago, I got in the habit of logging into all my financial accounts roughly twice a month to pay bills, ensure charges are accurate, monitor spending on pre-authorized bills (e.g., utilities), watch for unnecessary subscriptions, etc. I started a spreadsheet where I'd log each account value, roughly on the 1st and 15th of each month. This helped me in a few ways. I monitor available cash, to ensure that I was contributing appropriately to investment accounts and not allowing cash to stockpile. I'm currently a K-1 earner, so I also need to be alert to cash flow for liquidity for quarterly tax payments and other larger but periodic expenses.

Over time, having this data has helped me see my financial trajectory. I'm fairly goal oriented, and when I want to achieve certain goals--be it weight loss to financial success--I find that routinely tracking data helps keep me on target. With this data, I can see how my net worth compares to any two points in time, allows me to better balance our asset classes, etc. As we have become more successful and have many more accounts (and now work with a financial advisor), it helps me to have a quick and easy snapshot of our finances at any given time. In addition to net worth growth, I have long had a plan as to asset allocation among various classes, and this longer-term data has helped me track our progress in that direction.

Mostly, I'm perhaps a bit OCD with data. As noted, I started this years ago and haven't quit. I like having the longitudinal data of my own personal finances. I'm sure it is not for everyone, but it is something that works for me. Also having this data allows my spouse, who is not as attuned to our finances, have an ability to appreciate our circumstances.

Anonymous wrote:I understand academically it’s part of our net worth. But when we discuss our “number” (to retire) we don’t include it because we need a place to live and it’s also not throwing off income.

+1 We calculate both with and without real estate values, knowing that we need to look at savings not home values. We also don't count 529's because that money is already earmarked for kids' college.

Thank you all

I do include it based on Zillow but when I calculate my “personal” net worth I try to identify those assets that are reasonably liquid and available for my use. For example, I back out money in trusts where I am not a beneficiary, a charitable donor advised fund, 529s, money in alternative investments such as private equity where I can’t access the money immediately and home equity. The net number is what I have available to me without strings attached. If you have a $1 million net worth and 80% is in home equity your usable net worth is only $200K.

Anonymous wrote:I count home equity but not 529s since in my head that money is already spent. Of course if something horrible happened, we could use that money for something other than college, but I still don't count it.

I count everything because pretty much all monies saved are spent/earmarked for something. For example, most people count the full value of their 401k even though some percentage of that is going to the government via taxes. People count the full value of their savings account even though some of it (upwards of 1% of home value) will be used to cover home repairs each year. Every dollar saved has an eventual purpose.

I count home equity but not 529s since in my head that money is already spent. Of course if something horrible happened, we could use that money for something other than college, but I still don't count it.

Yes. Takes me from thousandaire to millionaire

It depends on what you are using the net worth figure for as other PPs have said. My major investment goal is to my maximize my estate, so I include home equity because that is what the IRS will do when I die.

Anonymous wrote:

Anonymous wrote:I understand academically it’s part of our net worth. But when we discuss our “number” (to retire) we don’t include it because we need a place to live and it’s also not throwing off income.

This.

OP - I don't include the home equity of my primary residence in my number (aka net worth) for the exact reason stated above. Academically, the definition of Net Worth does include all your assets less all your liabilities, but life is not an academic exercise and you need to do what makes sense to you.

Including the value of your my primary home's equity gives you a false sense of security that you have more than what you really can realistically tap into. Not including is a more conservative and practical way to track 'net worth'.

At the end of the day, do what makes sense to you. Follow the text book or follow common sense.

+1 agree.. I don't use the house value. However, when we are very old and if we need ltc, we would sell the house and use the proceeds for our care.

Anonymous wrote:

Anonymous wrote:I understand academically it’s part of our net worth. But when we discuss our “number” (to retire) we don’t include it because we need a place to live and it’s also not throwing off income.

I count it because I could always sell it and rent instead. Some assets that you own help you save money, but of course they are still convertible to cash. And what if it was worth $25MM? You would leave that off your net worth calc?

I'm the 00:36 poster and did not address your question in my post since it would have just complicated it..

In your scenario, I'd include "excess" home equity in net worth. Eg. Your home equity is $25M and you could reasonably buy another house for $5M and live a great life. Include the remaining $20M in your net worth. Apply common sense and don't follow someone else's 'book'.

Yes. But I only think about my net equity in the framing of ‘if I could never work again, how much do I have to survive on.’ Because I plan to work another 11 years and never sell my house. The equity is simply a last resort financial cushion.

Anonymous wrote:Just trying to get an idea. Thanks

I was a typically it is not included when conversationally talking about investments, etc. but technically of course it is.

Anonymous wrote:

Anonymous wrote:I understand academically it’s part of our net worth. But when we discuss our “number” (to retire) we don’t include it because we need a place to live and it’s also not throwing off income.

I count it because I could always sell it and rent instead. Some assets that you own help you save money, but of course they are still convertible to cash. And what if it was worth $25MM? You would leave that off your net worth calc?

Pointless hypothetical. I already said that I understand the term “net worth” and yes it’s in there. But when casually discussing things on DCUM I don’t include it because it is not part of what I’m counting on in retirement. If other people want to plan to sell their house and rent in retirement, they are free to do so. I don’t include my kids (substantial) college funds either because they are not available to me for use. So, when making casual remarks on DCUM when I say “We had X million dollars at 40” or whatever, I am not including home equity or college funds. My home equity is about 25% of my net worth ($1 out of $4M) but I still don’t think of it in my head because I’m always planning to live somewhere nice, or maybe two smaller places, unsure. Either way I don’t plan to invest that money outside of the real estate it currently is.