This piece is part of my 2016–2026 archive migration. Some original formatting, content, and external links may be missing, changed, or not be optimized.
It’s not an asset – and it’s not liquid
Your home is not an asset until it’s paid in full and no longer owned by the bank. Yet many people erroneously include the value of their homes in their net worths.
Your home is a liability unless it’s a rental or investment property.
But we all need a place to live, and not everyone has hundreds of thousands of dollars in cash to pay for a home, so for most people the home always remains a liability.
But even if your home is paid off, it will take money out of your pockets with taxes, maintenance costs, and utilities. The only way to offset these fees is to rent the property and make someone else cover these fees.
The best way to calculate your net worth is to subtract your liabilities from your assets.
Some of the best assets to calculate in your net worth are relatively liquid – as in stocks, bonds, notes, cash, retirement accounts, passive income sources, etc.
The reason that these assets should be included in your actual net worth is that they are more accessible.
Your home is not an asset that is readily accessible. It’s usually one of the last things you’d want to sell if you ever need the cash because you need a roof over your head! So, it doesn’t necessarily make sense to include it in your net worth.
If your home is paid off and you plan to sell it, the cash from that purchase would become a liquid asset to be used accordingly and applied to your liquid net worth.
Most people never pay off their homes because they constantly upgrade and take out new 30-year mortgages.
Every time you take out a new mortgage, that’s an additional 30-year loan unless you pay off your mortgage faster, which most people don’t.
So what does this mean?
Well, it means most people will leave this earth with a mortgage (aka debt).
If they were a real millionaire, they wouldn’t have a 30-year mortgage.
Do you get the picture?
A person with a million dollars or more net worth doesn’t leave this earth in debt because their net worth is in the black.
The worst thing about leaving the earth with your home mortgage unpaid is that whoever it passes on to has to take over those mortgage payments unless your house gets seized.
It’s all about perspective.
Many people believe they’re millionaires, when in reality, they’re wannabe millionaires with a lovely home that requires them to work a job to pay the bills to afford the home, or else they will lose it.
You can’t lose a home that you own.
And you wouldn’t lose a home if you’re a millionaire.
Don’t be fooledmedium.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.