Comments on: Measuring Financial Progress: Net Worth vs. Net Investable Assets

By: Moneyreasons

Moneyreasons — Fri, 04 Sep 2009 01:05:51 +0000

I count 80% of my estimated value of my house as an asset, and the current value of my mortgage as a liability.

IMHO, a house is worth too much to not be considered, vs say your sofa…

Why 80% you might ask… Well, I’d rather understate the value of my house instead of overestimate it. And I figure, 80% is the home owner equity I could get from a bank if the house was paidoff.

By: Save Money Hound

Save Money Hound — Thu, 03 Sep 2009 23:18:06 +0000

I think both measures are useful for different purposes. The second one takes into consideration the liquidity of your assets. It all links back to your financial goals and which measures are most appropriate to use for measuring your financial goals. I like net worth as it is the most commonly understood measure.

By: CardMaster

CardMaster — Thu, 03 Sep 2009 18:28:22 +0000

That’s an extremely good point – I feel like everyone I talk to figures their house into their wealth. But it’s kind of like a having your cake and eating it too kind of thing. Realistically, you wouldn’t really sell your home without buying another one. The only time factoring in your equity is really applicable when you are shopping around for a new home.

By: JoeTaxpayer

JoeTaxpayer — Thu, 03 Sep 2009 16:12:23 +0000

I think I follow Trent’s approach, basically adding up all assets and debts, but then subtracting out full value of the house. So my number is what I’d have if I paid off the mortgage in full. And this is the important number to me to track progress to retirement. I don’t want to count on the house to pull money out by downsizing or moving, so it’s not part of the retirement planning.

On the other hand, there will be a point, maybe 15 years into retirement when between the downsizing to a smaller home and moving to a less expensive area, there may be a windfall. Just not ‘counting on it.’