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I do include our house in my net worth calculations. I noticed that this is a slightly controversial issue in the personal finance world, but I don’t know why. Isn’t it pretty easy to simply deduct the home equity from a calculation to arrive at a new amount if you rather not include the house? Here is why I include our home in my net worth calculations.

Net Worth – No Value, But Debt?

If I did not include the estimated value of our house, my general net worth calculations would be way off if I did include the remaining mortgage debt. I have heard people say that it is more realistic that way, but in what world would you ever take into account the debt for something without taking into account its value too?

If I had $65,000 of credit card debt, that is pure debt with no inherent sales value. If I have $65,000 of mortgage debt, that is debt that could be repaid by selling the house itself. Right?

I understand that I may not be able to sell my house immediately, but in that “what-if” scenario, then why would my mortgage debt need to be paid back immediately? Maybe I simply don’t understand.

Net Worth – No Value, No Debt?

The other scenario I have seen acts like the house doesn’t exist. Like when you leave a paid-off car out of the calculations. I am sorry, but if you have a mortgage, that is a liability that should be taken into account. I simply think that a low estimated sales value should be taken into account too. If your house or car is paid off, sure, feel free to leave it out of your calculations if you want, but I personally know that I could sell my car in less than 3 days if I had to for at least $5000. I think that is something that adds to my net worth.

Net Worth Calculations are Personal

All of that said, I know that everyone likes to use a system they like. I have no problem with that at all, but then I should be able to use whatever system I like too. Right? Now, if we were comparing two different net worths, obviously we would need the same set of rules. I just don’t think it is that hard to look at whatever numbers a person uses and fit them into a new criteria.

What do you think? Do you include a home’s equity (negative or positive) in a net worth calculation?