Should Your Home Count in Your Net Worth? (The Answer Is Both)

Go to any personal finance forum and post "should I include my house in my net worth?" Then step back and watch the fireworks.

Financial Samurai has argued for years that your primary residence absolutely belongs in your net worth. Money with Katie has made the case that counting your home inflates the number and gives you a false sense of security. White Coat Investor takes a nuanced middle ground. The Bogleheads forums have threads with hundreds of replies and zero resolution.

This debate has been running for over a decade, and the reason nobody wins is because both sides are right. They're just answering different questions.

The case for including your home

Financial Samurai's argument is straightforward: your home is an asset with real market value. If you sold it tomorrow, you'd receive real money. Excluding it from your net worth is like pretending it doesn't exist.

It's your biggest asset. For the median American homeowner, home equity represents 40-60% of their total net worth. Ignoring it means ignoring the majority of your wealth.

Equity is accessible. You can tap home equity through a HELOC, a cash-out refinance, a reverse mortgage, or a sale. It's not as liquid as a savings account, but it's real money that millions of people access every year.

Every financial institution counts it. Banks, the SBA, and estate attorneys all include your primary residence when calculating net worth. When you fill out a Personal Financial Statement, your home's market value goes on the asset side. No lender in the world would accept a PFS that excluded it.

The Federal Reserve counts it. The Survey of Consumer Finances -- the most comprehensive study of American household wealth -- includes primary residence equity. Every published benchmark you compare yourself to includes home equity.

The case for excluding your home

Money with Katie's argument is equally compelling: you can't spend your house.

You need somewhere to live. If you sell your $500,000 house, you don't pocket $500,000. You pocket the equity, minus 5-6% in transaction costs, and then you need to find another place to live. Much of that equity gets absorbed into the next home.

It creates a false sense of security. Someone with $800,000 in home equity and $50,000 in retirement savings has a net worth of $850,000. On paper, they look wealthy. In practice, they have almost nothing generating income for retirement.

It's illiquid and expensive to convert. Selling a home takes months. Transaction costs eat 6-10% of the sale price. Compare that to selling index fund shares, which takes seconds and costs nearly nothing.

Why the debate is unsolvable (as framed)

Both sides are making valid points because they're optimizing for different questions.

The "include it" camp is answering: What is my total financial position? For this question, of course your home counts.

The "exclude it" camp is answering: How close am I to financial independence? For this question, home equity is mostly irrelevant. You need liquid, investable assets that generate income.

Neither question is wrong. They're just different. And that's why the debate never ends -- people are arguing past each other.

The framework that ends the debate: track both

Total net worth is everything you own minus everything you owe. Every asset, every liability, no exceptions. The complete picture.

Liquid net worth strips out your primary residence and the corresponding mortgage. It shows only the assets you could realistically deploy -- cash, investments, retirement accounts -- minus non-housing debts.

Both numbers matter. They just matter for different things.

When total net worth is the right number

• Loan applications. Every lender wants your total net worth. The SBA Form 413 includes real estate.
• Estate planning. Your home is part of your estate. It will be inherited, sold, or transferred.
• Wealth-building progress. Home equity compounds through appreciation and principal paydown. Watching it build alongside investments shows the full engine of wealth creation.
• Comparing to benchmarks. Every published net worth benchmark includes home equity.

When liquid net worth is the right number

• Financial independence. The 4% rule runs on investable assets. Your home doesn't generate retirement income.
• Emergency readiness. Your liquid net worth tells you how long you can survive if income stops.
• Actual spending power. How much could you deploy toward an opportunity or a life change?
• Risk assessment. If 85% of your net worth is home equity, you have massive concentration risk.

The power of seeing both simultaneously

Consider two households, both with a total net worth of $750,000:

Household A:

• Home equity: $350,000
• Retirement + investments: $400,000
• Liquid net worth: $400,000

Household B:

• Home equity: $600,000
• Retirement + investments: $150,000
• Liquid net worth: $150,000

Same total net worth. Wildly different financial positions. Household A has diversified wealth and strong retirement savings. Household B has almost everything locked in their house. If the housing market dips 15%, Household B's total net worth drops by $90,000 -- and their thin liquid reserves mean little cushion.

You can only see this dynamic when you track both views. One number hides the story. Two numbers tell it.

How to track both in practice

Use a net worth tracker that organizes accounts by category. When your real estate, bank accounts, investments, and debts are all categorized, calculating both views is straightforward.

Investment properties can reasonably go either way. Unlike your primary residence, you can sell a rental without needing to find a new place to live. Pick an approach and be consistent.

Stop debating. Start tracking.

The "should my home count?" debate is a distraction from what actually matters: knowing your numbers and watching them change over time.

Your total net worth gives you the complete picture. Your liquid net worth gives you the practical picture. You don't have to pick a side. The answer to "should my home count in my net worth?" is genuinely, honestly, both.

Track the total. Know the liquid. Watch the gap. That's the framework that ends the debate -- not by picking a winner, but by recognizing that one number was never going to be enough.