Net worth should/will include one’s equity for most people.

I personally don’t intend to ever buy a house. I don’t want one. I don’t want to feel tied down and I don’t want the hassle. Is it better to buy than to rent? Yes, IF you live in the house for several years (5 ). Which the average person/family doesn’t.

The home is an asset. The mortgage is a liability. They are two separate things.

The absence of income from the home is irrelevant to the question of whether something is an asset: lots of assets do not generate income: zero coupon bonds, bank bills, bullion, art, wine,shares that do not pay dividends and your home. The fact that there may be cash outflows does not turn an asset into a liability. Lots of assets generate negative cash flows over part or even all of their economic lives: consider any business development project (take a property development or an oil and gas field as examples), a negatively geared investment property, a wine collection or an artwork.

Whether or not something generates a positive “return” and the size of the return is also irrelevant to the question of whether your home is an asset: those are factors which determine whether or not it is a good investment. (Credit card driver’s comment above is also relevant: there are important non-financial considerations to owning a home.)

The fact that there may be a liability (mortgage) secured against the home does not turn an asset into a liability. Why should it? They are two separate concepts. If the fact that a liability is secured against a home turns the home into a liability, then the same logic requires that any asset (e.g. investment properties, shares brought on margin) which has a liability secured against it to be treated as a liability.

I fail to see why a home (and the mortgage liability) should not be taken into account in determining net worth for general financial purposes. Compare a person who rents and has no savings with a person who owns a home with no debt but has no other assets. (An extreme example but it illustrates the point.) If you exclude the home from the second person’s net worth then both people are in the same position – which is obviously not correct. Financial institutions which prepare wealth surveys often (usually?) exclude it. However this is done for the simple reason that the institutions are looking for potential clients and, for this purpose, they recognise that an owner occupied home is unlikely to be something the insitutions can earn a mandate to manage.

Relying on your home as a source of retirement savings is probably a bad idea. I appreciate that this is more debatable but I see no logical reason not to at least acknowledge the value of the asset for financial planning purposes. It certainly can and should play a role in financial planning – and it does in mine.

Without wishing to be inflamatory, I fail to understand any of the arguments put forward for claiming that a home (with or without a mortgage) is a liability or for excluding a home from a net worth calculations.

It’s a point that’s well worth considering. I live in a rented apartment, but I am about to close on a condo that I am going to renovate and rent out (my first real estate purchase). If all goes well, I will do this two or three more times before I buy something for me to live in personally. Hopefully by that point, the mortgage payments on my personal home will be more than covered by the rents from the rental properties. This is what Kiyosaki calls “buying assets to fund your liabilities.” He’s obviously not against homeownership, but he wants to change your way of thinking about it. Yes, it is an asset in the traditional sense…. a very illiquid, non-movable asset that sucks cash on a regular basis. Should you really be so proud of such “assets”?

I will probably never fully “own” my house because a house is a very static and wasteful place to hold that much value.

I personally love the 100% down payment plan on houses, but that is totally unrealistic for most people. Why? Because a few generations ago, our parents and grandparents started financing everything. That means that a minority of parents are able to help jump-start their children into a house and a debt-free lifestyle!

Imagine what life would be like for your children if you could start them off with a paid-for college education and a paid-for house!!!

Try to understand the lesson, and quit arguing semantics to no useful end.

-limeade