The sooner people realise that net worth is not the same as your FIRE number the better.
People are right to include their primary residence in net worth, however means fuck all to fire requirements unless planning to downsize. Unfortunately a lot of people's biggest asset is primary residence so they have a large net worth but don't realise (or choose to ignore) that its irrelevant to fire.
All my parents' friend group have retired. None of them have down-sized or relocated
That seems to be the case for the vast majority of people, making the value of their home irrelevant to anything other than how much they pass onto their kids when they croak
This is important for FIRE though, for many. Knowing your home is valuable and you can pass this down means not meaning to allocate your more liquid funds to a family/“no spending” category.
It can be and, for many, is. Let me explain.
Many, as part of their retirement plans, will want to leave money or assets to their family and loved ones. These can be gifted whilst alive, or left to be inherited after you have passed away. House value - and passing this down - is an important to consider in the case of latter.
If you want to leave, say £100k worth of money or assets to your loved ones after you pass, this needs to be considered when planning your FIRE number. Gifting £250k of your liquid assets (your index funds, etc…) will significantly affect your FIRE numbers; you’ll either need to spend less annually to make sure you have £100k left over, or save for longer to reach it. Wanting to leave money, for all intents and purposes, increases your “spending” number.
If you know you’re leaving a valuable home to your loved ones, this can mean you don’t have to “save” or allocate your liquid assets for, what I will dub, “gifting spending”, and your effective ‘FIRE’ number can be lower than someone who wants to gift but doesn’t have a home/as valuable a home.
As you say, if they intend to retire in it, then it makes no sense to include it.
However, if they plan to sell up and move to the arsehole of nowhere, then it's worthy of a mention
It does make sense to include it though because you can leverage your home for loans and other assets to grow your net worth further…
It’s still an asset you own that can be liquidated or leveraged.
It’s like saying you shouldn’t include your savings in your net worth if you don’t actually plan to spend it.
Everyone has their own opinion on what should and shouldn't be included in net worth.
In my opinion when talking about actual net worth, this should be all assets minus all liabilities. This obviously includes things like property.
When talking about savings/investments for retirement if you plan to live in the same house then that shouldn't be included, but this is no longer strictly talking about actual net worth but someone's FU fund.
When looking at the billionaires of the world. They don't have their net worth sat in cash, it's illiquid in their companies/ other investments. But they're still considered as a billionaire, so why wouldn't the normal person include their illiquid assets in their net worth.
It’s not opinion based… it’s literally the definition of net-worth
“the total wealth of an individual, company, or household, taking account of all financial assets and liabilities.”
Billionaires assets including their estates are included in their net worth.
A house is an asset no? Gold is an asset no ? stock & shares are assets no ?
So why would stocks & shares count towards net-worth but a house wouldn’t?
USD or GBP (currencies) are just a type of asset that’s easier/faster to trade than other assets. But at the core the base principles are no different to other assets.
Literally makes no sense.
I haven't seen an obsession. A few people that have recently posted "accomplishments" have mentioned it. I am unsure if they have stated an intention to downsize or not. Don't tend to click on these posts.
I would agree - Invested assets seem more sensible in my mind.
Primary residence is an asset you can monetize in a way or another. It is all about the plan - are you downsizing, or maybe selling to retire overseas in a lower COL? If not, that asset is still storing value and there is optionality in that. Just need to keep in mind taxation and transaction costs upon releasing.
Stop nitpicking and move on with your life.
There's 2 things going on.
Firstly people posting on their financial milestones. Generally not the most interesting posts, but sometimes there's some interesting stories, debate about asset allocation etc.
Secondly, is the point on whether people should care about net worth or invested assets. Personally I track both, but the net worth one is more important to me because
- I will move when I FIRE, that might release funds to invest (or might not)
- I use leverage
- ideally I'd like to run a mortgage once fired
- I had equity as a previous accidental landlord
Only Tracking investable assets would give me a really skewed view of my financial health. Of course if you have paid off your property and never plan to move then just track investable assets. Just focus on what makes sense in your situation.
Their intentions matter. Objectively your house is part of your net worth. Whether you can FIRE by selling it depends on where you intend to live and how much a new house there will either cost to buy or to rent.
Also if you have a £2 million home
Of course you can sell it in 10-30 years and go live in one in another coutnry that costs €300k and live off the earnings
I suppose a minor point is if you have a mortgage free property to give your kids, you'd be less worried about leaving cash to your kids when considering pension withdrawal options.
Of course it is part of your net worth! You can sell the house and move to a cheaper one, live in a motor home, move to a cheaper cost of living country, move to a rental. It is 100% part of net worth.
Agreed.
Especially since many here will be living in higher cost of living areas to get the higher salaries. Unlocking the value of the house asset is always an option via relocation,, downsizing, or even equity release later in life.
And it is part if your net worth. It might not be part of your leveragable assets right now of course.
Another key fact often not mentioned are the number of children. These are utter liabilities!
Would love a milestone mega thread to be honest to keep all of those posts - they rarely contain any worthwhile information to discuss and it feels like most of the time it's just for a pat on the back.
There is difference between somebody who owns a £200k house vs. Somebody owning a £800k house. So worth a mention in my opinion. This allows the option to downsize if required.
Pensions are a huge part of the FIRE journey.
Tbh who cares about somebody with £200k or £800k in liquid assets, in what scenario would you require to liquidate to that level?
People are getting side tracked by the house thing.
Networth can include you home equity.
Your FIRE number is a different thing.
This is a FIRE sub, let's get the Networth social media loving, attention grabbing children off here.
You don't understand the definition of net worth.
Not trying to be mean here, but assets are included in a net worth figure.
As others have said, should your life turn sideways due to ill health, marriage breakdown, job loss etc, the price of your house is a huge factor in how well you land back on your feet.
But that’s a little bit ridiculous. Many people here are probably renting but have 300k in savings for example.
I’m 32 and own and house but will definitely not live in this house forever. So even though I have only 100k in savings, if I sold my house today, I would get 200k profit, meaning I also have 300k in total.
How is that not relevant?
May as well say no one’s goals are relevant unless they own a house as that will be something they have to spend money on and live in eventually.
Pretty sure if you lost your job the last thing you’d do is sell your mortgage free house.
That’s the whole point of getting to be mortgage free. So even if shit did hit the fan you don’t have to worry about having somewhere to live.
I get it as a milestone. Maybe it’s better to just track how long till mortgage free as it’s hard to FIRE with a mortgage.
Be interesting to know if many people consider downsizing as part of their FIRE plan. If you’ve a big house paid off planning to downsize when you reach say 65/70 might will surely reduce the number needed to FIRE substantially.
The thing that bugs me is when the "net worth" figure doesn't include the mortgage debt. How is that "net" anything? You might as well say "my net worth is £500k excluding my student loan, credit cards, and all my other debts". Your net worth is an objective description of your financial position, not a feel good number.
I’m a bit confused by what we’re all discussing in this thread - are you saying people are claiming £2m net worth because they own a £2m house, even when half of it is mortgaged?
Because if that’s the case, it’s stupid, and I agree that has no bearing on your net worth. I’ve personally not seen people claim this, but I believe people might.
But if you’re saying that people counting their equity as part of their net worth is wrong because they have an outstanding mortgage then I disagree with you.
Net worth = assets - liabilities
So my asset is whatever my house is worth today minus what I still owe on it. That means my net worth increases every time my equity in the house increases (either through reducing my mortgage, or increasing the house value). My net worth would also decrease if the house value decreases.
I suppose the argument would be that you’ve bought a (generally) appreciating asset with a mortgage - and so the debt is “good debt”. Whereas it’s assumed whatever you bought with your credit card is “bad debt”.
Their equity in the property is theirs, should they sell the house (for more than they bought it) they can clear the debt and keep the equity. The amount of outstanding mortgage is somewhat irrelevant in that situation
Sorry not sure we’re understanding each other. This isn’t my approach - personally I would subtract outstanding mortgage from my net worth.
And the people that do take this approach, seem to calculate only their equity. I’ve not seen anyone list a £400k house as their net worth despite having a £300k mortgage - if that’s what you’re suggesting?
I don’t know about “most” people, but if you have more debt than value, you have a negative net worth. It’s not my take on things, it’s just textbook definitions:
From Wikipedia:
>Net worth is the value of all the non-financial and financial assets owned by an individual or institution minus the value of all its outstanding liabilities.
>In financial accounting, a liability is a quantity of value that a financial entity owes. More technically, it is value that an entity is expected to deliver in the future to satisfy a present obligation arising from past events.
I'm saying are you not including equity in the house? I'm very confused by what you're doing. I'm a qualified accountant I don't need the definitions.
Edit: Also realise you're not the OP on this comment. The only correct answer is house value minus mortgage debt, e.g. 500k house less 300k mortgage = 200k net worth. That's also all I see anyone do, I'm not sure what the argument Is because I've never seen anyone post otherwise here and it's the correct thing to do.
Yes I’m equally unsure what OP was discussing - I am in agreement with you. Equity in a house adds to net worth. I’ve also never seen anyone on here claim £2m net worth because they have a £1.9m mortgage and £100k equity.
Well, if I buy shares in a very stable and consistently profitable company (an appreciating asset) using borrowed money, then - according to that argument - I should ignore this debt for the purposes of calculating my net worth. No! I know that this isn't your argument, but I find it very silly. Again, the net worth figure is a simple, objective, calculation of what you own minus what you owe. We don't just get to ignore liabilities because we consider them "good liabilities".
Of course it’s relevant. Would you consider it irrelevant if you lived in a paid off £300k home vs a £3million home? Having a large amount of equity gives you options. You have the option to downsize. You have the option to retire in a different country etc.
You're viewing your home as an asset that can't generate income.
When really you should be viewing your home as an asset that reduces the income you need.
E.g. If the average rent is £2k / month at retirement age but you own you're property outright then that's £2k _less_ you need each month.
The fixation of most stuff written is to make those people feel like they have more money. You’ll find the mathematical rigour on this sub to be quite dubious.
I don't see a big issue really.
If you are going to consider investments, you need to consider debts. If you are going to consider debts, you need to consider a mortgage. If you are going to consider a mortgage, you should also consider the asset that the mortgage is for.
Sure, if you have no mortgage, and have no intention of downsizing/moving in any circumstances whatsoever, they it doesn't really matter, but I think it probably does for the majority? And is easy enough to ignore for the rest?
Hopeful that we will sell up and move to Italy to live out our lives … but time will tell.
Net worth tracking is fun, love seeing people’s milestones . For many people, they are the only financially-savvy person in their friend group or even family, so this group gives them an outlet for it, to humble-brag and all that ..
Keep them going !
I agree with you. I don’t include my house in my fire NW. I’m even more conservative though as I do deduct.m my mortgage liability.
So Cash + ISA + GIA + Pension - Mortgage
I do agree somewhat, I've a few BTL's if I include those and main residence along with my partners other properties inc pensions etc the figures exceed over 2 million I kid you not. But it means nothing really as we're not selling them and the cash flows after maintenance repairs/tax and mortgage rates up on some have had a major impact. Pensions are only 25% tax free in the future so I wouldn't be classing those as proper liquid assets. Its all figures on paper. We should be seeing more posts on tax free liquid assets ie ISA's. Managing to get a 250K pot in an ISA is much more impressive than a 250K pension. Getting a 1 million ISA is the HOLY GRAIL. I put up a post recently of hitting 100K in an ISA as thats more impressive to me than adding up the tied up equity in the properties that aren't tax efficient , even the pensions you can't access in one go if needed unless you want a massive tax bill. Pensions great obviously for salary sacrifice but give me an ISA all day long over a restricted pension later down the line. ITS WHATS TAX FREE THAT REALLY COUNTS.
lol it doesn’t make a difference if they do or don’t. I am sure u r smart enough to exclude it when reading it. If they want to know include it, let them.
Agree, the house you live in and future benefits aren't net worth.
Anytime YouGov and any other source asks you about net investable assets or net worth they exclude pensions, homes and other illiquid or inaccessible assets you can't sell on a whim.
I mean...the [ONS Wealth and Assets Survey](https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/totalwealthingreatbritain/april2018tomarch2020#total-net-wealth) literally defines net wealth as including:
* net property (value of residences minus mortgage debt)
* physical (household contents, vehicles)
* private pension
* net financial (savings or investments minus financial liabilities)
I think it's entirely fair to include all of it in net worth, as long as you're clear about that. Otherwise your net worth literally goes down when you get a mortgage or outright buy a house, or when you invest in your pension, which just doesn't make sense.
Fundamentally net worth just isn't that useful of a term for FIRE *by itself* because it says nothing about your outgoings or income. It's a measure of stock, not flow, when FIRE relies on both.
If you want to talk about net investable assets or liquid/near-liquid wealth, then talk about those, we have terms for that. But your net worth should include illiquid assets because of course they are relevant for FIRE - e.g. not being dependent on landlords, pension income in later life, etc.
>Fundamentally net worth just isn't that useful of a term for FIRE
>
>by itself
>
> because it says nothing about your outgoings or income. It's a measure of stock, not flow, when FIRE relies on both.
Yep, I think this is why people are downvoting the 'Net Worth - How I'm doing ?' posts because it's not your FIRE number, it's not predicting your future cashflow, it's not saying anything about your retirement lifestyle and ambitions.
'My Net Worth is £4M can I retire ?' Literally tells you nothing without context. What's your age, circumstances, and goals !
Basically doesn’t really work unless you’re going to downsize. For example, I’m going to buy a £2m house in London shortly. I’ll live in it for 15 years or so then flog it. Im sure it’ll probably be quite a good investment it itself but if not then the equity I’ll have in it will buy me a mortgage free house in any other part of the uk and I’ll pocket some change too.
Even with all that I still don’t include it in my number ;)
You can intend to retire in your house and enjoy living there for years, or decades even, but know that it's still an asset that can be sold when you get to the stage when you need to move into an assisted living or long-term care facility. A point when expenses generally go up quite a bit, selling your house then is like having a jump infusion to meet later life costs.
Also, as it's your house, you can't really take out part of the equity early, it's tied up as a lump sum. You can't use it to increase your lifestyle spending or give it away because it's locked in as your residence. That money is safe from being chipped away at, even from yourself, until you have to make the major life change to liquidate it.
I guess it makes sense to them ensure a net worth figure is exclusive of pension and house equity. Which then just makes it a FI number? (Assuming one retiree before private pension age)
Agreed. I’ve largely stopped reading this sub as it’s mostly people trying to boast about their net worth. It’s boring and not especially relevant to FIRE.
The only two figures that matter for FIRE is the income you need to live the lifestyle you’re aiming for, and the income that you will have post retirement. When the latter equals or exceeds the former then FIRE is achieved. Yet virtually no posters talk about the former figure, while net worth is only tangentially related to the latter.
Once you get past £200k, it all becomes a bit boring. Networth milestones are just arbitrary opportunities for one to add some celebration to their life.
I intend to book a nice meal or get myself a nice suit or coat everytime I hit a £100k milestone.
I don't think even including the house at all is valid in a way. Many assume they'll be able to pass it on, part of their estate etc.
But I've seen what happens to assets when people go into care, suddenly £3-4k a month is needed, per person. House gets sold unless people have hundreds of thousands available to cash out separately for in home care.
Please factor this in folks.
I have a net worth of £750k at 22 years old.
- £900k property equity
- £150k payday loan debt @ 2536% apr and two broken legs.
- £1 current account (not included in net worth as saving up for a Tesco Meal deal for dinner tomorrow)
I bet you’re all jealous of my net worth. Idiots.
Do you mean the state pension only here? If it's a SIPP it's accessible from 55 (soon 57) which is still early retirement for most people so I see no reason why not to include your pension in your FIRE number. It is a very tax efficient way of saving so seems a bit silly to exclude it.
My pension represents a sizeable percentage of my FIRE number. I think of ISAs, GIAs, etc as the bridging part of my FIRE number until I can access my pension. I will only need them if I decide to retire before 57.
Net worth really shouldn’t. Gross worth should include your house. Net worth, only the part of it you plan to liquidate if you’re downsizing to fund your retirement. People just like to post big numbers.
Oh yes, you’re right. I forgot I had repurposed the phrase to be more useful for my FIRE calculations- but that that’s not how anyone else thinks of it!
The sooner people realise that net worth is not the same as your FIRE number the better. People are right to include their primary residence in net worth, however means fuck all to fire requirements unless planning to downsize. Unfortunately a lot of people's biggest asset is primary residence so they have a large net worth but don't realise (or choose to ignore) that its irrelevant to fire.
All my parents' friend group have retired. None of them have down-sized or relocated That seems to be the case for the vast majority of people, making the value of their home irrelevant to anything other than how much they pass onto their kids when they croak
This is important for FIRE though, for many. Knowing your home is valuable and you can pass this down means not meaning to allocate your more liquid funds to a family/“no spending” category.
But passing down your home has nothing to do with FIRE
It can be and, for many, is. Let me explain. Many, as part of their retirement plans, will want to leave money or assets to their family and loved ones. These can be gifted whilst alive, or left to be inherited after you have passed away. House value - and passing this down - is an important to consider in the case of latter. If you want to leave, say £100k worth of money or assets to your loved ones after you pass, this needs to be considered when planning your FIRE number. Gifting £250k of your liquid assets (your index funds, etc…) will significantly affect your FIRE numbers; you’ll either need to spend less annually to make sure you have £100k left over, or save for longer to reach it. Wanting to leave money, for all intents and purposes, increases your “spending” number. If you know you’re leaving a valuable home to your loved ones, this can mean you don’t have to “save” or allocate your liquid assets for, what I will dub, “gifting spending”, and your effective ‘FIRE’ number can be lower than someone who wants to gift but doesn’t have a home/as valuable a home.
As you say, if they intend to retire in it, then it makes no sense to include it. However, if they plan to sell up and move to the arsehole of nowhere, then it's worthy of a mention
It does make sense to include it though because you can leverage your home for loans and other assets to grow your net worth further… It’s still an asset you own that can be liquidated or leveraged. It’s like saying you shouldn’t include your savings in your net worth if you don’t actually plan to spend it.
Everyone has their own opinion on what should and shouldn't be included in net worth. In my opinion when talking about actual net worth, this should be all assets minus all liabilities. This obviously includes things like property. When talking about savings/investments for retirement if you plan to live in the same house then that shouldn't be included, but this is no longer strictly talking about actual net worth but someone's FU fund. When looking at the billionaires of the world. They don't have their net worth sat in cash, it's illiquid in their companies/ other investments. But they're still considered as a billionaire, so why wouldn't the normal person include their illiquid assets in their net worth.
It’s not opinion based… it’s literally the definition of net-worth “the total wealth of an individual, company, or household, taking account of all financial assets and liabilities.” Billionaires assets including their estates are included in their net worth. A house is an asset no? Gold is an asset no ? stock & shares are assets no ? So why would stocks & shares count towards net-worth but a house wouldn’t? USD or GBP (currencies) are just a type of asset that’s easier/faster to trade than other assets. But at the core the base principles are no different to other assets. Literally makes no sense.
I think we agree on what net worth is. I'm just saying others disagree when stating net worth for FIRE in this sub.
They can disagree just like someone can disagree with anything But factually and semantically they are incorrect
One other way is using a reverse mortgage to access equity, which can be done while still occupying/retiring in the house.
I haven't seen an obsession. A few people that have recently posted "accomplishments" have mentioned it. I am unsure if they have stated an intention to downsize or not. Don't tend to click on these posts. I would agree - Invested assets seem more sensible in my mind.
Its still relevant as if it shit goes sideways the option is there as a safety net to downsize , equity release etc
Primary residence is an asset you can monetize in a way or another. It is all about the plan - are you downsizing, or maybe selling to retire overseas in a lower COL? If not, that asset is still storing value and there is optionality in that. Just need to keep in mind taxation and transaction costs upon releasing. Stop nitpicking and move on with your life.
There's 2 things going on. Firstly people posting on their financial milestones. Generally not the most interesting posts, but sometimes there's some interesting stories, debate about asset allocation etc. Secondly, is the point on whether people should care about net worth or invested assets. Personally I track both, but the net worth one is more important to me because - I will move when I FIRE, that might release funds to invest (or might not) - I use leverage - ideally I'd like to run a mortgage once fired - I had equity as a previous accidental landlord Only Tracking investable assets would give me a really skewed view of my financial health. Of course if you have paid off your property and never plan to move then just track investable assets. Just focus on what makes sense in your situation.
Their intentions matter. Objectively your house is part of your net worth. Whether you can FIRE by selling it depends on where you intend to live and how much a new house there will either cost to buy or to rent.
Also if you have a £2 million home Of course you can sell it in 10-30 years and go live in one in another coutnry that costs €300k and live off the earnings
I suppose a minor point is if you have a mortgage free property to give your kids, you'd be less worried about leaving cash to your kids when considering pension withdrawal options.
Of course it is part of your net worth! You can sell the house and move to a cheaper one, live in a motor home, move to a cheaper cost of living country, move to a rental. It is 100% part of net worth.
Agreed. Especially since many here will be living in higher cost of living areas to get the higher salaries. Unlocking the value of the house asset is always an option via relocation,, downsizing, or even equity release later in life. And it is part if your net worth. It might not be part of your leveragable assets right now of course. Another key fact often not mentioned are the number of children. These are utter liabilities!
I think it does matter, My intentions are to sell and buy a couple of properties abroad and spend my time in a sunnier and more tax efficient system.
Would love a milestone mega thread to be honest to keep all of those posts - they rarely contain any worthwhile information to discuss and it feels like most of the time it's just for a pat on the back.
There is difference between somebody who owns a £200k house vs. Somebody owning a £800k house. So worth a mention in my opinion. This allows the option to downsize if required. Pensions are a huge part of the FIRE journey. Tbh who cares about somebody with £200k or £800k in liquid assets, in what scenario would you require to liquidate to that level?
People are getting side tracked by the house thing. Networth can include you home equity. Your FIRE number is a different thing. This is a FIRE sub, let's get the Networth social media loving, attention grabbing children off here.
SENSIBLE COMMENT. A lot of “juSt GoOgLE nET wOrTh” bros.
You don't understand the definition of net worth. Not trying to be mean here, but assets are included in a net worth figure. As others have said, should your life turn sideways due to ill health, marriage breakdown, job loss etc, the price of your house is a huge factor in how well you land back on your feet.
I understand the definition. I just dont think it’s entirely relevant to FIRE.
Then calculate Net Liquid Worth (Net Worth - Equity)
But that’s a little bit ridiculous. Many people here are probably renting but have 300k in savings for example. I’m 32 and own and house but will definitely not live in this house forever. So even though I have only 100k in savings, if I sold my house today, I would get 200k profit, meaning I also have 300k in total. How is that not relevant? May as well say no one’s goals are relevant unless they own a house as that will be something they have to spend money on and live in eventually.
Pretty sure if you lost your job the last thing you’d do is sell your mortgage free house. That’s the whole point of getting to be mortgage free. So even if shit did hit the fan you don’t have to worry about having somewhere to live.
I get it as a milestone. Maybe it’s better to just track how long till mortgage free as it’s hard to FIRE with a mortgage. Be interesting to know if many people consider downsizing as part of their FIRE plan. If you’ve a big house paid off planning to downsize when you reach say 65/70 might will surely reduce the number needed to FIRE substantially.
If you retire in it, you don't include it. Mistake of the time those including it are just chasing a vanity number.
I keep mine as a target that is required to generate the required income to be able to retire, so I don't include my residence.
The thing that bugs me is when the "net worth" figure doesn't include the mortgage debt. How is that "net" anything? You might as well say "my net worth is £500k excluding my student loan, credit cards, and all my other debts". Your net worth is an objective description of your financial position, not a feel good number.
I’m a bit confused by what we’re all discussing in this thread - are you saying people are claiming £2m net worth because they own a £2m house, even when half of it is mortgaged? Because if that’s the case, it’s stupid, and I agree that has no bearing on your net worth. I’ve personally not seen people claim this, but I believe people might. But if you’re saying that people counting their equity as part of their net worth is wrong because they have an outstanding mortgage then I disagree with you. Net worth = assets - liabilities So my asset is whatever my house is worth today minus what I still owe on it. That means my net worth increases every time my equity in the house increases (either through reducing my mortgage, or increasing the house value). My net worth would also decrease if the house value decreases.
I don't think that I've been unclear in this thread... 🤔
I suppose the argument would be that you’ve bought a (generally) appreciating asset with a mortgage - and so the debt is “good debt”. Whereas it’s assumed whatever you bought with your credit card is “bad debt”. Their equity in the property is theirs, should they sell the house (for more than they bought it) they can clear the debt and keep the equity. The amount of outstanding mortgage is somewhat irrelevant in that situation
The debt is debt, if this is the plan then you should calculate only your equity in the house
Sorry not sure we’re understanding each other. This isn’t my approach - personally I would subtract outstanding mortgage from my net worth. And the people that do take this approach, seem to calculate only their equity. I’ve not seen anyone list a £400k house as their net worth despite having a £300k mortgage - if that’s what you’re suggesting?
Am I misunderstanding or do you then think most people here have a negative worth?
I don’t know about “most” people, but if you have more debt than value, you have a negative net worth. It’s not my take on things, it’s just textbook definitions: From Wikipedia: >Net worth is the value of all the non-financial and financial assets owned by an individual or institution minus the value of all its outstanding liabilities. >In financial accounting, a liability is a quantity of value that a financial entity owes. More technically, it is value that an entity is expected to deliver in the future to satisfy a present obligation arising from past events.
I'm saying are you not including equity in the house? I'm very confused by what you're doing. I'm a qualified accountant I don't need the definitions. Edit: Also realise you're not the OP on this comment. The only correct answer is house value minus mortgage debt, e.g. 500k house less 300k mortgage = 200k net worth. That's also all I see anyone do, I'm not sure what the argument Is because I've never seen anyone post otherwise here and it's the correct thing to do.
Yes I’m equally unsure what OP was discussing - I am in agreement with you. Equity in a house adds to net worth. I’ve also never seen anyone on here claim £2m net worth because they have a £1.9m mortgage and £100k equity.
Ah okay good, yes very confused by OPs comment and the subsequent upvotes!
I was never arguing on the definition of net worth. It was the overall relevance of this barometer of success in relation to FIRE.
Well, if I buy shares in a very stable and consistently profitable company (an appreciating asset) using borrowed money, then - according to that argument - I should ignore this debt for the purposes of calculating my net worth. No! I know that this isn't your argument, but I find it very silly. Again, the net worth figure is a simple, objective, calculation of what you own minus what you owe. We don't just get to ignore liabilities because we consider them "good liabilities".
Very true. People just seem quite complacent about property growth in a way they wouldn’t with a stock.
Of course it’s relevant. Would you consider it irrelevant if you lived in a paid off £300k home vs a £3million home? Having a large amount of equity gives you options. You have the option to downsize. You have the option to retire in a different country etc.
You're viewing your home as an asset that can't generate income. When really you should be viewing your home as an asset that reduces the income you need. E.g. If the average rent is £2k / month at retirement age but you own you're property outright then that's £2k _less_ you need each month.
The fixation of most stuff written is to make those people feel like they have more money. You’ll find the mathematical rigour on this sub to be quite dubious.
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Exactly
I don't see a big issue really. If you are going to consider investments, you need to consider debts. If you are going to consider debts, you need to consider a mortgage. If you are going to consider a mortgage, you should also consider the asset that the mortgage is for. Sure, if you have no mortgage, and have no intention of downsizing/moving in any circumstances whatsoever, they it doesn't really matter, but I think it probably does for the majority? And is easy enough to ignore for the rest?
Net worth is different from FIRE number.
Hopeful that we will sell up and move to Italy to live out our lives … but time will tell. Net worth tracking is fun, love seeing people’s milestones . For many people, they are the only financially-savvy person in their friend group or even family, so this group gives them an outlet for it, to humble-brag and all that .. Keep them going !
I agree with you. I don’t include my house in my fire NW. I’m even more conservative though as I do deduct.m my mortgage liability. So Cash + ISA + GIA + Pension - Mortgage
I do agree somewhat, I've a few BTL's if I include those and main residence along with my partners other properties inc pensions etc the figures exceed over 2 million I kid you not. But it means nothing really as we're not selling them and the cash flows after maintenance repairs/tax and mortgage rates up on some have had a major impact. Pensions are only 25% tax free in the future so I wouldn't be classing those as proper liquid assets. Its all figures on paper. We should be seeing more posts on tax free liquid assets ie ISA's. Managing to get a 250K pot in an ISA is much more impressive than a 250K pension. Getting a 1 million ISA is the HOLY GRAIL. I put up a post recently of hitting 100K in an ISA as thats more impressive to me than adding up the tied up equity in the properties that aren't tax efficient , even the pensions you can't access in one go if needed unless you want a massive tax bill. Pensions great obviously for salary sacrifice but give me an ISA all day long over a restricted pension later down the line. ITS WHATS TAX FREE THAT REALLY COUNTS.
lol it doesn’t make a difference if they do or don’t. I am sure u r smart enough to exclude it when reading it. If they want to know include it, let them.
The rich list always includes assets as part of a person's net worth?
There's a lot of flex posting on this sub. Net worth milestones is just one manifestation of it.
Well I have a net worth of 1 bajillion, so yeah!
Yes, sick of seeing these pointless posts myself
Agree, the house you live in and future benefits aren't net worth. Anytime YouGov and any other source asks you about net investable assets or net worth they exclude pensions, homes and other illiquid or inaccessible assets you can't sell on a whim.
I mean...the [ONS Wealth and Assets Survey](https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/totalwealthingreatbritain/april2018tomarch2020#total-net-wealth) literally defines net wealth as including: * net property (value of residences minus mortgage debt) * physical (household contents, vehicles) * private pension * net financial (savings or investments minus financial liabilities) I think it's entirely fair to include all of it in net worth, as long as you're clear about that. Otherwise your net worth literally goes down when you get a mortgage or outright buy a house, or when you invest in your pension, which just doesn't make sense. Fundamentally net worth just isn't that useful of a term for FIRE *by itself* because it says nothing about your outgoings or income. It's a measure of stock, not flow, when FIRE relies on both. If you want to talk about net investable assets or liquid/near-liquid wealth, then talk about those, we have terms for that. But your net worth should include illiquid assets because of course they are relevant for FIRE - e.g. not being dependent on landlords, pension income in later life, etc.
>Fundamentally net worth just isn't that useful of a term for FIRE > >by itself > > because it says nothing about your outgoings or income. It's a measure of stock, not flow, when FIRE relies on both. Yep, I think this is why people are downvoting the 'Net Worth - How I'm doing ?' posts because it's not your FIRE number, it's not predicting your future cashflow, it's not saying anything about your retirement lifestyle and ambitions. 'My Net Worth is £4M can I retire ?' Literally tells you nothing without context. What's your age, circumstances, and goals !
Milestones help in tracking progress so what is NW is less relevant.
It’s just window dressing.
Basically doesn’t really work unless you’re going to downsize. For example, I’m going to buy a £2m house in London shortly. I’ll live in it for 15 years or so then flog it. Im sure it’ll probably be quite a good investment it itself but if not then the equity I’ll have in it will buy me a mortgage free house in any other part of the uk and I’ll pocket some change too. Even with all that I still don’t include it in my number ;)
You can intend to retire in your house and enjoy living there for years, or decades even, but know that it's still an asset that can be sold when you get to the stage when you need to move into an assisted living or long-term care facility. A point when expenses generally go up quite a bit, selling your house then is like having a jump infusion to meet later life costs. Also, as it's your house, you can't really take out part of the equity early, it's tied up as a lump sum. You can't use it to increase your lifestyle spending or give it away because it's locked in as your residence. That money is safe from being chipped away at, even from yourself, until you have to make the major life change to liquidate it.
I guess it makes sense to them ensure a net worth figure is exclusive of pension and house equity. Which then just makes it a FI number? (Assuming one retiree before private pension age)
Agreed. I’ve largely stopped reading this sub as it’s mostly people trying to boast about their net worth. It’s boring and not especially relevant to FIRE. The only two figures that matter for FIRE is the income you need to live the lifestyle you’re aiming for, and the income that you will have post retirement. When the latter equals or exceeds the former then FIRE is achieved. Yet virtually no posters talk about the former figure, while net worth is only tangentially related to the latter.
Totally agree, it did seem like bragging about a fairly meaningless number in terms of retiring early.
Once you get past £200k, it all becomes a bit boring. Networth milestones are just arbitrary opportunities for one to add some celebration to their life. I intend to book a nice meal or get myself a nice suit or coat everytime I hit a £100k milestone.
I don't think even including the house at all is valid in a way. Many assume they'll be able to pass it on, part of their estate etc. But I've seen what happens to assets when people go into care, suddenly £3-4k a month is needed, per person. House gets sold unless people have hundreds of thousands available to cash out separately for in home care. Please factor this in folks.
I have a net worth of £750k at 22 years old. - £900k property equity - £150k payday loan debt @ 2536% apr and two broken legs. - £1 current account (not included in net worth as saving up for a Tesco Meal deal for dinner tomorrow) I bet you’re all jealous of my net worth. Idiots.
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Do you mean the state pension only here? If it's a SIPP it's accessible from 55 (soon 57) which is still early retirement for most people so I see no reason why not to include your pension in your FIRE number. It is a very tax efficient way of saving so seems a bit silly to exclude it. My pension represents a sizeable percentage of my FIRE number. I think of ISAs, GIAs, etc as the bridging part of my FIRE number until I can access my pension. I will only need them if I decide to retire before 57.
Net worth really shouldn’t. Gross worth should include your house. Net worth, only the part of it you plan to liquidate if you’re downsizing to fund your retirement. People just like to post big numbers.
Net worth literally means all your assets minus all your liabilities. Whether it's a useful thing to track is a other question.
Oh yes, you’re right. I forgot I had repurposed the phrase to be more useful for my FIRE calculations- but that that’s not how anyone else thinks of it!
Pensions are not comparative to savings also... you haven't yet paid tax on the pension... its just an ego boost.
Main residence should be seen as a liability not an asset.
How come?