What Net Worth Includes
Net worth is calculated by subtracting your total liabilities from your total assets. Assets typically include cash, investments, retirement accounts, and real estate you own. Liabilities include mortgages, credit card debt, and loans. Whether you include your primary residence depends on how you define assets for your personal or professional calculation.
Should You Include Your Primary Residence?
You can include your primary residence if you plan to sell it or use its equity as part of your financial picture. Many financial professionals recommend including it because it represents a significant portion of household wealth. However, some exclude it when focusing on liquid net worth, which only counts assets that can be quickly converted to cash without losing value.
How Real Estate Fits Into Financial Planning
Including your home can give a more complete view of your overall wealth, especially when applying for loans or planning for retirement. Real estate values can fluctuate, so consider current market conditions when estimating your home’s worth. For general guidance on calculating net worth, you can refer to Investopedia’s net worth overview.
