house's value included in net worth?

[bjl584]

Does anyone include the value of their home when figuring their net worth? One the one hand I would say yes, because it is an asset and has an appreciative value. On the other hand, I would say no because it is not a liquid asset that you can cash out quickly. Also, you need to live someplace. Even if you sold it, you would need to buy another one. It has a value, but if you did cash it out and invested or spent it elsewhere, you would be homeless. What does everyone think? I personally include mine as part of my net worth even though I know that it really isn't money that I have available to me short of selling it or getting a home equity line of credit.

[disneysteve]

The value of your home, your car, collectibles, furniture, etc. all count toward net worth whether you plan to sell them or not. I suspect you count your mortgage amongst your debts, so you need to count your home equity among your assets.

[vsjhoc]

"Rich Dad, Poor Dad" proposes another view: your house is a liability because you have to pay property taxes. An asset is only an asset if it generates revenue, in his view.

[disneysteve]

Originally Posted by vsjhoc

"Rich Dad, Poor Dad" proposes another view: your house is a liability because you have to pay property taxes. An asset is only an asset if it generates revenue, in his view.

So if I had a stack of cash in my safe deposit box, that wouldn't count as an asset because it isn't generating revenue? That doesn't make sense. What about artwork, jewelry or other non-financial items of value?

[pearlieq]

I do include my house because it is an asset that I expect will appreciate, and the equity is available to me as a source of cash.

I generally don't include depreciating assets (i.e. cars) and savings that are specifically intended for a future purchase (such as savings for a new car, vacation savings, reserves for property tax, etc.)

I know it's not technically the correct way to calculate net worth, but I feel it gives me a more accurate picture of where I am financially.

[bjl584]

All interesting responses. Calculated net worth seems to be a rather complicated thing to do. The easy part is your savings, investments, and debts. But when you start to try to figure out how much your furniture is worth or how much the tools in your garage are worth, you could really be in for quite a challenge.

[tinapbeana]

Originally Posted by bjl584

All interesting responses. Calculated net worth seems to be a rather complicated thing to do. The easy part is your savings, investments, and debts. But when you start to try to figure out how much your furniture is worth or how much the tools in your garage are worth, you could really be in for quite a challenge.

it's a challenge, but you really need to do it for insurance purposes. when you add up what it would cost to replace everything you own, you may find out that your insurance doesn't offer you the coverage you need. like CDs at 10$ each. if you have 100, thats 1k in CDs alone. anything of value (e.g. antiques collectibles, etc) should have an appraisal at least for insurance purposes. then you know what to figure for your net worth.

[pearlieq]

Originally Posted by bjl584

But when you start to try to figure out how much your furniture is worth or how much the tools in your garage are worth, you could really be in for quite a challenge.

That is a tricky one, and most people are too attached to their possesions to estimate objectively/correctly. Liquidation value of most household goods is 10 - 25% of their original purchase price at best!

I prefer to leave most of my household goods out.

[bjl584]

Any advice on where I could something like a table and chairs or a lawntractor appraised? I know what I paid for them, as I save my receipts, but things like that depreciate. Or doesn't depreciation matter so much when talking about that type of stuff for insurance purposes only?

[Ima saver]

I just had to do a financial report to renew my husband's contractor's license. They want to know the value of your house in your net worth. My home is a large part of my net worth because I have no mortgage.
I jump lump all my personal belongings together. I claim about $25,000. That includes hummels, antiques, furniture, tools, etc. (My husband has a fortune in tools)
I think Rich Dad is wrong. Yes, I have to pay taxes on my house, about $2500 this year, but where can I rent a big, nice house for $2500 a year?

[pearlieq]

Originally Posted by bjl584

Any advice on where I could something like a table and chairs or a lawntractor appraised? I know what I paid for them, as I save my receipts, but things like that depreciate. Or doesn't depreciation matter so much when talking about that type of stuff for insurance purposes only?

That's kind of two different animals.

For insurance purposes, you can choose coverage for either the actual, current value of your possesions or for the replacement cost of your possesions.

Figuring replacement cost is easy--just check out prices next time you're at the store.

Figuring actual current value is a little tougher. For that I guess I would check garage sales, classified ads, and thrift stores, and then adjust the prices I find there down at least 25% since most people tend to overprice their goods and later accept a lower offer.

I would only worry about getting appraisals for very valuable pieces of artwork, antique furniture, or collectables. Personally I wouldn't start thinking about getting something appraised unless I was confident it was worth at least $5,000 or so. But that's just me--others might handle it a different way.

If you decide to include your household goods in your net worth calculations, the most conservative (and IMO, accurate) way would be to use the actual, current value.

I know so many people who just can't quite accept that the sofa they bought for $800 3 years ago would command no more than $75 at a garage sale today. It's kind of a bitter pill to swallow!

[tinapbeana]

Originally Posted by bjl584

Any advice on where I could something like a table and chairs or a lawntractor appraised? I know what I paid for them, as I save my receipts, but things like that depreciate. Or doesn't depreciation matter so much when talking about that type of stuff for insurance purposes only?

check out the irs page and see what their depreciation standards are... it might not be 100% accurate, but it should give you a decent ballpark figure.

when it comes to insurance value, my company says to insure for replacement value, not saleable value (of course, that doesn't apply for my car, which is a whole 'nother gripe). chk w/ your insurance company to see what their requirements are.

[scfr]

I'm reading "The Net Worth Workout" by Susan Feitelberg right now; she is a JPMorgan Chase financial advisor. She says you include all liquid assets plus: real estate (including your primary residence), cars, jewelry, and furniture (but not other household items).

I agree with including the value of real estate, but I deduct 10% of the estimated current market value because if I were to sell it I would have to pay real estate agent's commission, sales tax (in my state), escrow fees, etc.

Personally, I don't include cars, jewelry, or furniture simply because I think it would be too much of a hassle to figure out their value, and mine aren't high-value (or maybe I should count a '93 Taurus with 200K miles as a liability? haha). I might feel differently if I had antiques or other high-value, more easily sold items.

[Ima saver]

I do figure my net worth, including cars. I have 2 antique cars that are going up in value, not down. I don't figure much for the van, but the vette is still under warrenty and worth quite a bit! I am sure the hummels are worth at least $15,000 and I have some other antiques and civil war stuff.

[Broken Arrow]

Ah, the age old brain teaser. A deceptively simple question with a not quite so simple answer.

Actually, yes, I would include it in the net worth calculation. Liquidity can be an issue, especially if it's your primary residence, but when you think about it, it can also be put on the market to sell, which is what we sometimes do when we move around, right?

A common error that I've seen though, is not subtracting the mortgage and its annual upkeep costs from the market value of the house. I love it when people run around bragging about how much they're worth with all the property they "own".

Riiiiiiight.

[vsjhoc]

Originally Posted by disneysteve

So if I had a stack of cash in my safe deposit box, that wouldn't count as an asset because it isn't generating revenue? That doesn't make sense. What about artwork, jewelry or other non-financial items of value?

I didn't say I agreed with him [Robert Kiyosaki, author of "Rich Dad, Poor Dad"], or that it all made sense. It's just another point of view to consider.

He says you will never get rich working for someone else; you must run your own show and have your own asset-producing investments. And he wasn't suggesting that you compare the amount of your property taxes to what you have to pay in rent if you didn't own. His point is that merely owning a house makes you liable to pay property taxes to the government. [uh, oh .... straying dangerously close to that other thread ...]

[bjl584]

Robert Kiyosaki is a hard man to argue against, as I believe that he is a self made billionaire. He must be doing something right.

[disneysteve]

Originally Posted by vsjhoc

His point is that merely owning a house makes you liable to pay property taxes to the government.

That's true. I'm just not sure what that has to do with the net worth question. I haven't read his book. Have to pick it up next time I'm at the library.

[vsjhoc]

Originally Posted by disneysteve

That's true. I'm just not sure what that has to do with the net worth question. I haven't read his book. Have to pick it up next time I'm at the library.

Yeah, don't spend your money on it at the bookstore.

My point, and I do have one (thank you, Ellen DeGeneres): In his diagrams for calculating your net worth, he puts the family home on the liability side, not the asset side.

[poundwise]

The gentleman may have a point about how one ought to view one's own finances, however, in terms of what actually constitutes net worth (as well as according to generally accepted account principles) a house is an asset.

How to calculate net worth:

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