mickeyd said:I do not usually include the value of our home in any of my calculations as I really do not know the true value of it (until it is sold) and I have no plans on selling it any time soon. Also, even though by defination the home is an asset of mine and should be part of the net worth #, I would only have to buy another place to live at probably a similar amount of $ so what's the use?
JustCurious said:First, it is because (as you said) your home is, by definition, an asset, which must be included in your net worth calculation. Thus, since we all use the same definition, it is a constant barometer. The definition of net worth is agnostic as to whether you can live the asset.
Second, it is not true that you would have to buy another place. There are many people who rent or lease.
retire@40 said:Your post is a fusion of right and wrong. True, a house is always an asset and it is always part of net worth by definition. But, in calculating net worth for purposes of determining a SWR from which you will draw for living expenses, you may or may not include your home in your calculation, depending on whether or not you will use any proceeds from the house for living expenses.
If you plan on living in your house until they day you die and will not do a reverse mortgage, sell it, rent it, etc., then your house is a sunk cost, no different than the pencil on your desk.
DRiP Guy said:I love the fact that even thought the poll's parameters were quite straightforward, it also led to a very good but compact discussion of how to properly consider a home in terms of NW and also FIRE, SWR. Thanks to all!
REWahoo! said:heh, heh, heh.... http://early-retirement.org/forums/index.php?topic=3219.0
furpants said:Hmm, I am currently the ONE person down there at the bottom with my home being around 200% of my net worth. Interesting.
dmpi said:You must be young. Most of us here are old farts.
Vincenzo said:Arg! I chose the wrong answer. I chose 31 to 45% when it is actually 10 to 20%.
AltaRed said:I won't vote because it is stupid to compare apples and oranges. The ONLY value you have in your home is your equity.
AltaRed said:I won't vote because it is stupid to compare apples and oranges. The ONLY value you have in your home is your equity.
retire@40 said:Why is he comparing apples to oranges? He's asking what percentage of home equity makes up your total net worth. Simple and valid question.
People are messing this calculation up by not using the correct divisor. Using the formula the OP gave, how could home equity ever be greater than 100% of net worth?