Do you consider your primary residence part of your net worth ? Is it part of your FI number ? Why or why not.

Do you consider your primary residence part of your net worth ?

The equity, yes. Although I dont adjust for current market price. I also include cars. But I dont adjust for market price. I just deduct a set amount each month/quarter/year for depreciation based on it lasting x number of year.

Is it part of your FI number ? Why or why not.

No, you can't eat your house. And if you sold it, you just need to buy a new one while losing out on additional origination and realtor fees.

If you sold it, you could rent a comparable one

I include it in my net worth when giving a personal financial summary to someone to qualify for a loan or whatever. But when calculating how I have to go for FI, no, because that value isn't helping me and isn't liquidable

It isn't as liquid, but all RE is liquid at the right price.

yes but again you have to live somewhere and frum-area real estate isn't going to be much less than whatever i'm selling for. if it's not capable of bringing in monthly income, it doesn't really help me get to FI. same with cars, IMO

Why are we all skipping the rental option?

renting in many frum areas is astronomicaly expensive-- more than a mortgage

@rich-notebook-17814 you could rent, but that increases the FI number and you need to be careful because that number isn't predictable. I would say owning after FI is way more preferable to renting. If rent goes up a lot over time it can really ruin the numbers.

So it's for stabilization reasons. That probably depends on where you are able to live, and for frum people with limited choices that makes a lot of sense. But that answer may vary depending on personal preference.

@curved-toothbrush-84425 why not adjust for market pricing for your house?

Few reasons: • Its hard to know what the actual market price is. I don't think it would be worth the time to try and figure it out (especially true since I keep track of my net worth on a quarterly basis). • Equity gained based on the purchase price is very easy to calculate. • It's fairly volatile since small swings in percentage can be large amounts in dollars. • The change in price could swing the net worth amount enough to kinda hide what else is going on underneath. This is especially true since it's a very large part of my assets. I would maybe have 2 calculations for net worth, one with primary residence included and one without. But for now I don't see much value in having to constantly figure it out.

Most net worth tracking software figures it out for you. But yeah it's only a best effort and probably wrong

Pardon my ignorance, how does knowing net worth help outside of estate planning?

I only use the word net worth bc most people don't know what FI number means. But yeah I agree with where you're going with that question

For me, partially its motivation. The other part is seeing whether your plan is actually working. Are you succeeding? How well are you succeeding? You can't know it unless you track it.

knowing net worth helps when applying for commercial loans-- many of the lenders want to see a picture of your overall financial health, and some even have criteria that they won't lend you more than the total of your net worth if you are the sole recourse address of the loan

How do you even begin to show them your net worth though lol? There are so many pieces. Do I give them my mint.com login?

@mysterious-tomato-10057 many have templates you can fill in. I personally have an excel doc which has a tab for my cash accounts, a tab for my investment portfiolio balances, a tab for my real estate holdings, and a tab for the notes I hold. I personally have a different excel doc where I track the values on those monthly (when I'm on top of it 😐 ), so it's not a big deal to copy over the most recent records

For a mortgage though you have to prove these values. Like when I state my income I had to show a W2 I couldn't just say a number...

yeah well a commercial loan is primarily based on the fundamentals of the property you are purchasing, not on your own financials. The personal financial statement is just to give the lender a sense of your financial health. I guess you could make it up? I wouldn't risk it. You do have to prove some amount of liquidity with actual statements

Yeah that's what I was trying to bring out 👍

A fully paid for primary home is certainly part of net worth, but net worth is not the same as invested assets. Should a primary home be part of the FI number when using the 4% or similar rule? No, but it does help the FI number indirectly by reducing housing costs (like rent) that would otherwise need to be accounted for in a FI calculation. Counting the home as an investment asset and accounting for the rent savings is double counting.