That One Time I Royally Screwed Up Our Net Worth Calculation

Long, long ago, in a house just like this one – oh wait – it was this one. Let me start over. Back when I first had the idea of starting a personal finance blog, I decided to do a quick and dirty analysis of the state of our finances. I quickly added up our assets and subtracted our liabilities. Right! Wrong. Really wrong. Although I added our mortgage debt on our primary residence and our rental property, I failed to factor in the value of those properties in the assets column. This resulted in a negative net worth. Yikes! After doing quite a bit of digging and a (IMO) proper analysis – we are in the BLACK, baby! Phew.

Starting Out

Yes, I said the result was a negative number! I couldn’t believe it. I mean, I knew I had a few difficult years and that I didn’t always make the absolute best financial decisions, but negative? I should not have had a negative net worth at my age. I immediately began reducing expenses and directing more and more income towards investments.

Funny thing, I realized, not too long ago, that I royally screwed up that calculation. I accounted for all of our expenses for sure, I just failed to account for the value of our properties. Oops. Big oops. Good oops.

There are quite a few schools of thought out there on HOW to calculate net worth. Some tell you to include your primary home and others tell you exclude it. The reasons are valid on both sides of the fence. Thankfully, however I calculate it, I have an impressive (to me) amount of net worth…especially after thinking I was in the RED for a long time. Check out the chart below to see where you rank.

Side Note: I’m not quite ready to share my net worth – but that could change in the future.

Median Net Worth Of Americans As Of 2015

Below is a snapshot of the median net worth of American families in 2015, courtesy of The blue bars represent net worth including primary home value, whereas, the pink represents net worth excluding primary home value. Keep in mind, the values listed in the chart below are demonstrating the median net worth of various age groups in America – the numbers are quite light compared to what one could or should have at at certain ages. I encourage you to read the full article linked in this paragraph.


How do you track your net worth? Do you use online calculators or do you have your own way of doing things? Do you add equity from your primary home? Why or why not?

Bailey Gato BW

Mad Money Cat

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Comments on this entry are closed.

  • Hawaii Planner May 15, 2016, 10:08 am

    I include: our retirement accounts, investments, savings, & the value of our rental house & vacation house. I deduct, of course our two liabilities – mortgage on both houses. I do not include the value of our cars or our kids college accounts (I consider these part of their net worth, not ours).

  • zeejaythorne May 7, 2016, 9:22 pm

    What a pleasant mistake! I still rent, but I am planning on buying within a year. I do not plan to include my housing values in my net worth, because I do not count it as an investment. I just want a bathroom of my own.

    • Mad Money Monster May 8, 2016, 5:12 pm

      I can definitely see the value to including and excluding the value of your home. Good luck with your purchase. Keep us posted!
      Mrs. MMM

      • zeejaythorne May 8, 2016, 6:24 pm

        Will definitely keep folks posted (otherwise, why am I blogging?). Thank you for sharing your journey. Love finding inspiration everywhere.

  • ourfrugalescapades May 3, 2016, 2:29 pm

    Oops! At least you discovered the mistake! 🙂 This chart is a real eye opener. Thankfully we have our act together and calculate our net worth on a regular basis. We do include the equity in our home where, as an accountant, I feel that is the correct way to do it. The good news is that we far surpass our age group in net worth. The bad news is that America overall is in really sad shape if this chart is accurate. – Mrs. FE

    • Mad Money Monster May 5, 2016, 7:22 pm

      I do think we might start including the value of our home, we’ll just keep it in mind that it isn’t accessible income.

      Yep – America, as a whole, is in rough shape. Thank goodness for social security, or there would be a ton of older people without any income at all 🙁

  • thejollyledger May 2, 2016, 6:58 pm

    Well this chart is making me feel pretty good about myself, but pretty scared for the state of the average American. We calculate our net worth using the value of the homes (assets) minus the liability left on the home (what we owe) which equals the equity. So yes, we include equity in our net worth calculation. I handle my net worth in a balance sheet. There is an example on my blog if you want to check it out. I will also update our net worth next week.
    However, having said all that, we realize that our net worth does not correlate directly to passive income. I subtract our equity for these calculations.

    • Mad Money Monster May 5, 2016, 7:19 pm

      Yes, I think we might consider adding in the value of our home and just consider it not accessible. I think I will go check out the chart. Thanks!
      Mrs. MMM

  • Kalie @ Pretend to Be Poor May 2, 2016, 2:09 pm

    Very interesting graph. We do include our equity in the net worth, though we can easily calculate it without as well. I think it helps to look at it from all angles.

    • Mad Money Monster May 5, 2016, 7:17 pm

      Yes, I continue to flip flop on that one. I suppose we could include our primary home net worth as long as we realize it isn’t actually accessible to us. 🙂

  • The Personal Economist Apr 30, 2016, 6:12 pm

    Big oops. At least you realised.
    I don’t include our owner-occupied property because well, you can’t eat bricks! Even though it is our biggest asset.We don’t include it because it doesn’t produce income and it is not part of our strategy to sell it and use it to produce income. I just think including it would give me a false sense of security. I focus more on cash flow than assets.

    • Mad Money Monster May 1, 2016, 10:10 am

      I completely agree with your strategy. Moving forward, we are going to continue to exclude our primary home’s value in our calculations. We will, however, continue to include our rental property because that actually does provide us with income. 🙂
      Mrs. MMM

  • Maggie Apr 29, 2016, 2:26 pm

    I do use the home value in my net worth calculations, but only include what I paid for it (low) just to be conservative. It’s a good thing too, because a neighbor just foreclosed and home values tanked. They should recover soon, but it’s annoying to have so much net worth tied up in the decisions of others. I don’t include car values because I think that’s ridiculous. Those could be totalled tomorrow – and they go down consistently every month. Those are just the way I do it.

    • Mad Money Monster May 1, 2016, 10:06 am

      I definitely see your point on cars. We exclude them, too. For now, I think we’re going to exclude our primary home value on paper but I can see the value in calculating it both ways. Hope all is well in Alaska!
      Mrs. MMM

  • sabbaticalia Apr 29, 2016, 1:19 pm

    I include an estimated value of my household’s home (and cars) into our net-worth calculation. After all, I own them! And then I proceed to ignore net-worth in my planning.

    You see, net-worth isn’t what will keep me fed, clothed, and housed when I hit FI — only realized passive income. So that’s what I measure to gauge my progress. I of course complement that number by yield on assets invested, reminding myself to get good bang for each buck I lay aside to generate more bucks.

    • Mad Money Monster Apr 29, 2016, 1:48 pm

      I completely agree with you. I believe that it is okay to include the value of your home as long as you realize that it isn’t going to provide passive income to cover living expenses. Going forward, I believe I’m going to just exclude my primary altogether from my calculation. I will, however, continue to include my rental property. Afterall, that is a true investment that is providing passive income 🙂
      Mrs. MMM

  • tenleygwen Apr 29, 2016, 10:54 am

    I’m so conflicted about this one! Most of my assets are locked up in my home, which has appreciated a good bit over the past five years. But I also have watched people bank on inflated home values and then suffer for it when the housing market crashed.

    With my home value added in, I’m comfortably above my age bracket in the chart you posted above. Without it, I am in the red. I bought my house in a neighborhood that has been gentrifying pretty rapidly in the past couple of years, and I don’t see that process reversing regardless of what the housing market does in general. But I’m afraid to let myself feel too comfortable — it’s not like I can just sell my house if I need cash!

    I end up focusing pretty exclusively on my debt, especially my credit card debt, as I work to pay it all off. It’s a bit disheartening to see that big red number, but it’s less anxiety-producing than feeling like I’m counting on assets that aren’t really accessible.

    Am I being financially naive? Maybe I’m doing it wrong!

    • Mad Money Monster Apr 29, 2016, 1:46 pm

      both investing and paying down debt will increase your net worth. And I do agree that the primary home can be a bit tricky and is a huge point for debate among people tracking their net worth. I believe, even though my number will fall a bit, I’m going to take it out of my net worth calculation. I will leave in my rental property value and mortgage, but I’m going to exclude both my primary home’s value and mortgage. Afterall, I could sell my rental and see a return but even if I sell my current home I will still need to buy another one, unless I’m going to run with the proceeds and start renting. On the other hand, I think it’s fine to include your home in your calculation as long as you’re aware that it is not going to provide passive income the way other investments do. You’re far from naive. The fact that you are tracking this stuff speaks volumes. 🙂
      Mrs. MMM

      • tenleygwen Apr 29, 2016, 1:48 pm

        Definitely — the rental is an investment, after all! And I’m glad I’m not way out in left field as I manage the money flow … 😉

  • Encore Voyage Apr 29, 2016, 10:20 am

    While we keep track pretty closely, every year we print our our net worth as of December 31st. I keep those printouts in a file. It’s fun to watch it grow every year!

    • Mad Money Monster Apr 29, 2016, 1:41 pm

      That’s a good way to do it. It can become an obsession otherwise!

  • youmeanme Apr 29, 2016, 7:33 am

    I calculated like you and then I switched to a new financial planner. He calculated both the mortgage and value of the home.
    That’s when I found out I was in the black.
    I was ecstatic! I would love to pay off the mortgage sooner but this is the one area ML and I butt heads

    • youmeanme Apr 29, 2016, 7:34 am

      Congratulations on your screw up!!! If you’re going to make a mistake this is the best kind!

    • Mad Money Monster Apr 29, 2016, 1:41 pm

      Yep, crazy how that one little mistake can mean the difference between elation and a heart attack 🙂 Congrats!
      Mrs. MMM

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