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I struggle with the housing price as part of networth as i feel unless you decide you are renting after you sell your home, you are still going to have to use that money to buy another home.
 

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Most people use current value minus any mortgage amount left to be paid. I do not include our home in our net worth calculation. As we move closer to retirement we will try to assign a value to our property as my living situation will change when retired. It is likely that we will move from a higher value property to something less expensive (house to condo). The transition may not be right away as we are very happy with our house and area. If I had revenue/investment properties I would definitely include those. There is nothing wrong in including your primary residence, in fact it is likely a more true net worth value. I prefer to keep items that are easily liquidated in this calculation. Some people also include their vehicle. i do not see vehicles as assets but as a means of transportation. However I am glad the credit providers see them as assets :D
 

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I'm very late in the discussion. But what does the house owner plan to do if his equity in it (net after liabilities) has ballooned to an overwhelming proportion after his purchase? Will he take out additional mortgages to bring his equity down proportionally? What if his equity drops afterward? Sell his other investments and pay off his mortgage? Would he be planning to do this analysis every year to balance everything he owns?

When I purchased my first houses over 30 years ago, buyers were required to put down 20%. Nowadays, it's 10% or even 5%. So it may be relatively easy for someone's equity to double based on leverage and real estate appreciation.
 

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We have 3 vehicles but the only one I include in NW is the collectible. I also consider the home as part of NW as it could always be liquidated and downsized, or rent a condo if required.
 

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I'm very late in the discussion. But what does the house owner plan to do if his equity in it (net after liabilities) has ballooned to an overwhelming proportion after his purchase? Will he take out additional mortgages to bring his equity down proportionally? What if his equity drops afterward? Sell his other investments and pay off his mortgage? Would he be planning to do this analysis every year to balance everything he owns?

When I purchased my first houses over 30 years ago, buyers were required to put down 20%. Nowadays, it's 10% or even 5%. So it may be relatively easy for someone's equity to double based on leverage and real estate appreciation.
The real question about this "net worth" is "why".

Net worth for me is an intellectual curiosity of little real worth.
When I die and it's liquidated it will be more applicable to the kids.

Net worth is nice if you want to measure "financial success", but that's a silly game, for me, money is a tool.
Do I have enough of the right tool to accomplish the task?
My stocks spitting out dividends are a tool, hopefully they will eventually be enough to handle the task of supporting my lifestyle.
My household equity, really doesn't do much other than secure my home and avoid rent, irregardless of $ value.


I think of "investible assets" as more useful than net worth.
I wouldn't take out a mortgage to invest in bonds so I hit some silly imaginary ratio
 

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I agree. A networth statement is something you are told in financial planning to do but i don’t see the point really. I think it is useful to know if due to job loss or sickness you have to start drawing down your assets but i don’t think thats why financial planners tell you to do it. I think its supposed to show your financial health but as long as your networth isn’t negative how do you judge.
 

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I have 2 net worth calculations. One includes the principle residence and recreation property, the other excludes these two. The one excludes our personal property is what I use to plan our retirement because we plan to live in the house and use the recreation property. They are only there as an emergency if there we start to run short in our final years and long term care is more than planned.

The other calculation includes both. This is for my estate planning and when were were determining how much life insurance we would need to buy. In the case we both died, my kids would have lived with a relative, and both the house and rec property would have been sold for their care.

In terms of percentage, I don't think there is a right answer for the amount of house. I think we are about 25% for our house of networth.

Greater Fool site once offered a formula that:
90 minus your age is the max of net worth you should have tied up in a house.

That sort of approach makes sense to me.
I think this makes sense for when you are in the accumulation stage, but when you are retiring, I don't know if it applies. One is decreasing the retirement assets, while their house keeps increasing. My dad is 87. His house is more than 3% of his estate.
 

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My house represents 26% of net worth and I use my original purchase price + inflation as a valuation. On a related note, since reading the Millionaire Next Door many years ago, I have used that book's measure of expected net worth and looked at it every 5 years. The goal of being a PAW or prodigious accumulator of wealth (instead of all hat no cattle) seemed to resonate with me and motivate me to save/invest money. I just updated it for 2021. My mid-life crisis sports car from Stuttgart may have played a role in me being an under-accumulator of wealth in my early 40's! 😎
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Greater Fool site once offered a formula that:
90 minus your age is the max of net worth you should have tied up in a house.

That sort of approach makes sense to me.
Why?
Lets say you're 80, in good health with a net worth of about $1M, you're suggesting a $100k house s too much?

It makes no sense to me.
As long as you can afford your lifestyle, it doesn't really matter how much is "tied up" in your house.
 

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It's pretty meaningless.

In Vancouver, where houses are well over a million dollars, it might be 50% -- and that would be just fine.

In St. John, it might be 20%, but maybe your house is only worth 200K, which means you only have 800K outside of the house. That's worse than the Vancouver person who has a higher percentage in their house.
 

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I also think the 90-age formula is not of much use . Asset allocations are personal based on a lot of factors. However many often overlook the fact that their home makes often make up a large portion of their assets. When I first started DIY I felt I needed a portion of equities to REITs. I still have REITs in my portfolio but not a very large concentration. Having a large allocation to any asset increases risk. As long as you are within your risk tolerance it's fine. Sadly until you have experience a correction in your overweighed assets you really won't know if you are within you actually wihtin your risk tolerance. A 40% correction in equities has less impact on someone who has 90% of their assets in physical properties.
 
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