Should My Net Worth Include My Primary Residence?

by | Oct 10, 2022 | Money

There are benchmarks in every community. Among gym rats, that question might be: “What do you bench, bro?” Among CrossFitters, “What’s your Fran time?” And in the FIRE community, “What’s your FI and Net Worth number?”

Granted, that last question is not something I commonly hear people ask each other at FI/RE community events. But if it did come up in conversation, FIRE people are refreshingly transparent about their finances.

I DO include my primary residence in my net worth calculation, but don’t just take my word for it. I’ll explain the reason why I do, give examples for why some people chose to NOT include it, and arm you with the background info to decide whether you want to include your primary residence yourself.

Gather around children. Let’s learn about how to get the most from our net worth calculations…

On the Menu for This Post…

Hey moneymakers! Today, we’ll cover a lot related to Money:

  • The definition of Net Worth vs. an FI Number
  • How to calculate your net worth
  • Why some people don’t include their primary residence in their net worth
  • Why I chose to include my primary residence in my calculation of net worth,
  • How other members from the FI community are calculating their net worth, and
  • The mind hack that I believe can come from including your primary residence in your net worth

The Definition of Net Worth vs. an FI Number

Someone’s financial independence (FI) number is the total amount their net worth needs to grow to so that they can live off 4% of it. (Note: 4% was the original number used to calculate the “safe withdrawal rate” and some people prefer a number closer to 3% to be more conservative.) This math is based on how much a person spends per year on average.

To calculate your FI number, figure out your annual spending and multiply that number by 25. As your nest egg continues to grow, the theory is that you can dip into it for living expenses and never need to erode the principal balance. This means your retirement savings can in theory last forever without the fear of running out of money before you die.

Let’s use my numbers as an example:

  • I spend about $5,000/month
  • $5,000 x 12 = $60,000/year
  • $60,000 x 25 = $1,500,000

FI Number ≠ Net Worth

The tracking of an FI number is very similar to the way a person would track their net worth, except the FI number assumes the entirety of a person’s assets are liquid (able to be cashed out) for the investor to live on.

If someone’s primary residence is not being used to house hack with short-term renters (e.g. Airbnb guests), medium-term renters (e.g. travel nurses), or long-term renters (e.g. housemates), that home is not generating any cash flow for them in retirement. Personally, I believe it’s this distinction that has created the debate over whether to include your primary residence in the net worth calculation or not.

If you haven’t calculated either one yet, girrrrrrrrrrl… you gotta get on that!

By calculating your FI number, it forces you to reflect on your spending. The lower your annual spending, the lower your FI number. If early retirement appeals to you, take a hard look at your expenses and it can help you reach FI much, much sooner. 

Still confused about how the FI number relates to your spending?

No problem. Take it from Missy: if it’s worth it (FI), you can work it. Put that thing down, flip it and reverse it.

The 4% Rule shows how the FI number we came up with for my own situation (above) will theoretically provide enough money to live on forever to cover for my annual expenses.

$1,500,000 x 0.04 = $60,000

In other words, my FI number needs to reach $1.5M in order to cover my annual expenses, and I’ll explain later why I DID choose to include my primary residence in my net worth number.

Quick note: for people crushing it in the real estate game, they may not have an FI number because their focus is to cover their monthly expenses using the cash flow from their rental properties instead of living on a 4% safe withdrawal rate from their liquid investments.

How To Calculate Your Net Worth

If you’re new to the money game and want to calculate your own net worth, the calculation is simple.




Some examples of assets: checking account balances, stocks, bonds, and rental property. Some of my favorite versions of those are high yield savings accounts that are FDIC insured, low-cost index funds like VTSAX, Series I Bonds from, and cashflow-positive real estate listed on FurnishedFinder.

Some examples of liabilities: credit card debt, student loan debt, mortgages, and car loans. My favorite versions of these are the Southwest Airlines Rapid Rewards credit card and the 30-year fixed rate mortgage, especially if it’s a VA or FHA loan which requires the lowest possible down payment.

If you want to save yourself some time and energy calculating your net worth, there’s lots of FinTech (financial technology) apps that can do the heavy lifting for you. I plug all my accounts into Mint (available for free in both a website and app) and use the Net Worth tab under “Trends” to calculate that number for me.

Why Some People Do NOT Include Their Primary Residence in Their Net Worth

The rationale given by lots of “stealth wealth” millionaires on the podcast Millionaires Unveiled is that they will always need to live somewhere, so they only include their other assets. Other assets are more liquid, meaning they can usually be sold off to provide money to live on. Here’s a few more people weighing in on the debate.

“Your house is not an asset. Rather, it is a liability. An asset is something that puts money in your pocket. [Your primary residence] takes money out of your pocket in the form of a mortgage, utility payments, taxes, maintenance, and more. That is the simple definition of a liability.”
Robert Kiyosaki

Author, Rich Dad, Poor Dad

Exclude your primary residence using Kiyosaki’s definition if you are not making any rental income from bedrooms, your garage, or other structures located at your primary residence.

“I want my home to be off the books and simply a place that I love.”
Joe Saul-Sehy

Author/Podcaster, Stacked, The Stacking Benjamins Show

Exclude your primary residence if you would never see yourself downsizing into a smaller home (or a more affordable country) in retirement.

“I think it’s absolutely fine to include your primary residence as part of your net worth. On the other hand, I excluded my primary residence in calculating my net worth at 28… to be conservative.”
Sam Dogen

Author/Blogger, Financial Samurai

Exclude it to be conservative in your numbers.

“The primary residence is not counted as an asset in the net worth calculation [to be considered an accredited investor with a $1M net worth].”

U.S. Securities and Exchange Commission (SEC)

Government Agency

Exclude it to make your calculation qualify you for investments that require you to be an accredited investor.

Why I DO Choose To Include My Primary Residence in My Calculations of Net Worth

My primary residence is a 1-bedroom condo in the high cost of living city of San Diego. When I move into my next property, my condo will become a rental property, so I count it as a future source of rental income.

When I took a temporary work assignment in DC, I listed my condo on Furnished Finder and found that my place had so much demand from travel nurses that it stayed rented for the entire 11 months and sat vacant for only 10 days between renters!

When I retire from my FT job at 55, my plan is to rent out all my properties so they can provide as much cash flow as possible while I slow travel the world. This travel might come in the form of driving an RV or tiny house around the country and staying in national parks, flying to visit friends and/or living like a local in Airbnbs for a month at a time, or moving to a low cost of living part of the world like Thailand or Portugal. With all those options, I plan on spending less while traveling than if I were staying put in San Diego.

Because the rental demand is so strong in San Diego, I’m confident there will always be renters looking to stay in my properties when I want to do some slow travel around the world. And that includes my primary residence.

How Other Members from the FI Community are Calculating Their Net Worth

Spoiler alert: it’s not calculated the same way by every person I interviewed.

The Mind Hack That I Believe Comes from Including Your Primary Residence in Your Net Worth

In the 1999 classic Fight Club, the character Tyler Durden—played by Brad Pitt—tells Edward Norton that Ed shouldn’t fret about the explosion in his condo and all the belongings he lost. It was all just stuff. As he says in the movie:

“The things you own end up owning you.”

Tyler Durden

Bad@ss, Fight Club

In another one of my favorite movies, The Secret Life of Walter Mitty, that burden of physical possessions came in the form of a grand piano. This oversized instrument always needed to be paid for, whether it was in storage, being moved, or taking up an expensive room of someone’s home where it sat collecting dust.

house hacking with my pup

If you feel like your home (and your stuff) is so precious that you are not willing to let someone else stay there when you’re gone, it could be a sign that your oversized home has become the financial equivalent of a grand piano that you keep carrying around everywhere you go because you can’t bear to part with anything in it.

This is not a judgment on McMansions. If all those bedrooms bring you joy, and you are so financially set that the high property taxes and utility bills are merely a drop in the bucket of your infinite net worth, it’s all good!

This last section is more so a call to action for anyone who would like to downsize because they are stressed over money, want to reduce their spending, or prefer to live a frugal Warren Buffet lifestyle to live and give generously AF.

If you identify as any of those “financial orientations” above, read on.

In the spirit of minimalism, I’d encourage you to do a little Marie Kondo purging to see if you really need all 11 bedrooms of your McMansion. And also, are your things so precious that you are willing to always pay a mortgage and/or property taxes on it, including when it sits vacant and you’re traveling the world in retirement? Even worse, will you be the constraints of a fixed income in retirement because you’re paying all of the above expenses while you also pay someone to “house-sit” for you when you go on vacation?

Not to get all Tyler Durden on you, but if that’s the case, your primary residence might be owning you.

Final Takeaways

Your net worth is one of the most important metrics to motivate you along your journey to FI. If you haven’t used an app like Mint to start tracking your net worth yet, I’d encourage you to make like Shia Labouf and…

Even if you’re new on your journey to financial freedom, you’ll appreciate having your net worth documented. As the years tick by, it will give you a record of where you’re at with data points to track your journey.

This will keep you motivated to stay the course when you look back and see how far you’ve come. As your net worth starts to hit that hockey stick stage of exponential growth, you’ll be able to see exactly how much more it’s growing in a single month compared to when you first started.

My own experience has matched up with what I hear countless FIRE members say about investing: “the first $100,000 takes the longest and then it grows quickly from there.”

For me, it took half a year to go from $10,000 in debt to becoming debt-free. After that, it took me 4 more years to go from debt-free to $100,000 in net worth. From there, it only took 7 more years for me to get to $900,000. Next up, I project hitting $1,000,000 by early 2023.

Check out my $5 eBook for all the deets and actionable advice from my journey.

I share these numbers NOT to brag. That’s just gross.

It’s the opposite, actually.

I share in the spirit of transparency because I genuinely want the same for you and for all my readers. So do me a favor. When you hit your next financial milestone, whatever that is for you, tag me on Instagram. Reason why: there may not be a lot of people who want to cheer you on and I would love to be that person to celebrate your wins with you!

The sooner you get started, the better. Over time, all that compounded growth will eventually produce a nest egg that can support you passively in retirement. Put in the reps of saving and investing now, and get that momentum started.

Down the road, you may just find yourself the money bro of your friends, being asked for a “spot” by newbies getting started with their own financial fitness.💪🏻


  1. Veronica Crass

    This post is great! And I love that you brought up that quote from Robert Kiyosaki – “Your house is not an asset. Rather, it is a liability. An asset is something that puts money in your pocket.” This is why I personally have not (and will not) include my primary residence in my Net Worth. Unless it’s an asset, then I wouldn’t count it 🙂

    • H.M.

      I love how you’re so measured and conservative! After having setbacks in the 2008 crash and having to start over, it’s made me the same way. To quote Lauren’s clip from the video interviews I included in my post, I like to include my primary residence, but only because it’s a “personal use asset” which I plan on turning over to renters when I move on to my next place. I love parsing out these nuances, because I believe that’s how we can really apply the information to our own lives and lock it into a daily practice. Thanks for sharing your own preferences on this question, Veronica!


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