# Calculating Net Worth: Does Home Value Belong There?

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Ever since I started tracking my net worth I’ve had the value of our home in there. I’ve often considered tweaking it and coming up with better methods of calculating it, but the concept of taking OUT your home (or cars for that matter) 100% boggles me. After all, the definition of “net worth” is the total of all your assets minus the total of all your liabilities, right? At least that’s what I subscribe to.

So why do I bring this up? Because the main man himself Trent, from The Simple Dollar, recently decided to take out his mortgages AND cars from the equation. But interestingly enough, he left the mortgage on it. Huh?! You’ll have to read his article for all the dirty details, but he basically feels that he can’t just cash out his house & cars as he’ll always need them to live – thus, they shouldn’t be calculated into his net worth. And I suppose the mortgage on it is a liability no matter how you slice it, so he’s def. still keeping that in there (although at that point, wouldn’t it be more like “rent”?)

I find this interesting in a number of ways, but mainly that there are SO MANY different methods one can go about calculating this stuff. So out of curiosity I thought I’d play around with our most recent net worth and see what it would look like after playing with this house variable.

## Our Net Worth (w/out home value): -\$186,789.11

Damn, I’m not liking that too much. In theory I like the idea of not counting on the value of your home, but the optimistic part of me says that it WILL sell one day, it’s just a matter of when and at what price. Needless to say, I’m not crazy/smart/comfortable with taking out my home value anytime soon – it’s still an integral part of the “big picture”.

(for all not familiar with our house’s value, we calculate it @ \$300k – the price our realtor set it at a couple months back. He’s the master in our particular neighborhood, and has been selling (and living in) in our area for 20+ years. I also keep an eye out on Zillow & Redfin.com, but sometimes they fluctuate a bit too much for my taste.)

## Our Net Worth (w/out home value & mortgages): \$163,179.59

I’m liking this number a bit more ;) But while I’d love to sell our underwater house more than anything and break even, it’s just not going to happen. Because of this, I still need to include our mortgages in there to keep things more realistic.

## Current Net Worth: \$113,210.89

For me, this number still works. It gives us a pretty accurate snapshot of our overall finances, and includes all real estate and autos. It’s not as sexy as taking out the house situation altogether, or as hardcore as wiping out the value of our house, but it keeps me on track and motivated.

There really isn’t ANY “right” way to calculate your net worth, you just have to do what works for YOU (kinda like most other financial situations, eh?). I do, however, give Trent mad credit for standing up and sharing his opinion. He knew he’d get slammed for it (which he did), but he also brought a fresh new way to consider tracking our financial snapshots.

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PS: Here are a couple of spreadsheets to help track your money and/or net worth if you're looking to get started (and love manually tracking it as I do :)):

If you're not a spreadsheet guy like me and prefer something more automated (which is fine, whatever gets you to take action!), you can try your hand with a free Personal Capital account instead.

Personal Capital is a cool tool that connects with your bank & investment accounts to give you an automated way to track your net worth. You'll get a crystal clear picture of how your spending and investments affect your financial goals (early retirement?), and it's super easy to use.

It only takes a couple minutes to set up and you can grab your free account here. They also do a lot of other cool stuff as well which my early retired friend Justin covers in our full review of Personal Capital - check it out here: Why I Use Personal Capital Almost Every Single Day.

(There's also Mint.com too btw which is also free and automated, but its more focused on day-to-day budgeting rather than long-term net worth building)

Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!

1 mike April 29, 2010 at 10:06 pm

Personally, I believe including your home depends very much on if you anticipate selling it in the future and down sizing or some other “change during retirement” plan. If someone intends on dying in the house they are currently in, they should not include the home in their net worth.

2 Tom November 21, 2012 at 10:35 am

Hi – I definitely think a house value (realistic sale price- minus remaining mortgage) should be part of Net Worth. Net Worth to me implies all assets minus liabilities … and should not factor in liquidity. That could be a subset of the Net Worth.. your liquid or semi-liquid net worth … and not include house.

But to calculate my House Value … I also factor in the cost of selling … 6% to real estate agents, etc. and to be very conservative … I factor in 10% selling costs (real estate agent; some pre-sale fix up; lawyer fees; moving, etc.)

Using an easy example. Let’s say you own a house that would sell for \$500,000. Your remaining mortgage on it is \$250,000. I would take the \$500,000 – subtract 10% selling cost or \$50,000 … leaving \$450,000 .. then subtract remaining mortgage of \$250,000 which gives you \$200,000 net house value to add to your net worth.

If your house goes up in value 10% over the years to \$550,000 in this scenario, then the 10% selling goes to \$55,000 …. minus the remaining mortgage of \$250,000 … you would have \$245,000 net house value to add to your net worth.

3 J. Money November 21, 2012 at 2:39 pm

Ooh I like that! I agree that the house probably needs to go in the calculations, esp. since you need something to offset the mortgages too which need to go in there, but hadn’t thought about including more into the house’s value like you’re doing. That’s a good way to think of it, thanks man!

It sucks all the other comments here got wiped away when I moved blogging platforms a cple years ago, but maybe you’ll start a new discussion here for anyone who reads in the future :) So thanks!

4 Richard July 14, 2016 at 2:50 pm

I do the same as Tom. But how do you easily get a value for the home? I have been using Zillow and subtracting 20%. Then I subtract an additional 10% for selling expenses. Looking at actual sales in last 3 months, and calculating a price per square foot I get a larger value. Even using the lowest number from a foreclosed fixer upper. The house is a large part of my retirement plan. Therefore, I am trying to keep the numbers realistic. The current difference between the lower estimated value and mortgage+ selling expense s \$130 k in my favor. :-)