Add both mortgage and my homes value for Net worth?

This is probably silly but I just added my home's Zillow value to my tracked accounts.  This intern made my net worth look  good.   Before my Idea was that my net "net worth" told me if  I lost my job tomorrow could I pay off all my debts, and still afford to live.  Kind of a useful goal.   Now that I have added the value of the house I "think" it is a true Net Worth calculation, but only really tells me that if I liquidate EVERYTHING, what would I have left. Not realistic, (or accurate because retirement account have penalty's for one) .  What do you do, should I change anything?

Thanks

Tim

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    • WordTenor
    • Can we agree that goals are dumb and immature? Sure.
    • WordTenor
    • 8 mths ago
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    Your net worth is indeed what would be left if you liquidated everything. That's exactly right. And yes, technically it would be less penalties for retirement accounts if you actually had to liquidate them. 

    Like 2
  • Net worth should be all assets minus all liabilities so sounds like you have done it right. 

    I updated my home value once a month or so (whenever i got an email from realestate.com.au with a price update). It fluctuated all the time but i used a rolling 3 month average to try and smooth out the jumps a little. After 6 years, by the time we sold, it was reasonably accurate to what we received.

    More recently I actually automated these updates using the YNAB zapier integration which can read the emails and send updates to the API.

    Here's my example. Despite buying and selling a house the chart still represents the net position. I'll be adding our new mortgage in May when we settle on the new place.

    Like 1
  • Since the Net Worth report let's you choose the accounts you are using for the graph, the best is to have all accounts in. Then you tailor the plot depending on what you want to look at. Want to see what would happen without liquidating your retirement accounts? Uncheck those in the drop-down list of the report. Etc.

    I often use the report to see how I am doing in paying off liabilities without having to sell retirement or my home. So I have the retirement accounts and home value in tracking account but routinely use the Net Worth report without those.

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    • TheTabby
    • Just a common cat trying to budget uncommonly well.
    • TheTabby
    • 8 mths ago
    • Reported - view

    Given that we rent, it’s not really as applicable to us, but I suppose we could add the value of my wife’s car.  (I’m lucky enough to drive a company car.)

     

     really this brings up the question of which net worth you’re discussing, I think of it in three different ways.

    1. Liquid net worth - this would be bank accounts, credit cards, probably loans and taxable/accessible investment accounts

     2. Financial net worth - this would be everything in 1, definitely including loans and taxable investments.  This also includes retirement accounts, and basically anything that you can look up an account and read the dollar sign value on.  Okay, whatever the local currency is.

    3. Total net worth - this would include the value of everything.  From the car to the house to the jewelry to the coin collection, along with everything listed so far.

     Each of these has a use, but each of them is also terrible for other situations.  On a day to day basis, liquid net worth is a useful metric, but the retirement accounts and car value really don’t matter.  On a planning basis, the financial net worth is useful.  Will I have enough saved for retirement?  Am I on track to replace a car?  In my opinion the total net worth is only useful as a score keeping tool, because things would have to be pretty dire before I start selling my computer, coin collection, and grandfather clock (that one was a gift/inheritance when my grandparents moved into assisted living), or before my wife started considering selling her car, or jewelry.  Yes, all of that has value, but it’s not primarily financial value, it’s practical value.

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      • SgtBatten
      • "YNAB broke" since 2013
      • SgtBatten
      • 8 mths ago
      • 2
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      TheTabby I agree with everything you've analysed there.

      I do not include cars because I have not gone out and bought luxury, rare or special cars. Rather they are as you say, practical. I will always have a need for such a vehicle and therefore my plan is to run them into the ground. I tend to only include appreciating and monetary assets. On the chart i posted above i have my retirement funds, investments, house and mortgage, bank accounts and credit cards. But again, each to their own. 

      Like 2
  • I do the same, and track both my mortgage and home value.  

    For home value, I use 90% of the current value as calculated by the housing price index here: https://www.fhfa.gov/DataTools/Tools/Pages/HPI-Calculator.aspx

    90% because if I sell with a realtor that would cost 6% and the other 4% for either moving costs and to stay conservative with the amount.  

    I didn't track vehicle value until I upgraded two vehicles a year apart and I was discouraged by the drop in net worth and curious the impact if I offset the cash drop from the purchases by the change in value in vehicles.  The interesting thing I learned was seeing the depreciation.  It's been crazy to see how quickly the drops (despite both vehicles being 7-8 yrs old when we purchased them.  They've dropped more than 50% in the past 4-1/2 years.  That's good incentive to NOT drop cash on newer ones now. 💸

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