HomehousingDid my Net Worth just get cut in half?

Did my Net Worth just get cut in half?

For three long years Girl Ninja and I have been diligently socking away $2,000 to $5,000 a month in our savings account. As of Friday, we officially hit our goal to have $100,000 in savings. How hot is that?

Bow chicka bow wow. 

If you’ve tracked our net worth at all over the last few months, you’d know this cash accounts for about half our net worth.  You also saw last week that Girl Ninja and I went under contract to buy our first home, a 1930’s cottage. We are just a few weeks away from writing the biggest check of our lives, to the tune of $80,000, and I can’t help but wonder….

Is our Net Worth about to be cut in half? 

I’ve never owned real estate, and therefore have had no reason to include it in our net worth. Part of me thinks I should begin including it because…

  • …real estate is an asset and has value
  • …real estate typically appreciates over time
  • …I include our retirement fund, which I consider illiquid since I can’t touch it
  • …it would be depressing to go down $80,000 in NW overnight
  • …I could sell the house and get a lot (if not all) of this money back

but then another part of me thinks I shouldn’t include the house in our NW updates because….

  • …real estate is illiquid
  • …when we sell we will probably just roll our equity in to next down payment
  • …determining our home’s value on a monthly basis is virtually impossible
  • …I don’t include our cars in our NW, so why would I include our house

I don’t know what I’m going to do, but I only have a few days to figure it out before my July Net Worth update. I’m thinking I’ll probably leave it off, unless I hear some compelling reasons to add it on. A smaller net worth will likely motiviate me to save harder 😉

What about you? Do you (or would you) include your primary residence in your net worth?



  1. Definitely include it! That is a ton of money just to write off. As you have experienced, the purchase of your home was such an intense competition that generated a higher price than was asked for just as it came on market. Not very illiquid!

    As for trying to calculate the value, it is very difficult. However, I do like Zillow, Redfin, and Trulia that gives a pretty good estimate of homes. I would probably take the lowest estimate just to be on the conservative side.

    In your quest to punch mortgage in the face, you will soon realize the value of having a paid off house. This is why I include it in my own net worth. Baring anything catastrophic, I can realize the value of my home by selling, renting, or taking equity out of it.

  2. I include TL savings, US savings, Gold, Individual stocks in my NW. I leave out my residence, my rental property, my retirement account and car because, I like to know the liquidity rather than how much my Total Worth is. Besides, including the apartments and the car would mean I would have to make an estimate and how reliabe would that be?

  3. If you include the house, you include the liability: the mortgage. Do you include the loan in your liability? How much of it? Do you include the house payment, the tax escrow, the insurance payment (you ARE getting insurance, right? and checking into the flood insurance that is separate? and perhaps an umbrella policy? anyway… ) I have knowledge of my home’s current market value in general; and the payoff is part of my liabilities. I don’t count the house, unless I am looking at EVERYTHING. Liquid assets: how much can I get should I need to ransom someone? *grin*

  4. Yes and no. Using Zillow or Trulia will give you an estimated value only and/or you can use a real estate agent. Use the average between whatever sites/agent you use and set that value to the side or know what your total taxable value is. Typically this is closer to actually value than most people realise. Take your actual payoff amount and subtract that from your estimate/taxable value to get your estimated equity. Use only your equity in figuring out NET worth. This works all the way up to having a paid off mortgage which is when the “big” numbers really start looking good.
    In my “monthly” budget spreadsheet, I show the est value so as to keep track/trending but I only add the equity into my net worth.

  5. I include my property – though only because I include my mortgage. I have used a couple different methods for estimating the property value. Currently, I use the lower of tax assessed value (our property is reassessed every December for new rates that go into effect Jan 01 – ie the city figures out its budget deficit and messes with property value just in time to fix it) or the original purchase price less any depreciation that would be allowed by the IRS if I was using it as rental property.

    The depreciation method allows me to automate the calculation so that the value can fluctuate monthly. It also allows me to account for any major improvements made to the property. The tax assessment method just lets me use one value for the year and I ignore monthly variance.

  6. Here is what I do to reflect my house in my net worth calculation

    I use the purchase price as the value of my house and I don’t change the monthly value of my house “on the books.” I do this because I feel it truly reflects my investment in the property. I then put up a liability against the asset (in this case the house.) That way I don’t lose track of what the mortgage is on the house. As you pay down the mortgage, you then reduce the mortgage liability on the books. Then when you do your Net Worth Updates, you can look up the value and do a separate line item for unrealized gains/losses as of day/month/year end. If and when you go to sell, I would recognize the gains/losses at that particular time.


    Liquid Cash: $10,000.00

    Property Purchase Price: $300,000.00
    Loan on Property: ($240,000.00)
    Net Investment in Real Estate: $60,000.00

    Total Net worth: $70,000.00
    Unrealized gain/losses $2,000.00

    Actual Net Worth $72,000.00

    Also, I like this way because I can calculate how much of the house I own. I can say I own 42% of my house, which is my kitchen and half the bedroom.

  7. I would include your homes value (based on either your tax value or zillow (or similar)). I think a true NW calculation needs to include the mortgage as a liability so including the value of the asset only makes sense.

    2. For an individual, the value of a person’s assets, including cash, minus all liabilities. The amount by which the individual’s assets exceed their liabilities is considered the net worth of that person.

    You could track your Liquid Net Worth and label it as that. I prefer a total NW calculation.

    I like Daniels method above also. Pretty easy and makes sense.

  8. Having a daughter that is just two years away from college, I have been learning a LOT about net worth from a financial aid perspective. The financial review committees that determine how much aid you are elgible for do consider your house as part of your net worth. If you owe more than it’s worth (like we currently do) then it’s a negative asset (GREAT for financial aid) and can actually lead to haveing a negative net worth, which you would have if you include the house.

    SO if you want to look at your total net worth the same way the financial aid gurus would, include it.

    • This is incorrect. Home values (unless it’s not your primary residence) and retirement accounts are not used in financial aid decisions.

  9. Make sure you subtract realtor fees from the value of the house unless you are certain to sell “by owner”.

    For example, if the house is worth $400,000 and you have a mortgage of $320,000, you would subtract $24,000 (6%) from the value for the realtor, subtract $320,000 for mortgage, and be left with $56,000 to be added to your net worth. Because of that, your net worth did take a hit by buying a house, you shouldn’t assume you could sell it the week after you purchased it and get back what you spent. I also try to estimate what it would take the sell the house “quickly” as the value, not “full price”.

  10. Include it. It’s an asset, and any net worth tracker online considers home value. You don’t have to update the value of the house each month (I do once a year or when a similar condo in my building sells). Although it’s not as liquid, you are reviewing your ‘net worth’ not your ‘liquid net worth.’ Go a bit extreme and think about really rich people that own tons of property and other assets like art, etc. They definitely include that all in their net worth!

  11. I include the mortgage for my total debt calculations, but not the home for my total assets. You need to have a place to live, so I treat it as a residence rather than an asset or investment. I know I could sell it if I absolutely HAD to, but I prefer not to think that way.

  12. I include it but don’t worry about the value like other personal finance bloggers, how else would you offset the very costly mortgage you are about to take on?

  13. I calculate 2 figures when determining my net worth. One is my total net worth, which provides me with the big picture. It includes illiquid assets, including my principle residence and revenue properties and any any liabilities that offset their values. It also includes all other assets and liabilities. This figure shows me the entire scope of my financial life.

    The other figure I calculate is my ‘liquid net worth.’ Stocks, bonds, CD’s, cash, etc are included here, along with any related liabilities. This number is smaller than my big picture net worth but it is spry. 😉 It can jump in the ring, both fists flying, with little notice. Liquid net worth is essentially a description of your investible assets.

    If you track the value of your property, there is no need to update it more than yearly, unless the local market is making big moves in one direction, or another. If you don’t include your home, then you can’t include the mortgage. The value of tracking your mortgage is the emotional reward you get when you pay it down. That widening gap between the value of your home and the diminishing mortgage balance is a beautiful thing…totally worth keeping your eye on!

    Big picture net worth provides a measure of how stable your financial footings are. Liquid net worth tells you how flexible you can be when the cups are down.

  14. I choose to leave my house out of my net worth. I need to live somewhere and I can’t afford to move so the house is hardly an asset. I will use the procedes for retirement when I am in my 70s but I would not count it now. Now it is just an expense. Maintenance, taxes and house insurance that go up every year and continually saving for the next big repair.

    My net worth would be over $200,000 instead of a negative number if I included my home. I could count my rapidly depreciating car as part of my net worth too but I don’t think people should include cars either. You can never sell if for the blue book number and the money from a sale just gets poured back in to the newer, higher priced car.

  15. I would definitely include it. As an accountant preparing financial statements it drives me crazy that people think its okay to pick and choose which things to include on the balance sheet. If you want to divide your assets into current and noncurrent, that might help you see what is liquid and what is not. But to expense an entire house I feel would be more misleading than including an estimate. Just my two cents.

  16. Standard accounting principles allow you to include fixed assets on your balance sheet, so you can include it (as well as cars, furnishings, what have you). I understand where you’re coming from, in that determining the values of such assets as well as any depreciation is the sort of thing a business would have to do but is cumbersome and uncertain for the individual. I do it both ways myself: computing my net worth only from cash and investments, and computing it again by adding an estimate of my possessions.

    In your case, however, if you include your house your net worth has likely gone up. Let’s oversimplify and use simple numbers, so say that before the purchase you had assets of $200K, debt of $0, and hence a net worth of $200K.

    Now you buy a $300K house with $50K down. You now have assets of $500K and liabilities of $250K. So your net worth is now $250K.

    • This is wrong, if he used $50 k as a down payment his other assets would decrease. If he paid no closing costs or loan fees his net worth would not change. Just shift from liquid to illiquid.His net worth probably went slightly down due to these fees, plus if he records the house at the future sales price (meaning current price less future commissions) it would drop more.

      What ninja really cares Bout is working capital not net worth. Both Are useful, I would consider retirement to be outside liquid accounts though.

      • Sorry, Kyle, you are right. I was trying to keep things simple and tripped myself up. Using my example, and deliberately trying to avoid complications like closing costs and other fees, his assets would have dropped to $450K (because I stupidly failed to subtract the $50K down payment – and add the closing costs as part of that if you prefer). And therefore net worth would remain the same.

        • Right, which is support for including both in the bet worth. Plus the blog title will make sense again. I would be interested to hear what the interest rate is. We refinanced a month ago to 3% but my wife (loan officer at a bank) told me there are only short term ARM’s below 4% now. I am sure it is due to the fed’s comments about QE3, but that makes a HUGE difference. More important than the house price really.

  17. If you are going to include the liability attached to it, you should probably include the asset it is tied to.

    I personally don’t include my house in my calculations, but that is because I own it free and clear and would rather calculate my “liquid” net worth.

  18. Absolutely. Net worth, by definition, equals your assets minus your liabilities. If you don’t include your biggest and your biggest liability, then you’d be doing it wrong.

    I’m conservative in my estimates, so what I do is take the expected value that I think I would sell my house for, and deduct 7.5% as the ‘asset’ portion of my net worth statement. The reason for this is that I deduct the expected selling fees, including 6% to the realtor and 1.5% that should cover other stuff involved in the selling process.

    This ties in with my definition of net worth, which is basically that if I were to sell all my assets and pay off all my liabilities, how much cash would I have in hand.

  19. Net worth is “what you own, minus what you owe”. So, yes, include it: equity in the home, minus the outstanding balance. Even if that pushes you negative, you guys are Ninjas- you’ll knock that down in no time!

  20. For my month to month net worth calculations I do not include equity in our home or our growing pensions. This helps me see how much money we are shifting out of our day to day spending, rather than just seeing gains through market increases.

    However, I do include it in my net worth “year over year” calculations because it is an asset (and a big one at that!), that typically grows by $15,000-20,000 per year (including decreasing mortgage liability and market increase).

  21. In the beginning, I included my home in my net worth because of the sizable investment and mortgage. Eventually, I no longer include it because my mortgage is less than $50K and will be paid off in less than 4 years. The value of my home is huge, but I do not include it for many of the reasons you used.

  22. I like the idea of taking into account the total cost spent on the house and subtracting the mortgage. AKA I would only use the money you invested directly into the house as part of your net worth. I wouldn’t use equity because if you were to turn around and sell the house, you don’t know exactly how much it could sell for until you receive offers. I would base your net worth on things you know for sure you can control, and you can’t control housing prices in the future.

  23. The house counts. You don’t necessarily need to sell the house to access the equity in it. You could take out a HELOC if you needed to. Selling the house could take time, but accessing the equity is quick and easy.

  24. I include the house as the asset and the mortgage as the liability because it is part of my Net Worth by any legal standard. I also include the car even though I have paid off the loan for the same reason. I don’t keep track of things less than 1k in value (think bee hives, clothes, furniture, cheap computers) even though I should just because I am just lazy.

    Now if you want to track your liquid assets then drop the house, car and retirement accounts and all the associated liabilities (unless the liability exceeds the value of the asset in which case track the amount that exceeds the value).

    As for tracking the value I just use KBB’s good value, for the house Zillow’s zestimate and EBay’s recent sales (for high value items).

  25. Hey, I started a couple a weeks ago to trade money online with a new system called binary options (gives you 2 options and that’s it) and seen good revenue from it.
    The secret to it is that it copies what professional traders do to my own account. It’s all automated and it saves you time. I just leave it on auto-pilot and it trades in my place. Started with 500$ and it makes $25-50 daily from it. I’ll leave you a link, you should check it out : Hope it helps

  26. I include it in my Networth. Actually does and that is where I track everything because I am not good with numbers. My vehicle is also included, but I make a point to update that figure occasionally as the vehicle depreciates. I also include a few pieces of jewelry, like the watch my father gave me, guns and some of the tack for my horse (saddle). I also make sure that I have valued everything at a price that it would quickly sell for.

    Including some of these items is controversial, but the things I have listed aren’t depreciating rapidly and I know that I could sell them within a matter of days if I ever needed to. Some of these items I have even been required to list as part of my financial disclosure during background investigations, so that is another reason I like to keep track of how much everything is worth.

  27. I include about 90% of estimated value (to account for closing costs if we were to sell) as an asset and the mortgage as a liability.

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