Author Topic: So, am I a millionaire?  (Read 9203 times)

SnackDog

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Re: So, am I a millionaire?
« Reply #50 on: January 16, 2019, 03:21:21 PM »
If you total up all assets minus debts and are 7 figures, you can consider yourself a millionaire.  Forget taxes.

When I was growing up there was a nut named Mark O. Haroldsen who advertised how to get rich in real estate in the Sunday newspaper.  He was pictured standing in front of (what the reader presumed to be) his Mercedes-Benz S-class.  (I was always drawn to the advert as a guy on my newspaper route had a 6.9 and 500 SEL). He claimed to have become a millionaire by simple real estate investing.  There was a footnote that his accountant had certified that he had assets worth in excess of one million dollars.   I say good enough!

BTW, the term "millionaire" ain't what it used to be.  Coined in 1821, the same amount would be worth nearly $20 million today.  So, you have a ways to go to meet the original definition.

Boofinator

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Re: So, am I a millionaire?
« Reply #51 on: January 16, 2019, 03:34:49 PM »
On a broader level I chose not to count home equity because I've met so many people who are house rich and cash poor. It was particularly evident where I lived in coastal California.  There are quite a few 'paper millionaires' that couldn't scrap together $100k in 1 month without taking on debt or moving out of their home.  Some struggled to cover a $1k car repair even though their home (bought in the 1960s) was appraised at over a million bucks.  One might argue they could sell their home and then qualify to be a millionaire under my accounting (true), but few would because they can't afford to live anywhere else local, and they don't or can't leave their community.

I think a good lesson from your example is that being a millionaire (breaking a million dollars in assets) doesn't mean shit in coastal California (and is getting to mean less and less many other places as well).

DreamFIRE

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Re: So, am I a millionaire?
« Reply #52 on: January 16, 2019, 04:50:14 PM »
I agree with the comments that you shouldn't count your home's value in determining if you are a millionaire, just as you shouldn't count other "stuff" that you spent your money on.  Calculating your net worth is not the same thing.

If your stash of cash, savings, investments add up to a million+, then you're a millionaire.

Nate79

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Re: So, am I a millionaire?
« Reply #53 on: January 16, 2019, 07:43:56 PM »
#1 is factually correct as the meaning of net worth millionaire. All of the other categories are not net worth but could be described differently (liquid assets, invested assets, etc). Whether you decide to include certain assets or not in how you calculate your net worth is irrelevant - leaving out assets is just an incomplete calculation. Your net worth is all assets minus all liabilities.

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aspiringnomad

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Re: So, am I a millionaire?
« Reply #54 on: January 16, 2019, 08:55:55 PM »
#1 is factually correct as the meaning of net worth millionaire. All of the other categories are not net worth but could be described differently (liquid assets, invested assets, etc). Whether you decide to include certain assets or not in how you calculate your net worth is irrelevant - leaving out assets is just an incomplete calculation. Your net worth is all assets minus all liabilities.

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Right. You can decide which category is most useful/important to you, but words are useless if you choose to ignore commonly accepted definitions. Assets - liabilities = net worth. And in calculating net worth and not some other random (but perhaps more useful) category, assets should always include generally appreciating assets like real estate, or even classic cars and fine art.*

*Like most reasonable people, I don't count most material possessions when I calculate my net worth primarily because they add up to an inconsequential rounding error that is rapidly depreciating to nigh zero. BUT, if someone told me to report back my actual net worth within $100 accuracy the following day on pain of death, I would make the effort to figure out the Craigslist value of an 15-year old Ikea Malm queen-size bed frame (40 bucks, maybe) and add that to the tally along with everything else.

nereo

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Re: So, am I a millionaire?
« Reply #55 on: January 17, 2019, 05:18:12 AM »

House rich is still.... RICH.  But if you have your own arbitrary requirements about where you must have your funds stored, then I don't know what to say.  Sorry, I put them in the wrong place.  Guess I'm not rich anymore.
I don't understand why my arbitrarily decided definition is less valid than your arbitrarily decided definition.  Neither of us is 'wrong'. The whole point of the thread is to ask people how they define it, and I've given my definition and my reasoning behind it.  There's a reason why stocks and bonds are considered 'liquid' and home illiquid.

SaucyAussie

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Re: So, am I a millionaire?
« Reply #56 on: January 17, 2019, 06:47:55 AM »
I use #1 (don't have kids, so #2 is the same) to declare we're millionares....and we needed 2 million to claim I'm a millionaire, since DH has half.  He wouldn't let me call us millionaires until we had a net worth greater than $2 million.

For my retirement planning I use #3 since our retirement house will be approximately the same value as current home, but I assume I'm selling my house at 90, so I add a $ amount back in then.

I think DH has a good point.  You might be able to claim a household net worth of a $1 million but the term "millionaire" is clearly referring to an individual.
https://en.wikipedia.org/wiki/Millionaire

"While statistics regarding financial assets and net worth are presented by household, the term "millionaire" is also often used to describe only the individual who has amassed the assets as millionaire. That is, even though the term statistically refers only to households, common usage is often in reference only to an individual."
« Last Edit: January 17, 2019, 06:51:08 AM by SaucyAussie »

dude

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Re: So, am I a millionaire?
« Reply #57 on: January 17, 2019, 07:38:00 AM »
OP just reminded me that we have a very nice bottle of wine I'd suggested to my wife we open when we crossed the million dollar threshold. Well, we crossed it like nearly two years ago and never did open that bottle! Time to drink that sucker.

iris lily

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Re: So, am I a millionaire?
« Reply #58 on: January 17, 2019, 08:09:47 AM »
We calculate our net worth as this: The value of all that we own on the day that we die.

 So yeah, I put a value on household goods and etc. I am conservative in valuation. Each year when updating our net worth statement we look up the descending  book value of our automobiles. As I give away more crap arpund here I make very slight adjustments to the value of household goods.

We do not have 529 plans so do not have to figure out if that counts as part of our net worth.

The one thing I havent included in net worth is the “cash value” of my pensions. Those values are not  a lot of money, it is hard to know how much is there, and those amounts disappear after a few years anyway.  I just mention these values in our “Legacy” document so that our trustee knows to go out and find this money if it still exists.

Cassie

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Re: So, am I a millionaire?
« Reply #59 on: January 17, 2019, 03:17:31 PM »
I wouldn’t count household goods because they are of little value in general. Yes I would count home equity and cars. Since our pensions have a survivor benefit they are of value only until we both die.

patchyfacialhair

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Re: So, am I a millionaire?
« Reply #60 on: January 17, 2019, 03:42:50 PM »
I count all assets before tax, and include home equity, but also estimate selling costs to include prepping the home to sell and real estate transaction/agency costs. I don't include things like cars or valuables or furniture or any other personal property.

But it's just a meaningless number that I like to look at on paper. My FI calculations, tracking, and forecasting don't include the house at all.

AlexMar

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Re: So, am I a millionaire?
« Reply #61 on: January 17, 2019, 07:25:49 PM »

House rich is still.... RICH.  But if you have your own arbitrary requirements about where you must have your funds stored, then I don't know what to say.  Sorry, I put them in the wrong place.  Guess I'm not rich anymore.
I don't understand why my arbitrarily decided definition is less valid than your arbitrarily decided definition.  Neither of us is 'wrong'. The whole point of the thread is to ask people how they define it, and I've given my definition and my reasoning behind it.  There's a reason why stocks and bonds are considered 'liquid' and home illiquid.

"Liquid" and "illiquid" are different ways to describe net worth.  You have an illiquid networth of $1.5M and a liquid networth of $500,000.  You are still a millionaire.  Illiquid vs liquid has nothing to do with whether you are a millionaire or not - it's a question about how much you have liquid/available.

My definition isn't arbitrary, because if you have assets worth over a million (which includes your house) - well, you are obviously a millionaire and it's widely accepted as such.  You are taking a contrarian view that doesn't make a whole lot of sense, with arbitrary requirements to support it.

The question is right in the title "So, am I a millionaire?" - and that's an easy answer.  If your assets, minus your liabilities is over $1M, then yes, you are a millionaire.  If you wanted to sell all of your worldly possessions, including your house, and pay off any liabilities, would you have $1M in cash?  If the answer is yes, then you are a millionaire.

DreamFIRE

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Re: So, am I a millionaire?
« Reply #62 on: January 17, 2019, 07:58:38 PM »
Defining millionaire isn't so straight forward.

https://www.thebalance.com/what-is-a-millionaire-453762

I personally don't include the home I live in toward calculating whether I am a millionaire, but then I don't need to, either.

Net worth is a different story, and I don't bother calculating that, only my stash, which I'm actually going to draw down on.

A millionaire

AlexMar

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Re: So, am I a millionaire?
« Reply #63 on: January 18, 2019, 06:13:00 AM »
Defining millionaire isn't so straight forward.

https://www.thebalance.com/what-is-a-millionaire-453762

I personally don't include the home I live in toward calculating whether I am a millionaire, but then I don't need to, either.

Net worth is a different story, and I don't bother calculating that, only my stash, which I'm actually going to draw down on.

A millionaire

Again, this makes no sense.  The home is just as much an investment as any of your brokerage accounts.  Some people choose to put the money towards their home to realize the savings on interest or for asset protection (Doctors aggressively do this in my state), some put it in a Vanguard account.  It makes no sense why one makes you a millionaire and the other doesn't.... Lol. 

oldtoyota

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Re: So, am I a millionaire?
« Reply #64 on: January 18, 2019, 06:18:40 AM »
#3. I don't understand including the house unless you plan to sell it and move somewhere cheaper.


Mississippi Mudstache

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Re: So, am I a millionaire?
« Reply #65 on: January 18, 2019, 06:39:36 AM »
#3. I don't understand including the house unless you plan to sell it and move somewhere cheaper.

So, if you rented rather than owning, would you exclude the amount required to pay your rent in perpetuity? That's harder for me to understand than including home equity in net worth.

AlexMar

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Re: So, am I a millionaire?
« Reply #66 on: January 18, 2019, 07:45:09 AM »
#3. I don't understand including the house unless you plan to sell it and move somewhere cheaper.

Do you consider the mortgage a ding against being a millionaire?

oldtoyota

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Re: So, am I a millionaire?
« Reply #67 on: January 18, 2019, 02:54:35 PM »
#3. I don't understand including the house unless you plan to sell it and move somewhere cheaper.

So, if you rented rather than owning, would you exclude the amount required to pay your rent in perpetuity? That's harder for me to understand than including home equity in net worth.

No. It would be part of my expenses. If I had the invested assets to cover that expense, then I could not count rent differently than a different type of expense.

If I need $1M to create $40K a year for me to live on, then including the cost of my home in that $1M figure would not help me at all in generating that annual revenue.





« Last Edit: January 18, 2019, 02:58:19 PM by oldtoyota »

oldtoyota

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Re: So, am I a millionaire?
« Reply #68 on: January 18, 2019, 02:55:50 PM »
#3. I don't understand including the house unless you plan to sell it and move somewhere cheaper.

Do you consider the mortgage a ding against being a millionaire?

The mortgage payment or the mortgage overall?

I do consider a loan to be a liability so a home loan would not be considered an asset. If I retire before my mortgage is completely paid off, then I will save the pay-off amount on top of what assets I need to generate my annual income.

« Last Edit: January 18, 2019, 02:59:52 PM by oldtoyota »

DreamFIRE

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Re: So, am I a millionaire?
« Reply #69 on: January 18, 2019, 03:08:45 PM »
Defining millionaire isn't so straight forward.

https://www.thebalance.com/what-is-a-millionaire-453762

I personally don't include the home I live in toward calculating whether I am a millionaire, but then I don't need to, either.

Net worth is a different story, and I don't bother calculating that, only my stash, which I'm actually going to draw down on.

A millionaire

Again, this makes no sense.  The home is just as much an investment as any of your brokerage accounts.  Some people choose to put the money towards their home to realize the savings on interest or for asset protection (Doctors aggressively do this in my state), some put it in a Vanguard account.  It makes no sense why one makes you a millionaire and the other doesn't.... Lol.

"One" doesn't make me a millionaire???  I'm not sure where you got that.  I said I didn't need to include my home in my calculation.

I live in my home as a place to live and have no plans to sell it.  So again, I personally don't consider it an investment like my stash, so I only include my stash for figuring my drawdown and whether I am a millionaire.  Spoiler alert:
Spoiler: show
 I am a millionaire.   LOL!



nereo

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Re: So, am I a millionaire?
« Reply #70 on: January 18, 2019, 03:17:23 PM »
Defining millionaire isn't so straight forward.

https://www.thebalance.com/what-is-a-millionaire-453762

I personally don't include the home I live in toward calculating whether I am a millionaire, but then I don't need to, either.

Net worth is a different story, and I don't bother calculating that, only my stash, which I'm actually going to draw down on.

A millionaire

Again, this makes no sense.  The home is just as much an investment as any of your brokerage accounts.  Some people choose to put the money towards their home to realize the savings on interest or for asset protection (Doctors aggressively do this in my state), some put it in a Vanguard account.  It makes no sense why one makes you a millionaire and the other doesn't.... Lol.

"One" doesn't make me a millionaire???  I'm not sure where you got that.  I said I didn't need to include my home in my calculation.

I live in my home as a place to live and have no plans to sell it.  So again, I personally don't consider it an investment like my stash, so I only include my stash for figuring my drawdown and whether I am a millionaire.  Spoiler alert:
Spoiler: show
 I am a millionaire.   LOL!




But Alexmar said so, and his method matters while others don't.  plus he ended it with "Lol".  How can you argue with that?

frugalnacho

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Re: So, am I a millionaire?
« Reply #71 on: January 18, 2019, 10:21:22 PM »
#3. I don't understand including the house unless you plan to sell it and move somewhere cheaper.

So, if you rented rather than owning, would you exclude the amount required to pay your rent in perpetuity? That's harder for me to understand than including home equity in net worth.

No. It would be part of my expenses. If I had the invested assets to cover that expense, then I could not count rent differently than a different type of expense.

If I need $1M to create $40K a year for me to live on, then including the cost of my home in that $1M figure would not help me at all in generating that annual revenue.
[/b]

That's a separate question from the original post, which was how to measure networth and determining millionaire status. 

I think determining your actual expenses and your 4% generating stache is a separate exercise from simply determining net worth.  If I have $800k invested and a $200k house I could live in my paid off house and have $32k annual spending while considering myself a millionaire.  I could also sell the house and invest $1M while adding rent to my actual expenses.  Either scenario I would calculate networth the same and they would both be millionaires.

I will personally be celebrating with my millionaire wine when I cross the threshold using criteria #2.  I will be basing my 4% annual spending allowance on just my "stache" of investments and not my net worth of $1M.

oldtoyota

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Re: So, am I a millionaire?
« Reply #72 on: January 19, 2019, 06:52:56 PM »
#3. I don't understand including the house unless you plan to sell it and move somewhere cheaper.

So, if you rented rather than owning, would you exclude the amount required to pay your rent in perpetuity? That's harder for me to understand than including home equity in net worth.

No. It would be part of my expenses. If I had the invested assets to cover that expense, then I could not count rent differently than a different type of expense.

If I need $1M to create $40K a year for me to live on, then including the cost of my home in that $1M figure would not help me at all in generating that annual revenue.
[/b]

That's a separate question from the original post, which was how to measure networth and determining millionaire status. 

I think determining your actual expenses and your 4% generating stache is a separate exercise from simply determining net worth.  If I have $800k invested and a $200k house I could live in my paid off house and have $32k annual spending while considering myself a millionaire.  I could also sell the house and invest $1M while adding rent to my actual expenses.  Either scenario I would calculate networth the same and they would both be millionaires.

I will personally be celebrating with my millionaire wine when I cross the threshold using criteria #2.  I will be basing my 4% annual spending allowance on just my "stache" of investments and not my net worth of $1M.

Yes, the questions are different. The question the person asked about how I count my mortgage differs from the original question, so each received their own answer. 


AlexMar

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Re: So, am I a millionaire?
« Reply #73 on: January 21, 2019, 09:55:38 AM »
Defining millionaire isn't so straight forward.

https://www.thebalance.com/what-is-a-millionaire-453762

I personally don't include the home I live in toward calculating whether I am a millionaire, but then I don't need to, either.

Net worth is a different story, and I don't bother calculating that, only my stash, which I'm actually going to draw down on.

A millionaire

Again, this makes no sense.  The home is just as much an investment as any of your brokerage accounts.  Some people choose to put the money towards their home to realize the savings on interest or for asset protection (Doctors aggressively do this in my state), some put it in a Vanguard account.  It makes no sense why one makes you a millionaire and the other doesn't.... Lol.

"One" doesn't make me a millionaire???  I'm not sure where you got that.  I said I didn't need to include my home in my calculation.

I live in my home as a place to live and have no plans to sell it.  So again, I personally don't consider it an investment like my stash, so I only include my stash for figuring my drawdown and whether I am a millionaire.  Spoiler alert:
Spoiler: show
 I am a millionaire.   LOL!




But Alexmar said so, and his method matters while others don't.  plus he ended it with "Lol".  How can you argue with that?

It's not MY method.  It's the STANDARD method.  If you want to redefine what it means to be a millionaire and make up all sorts of nonsensical arbitrary requirements, then you are certainly entitled to do that.

AlexMar

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Re: So, am I a millionaire?
« Reply #74 on: January 21, 2019, 09:57:41 AM »
#3. I don't understand including the house unless you plan to sell it and move somewhere cheaper.

Do you consider the mortgage a ding against being a millionaire?

The mortgage payment or the mortgage overall?

I do consider a loan to be a liability so a home loan would not be considered an asset. If I retire before my mortgage is completely paid off, then I will save the pay-off amount on top of what assets I need to generate my annual income.

You didn't answer the question.  You said you wouldn't include the house in calculations concerning the question OP asked "Am I a millionaire?" - you said not to count the house.  I'm asking if you count the mortgage AGAINST being a millionaire.  I don't think your comment made much sense.  Because if you don't count the house towards being a millionaire, then it makes no sense to count the mortgage either.  And who wouldn't count loans/liabilities?!

AlexMar

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Re: So, am I a millionaire?
« Reply #75 on: January 21, 2019, 09:59:48 AM »
Defining millionaire isn't so straight forward.

https://www.thebalance.com/what-is-a-millionaire-453762

I personally don't include the home I live in toward calculating whether I am a millionaire, but then I don't need to, either.

Net worth is a different story, and I don't bother calculating that, only my stash, which I'm actually going to draw down on.

A millionaire

Again, this makes no sense.  The home is just as much an investment as any of your brokerage accounts.  Some people choose to put the money towards their home to realize the savings on interest or for asset protection (Doctors aggressively do this in my state), some put it in a Vanguard account.  It makes no sense why one makes you a millionaire and the other doesn't.... Lol.

"One" doesn't make me a millionaire???  I'm not sure where you got that.  I said I didn't need to include my home in my calculation.

I live in my home as a place to live and have no plans to sell it.  So again, I personally don't consider it an investment like my stash, so I only include my stash for figuring my drawdown and whether I am a millionaire.  Spoiler alert:
Spoiler: show
 I am a millionaire.   LOL!


I don't care if you are a millionaire or not.  You said funds in a bond fund make you a millionaire, but your house doesn't count towards that.  There are many reasons someone may take the mortgage interest savings along with financial security of putting the money in their home instead of a bond fund. You claim if you put it in the house = not millionaire.  This makes little sense to me.  If you take the SAME funds and put it in a bond fund = millionaire.  Put it in house = not millionaire.  That's just kind of stupid, no?

bbates728

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Re: So, am I a millionaire?
« Reply #76 on: January 21, 2019, 12:05:26 PM »
Whew, this thread has gotten heated... We may want to take a step back and realize that we are all on the same team here. We all are working together to buck the consumerist narrative in order to break away from NEEDING to work (regardless of if we want to quit work. Let's put our pitchforks away, everyone.

Anyway, to address some reasonable questions:

AlexMar, the definition of millionaire isn't set in stone. There is no universal standard and is the cause for this question. If I understand correctly, you suggest taking the approach of Assets-Liabilities=Equity and Equity>$1,000,000 means you are a millionaire. Seems reasonable and the equation makes me happy as a CPA. I don't think this definition is very useful though in the grand scheme of the FIRE movement as the value of the home is locked until sold. I get your argument that you could sell if needed. Fair 'nuff.

Nereo, I agree with your definition and that is how I will determine my own millionaire status; not as Net Worth or Equity >$1M but instead having $1M in liquid assets. I don't factor in my future house or my future mortgage into my calculations of FIRE, though I would include them in my Net Worth calcs. Ultimately, to answer AlexMar's questions, the difference between putting money into bonds compared to a house is that I fully expect to sell my bonds whereas I don't expect that I will sell my house without buying another.

iris lily

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Re: So, am I a millionaire?
« Reply #77 on: January 21, 2019, 12:15:56 PM »
We went out to dinner to celebrate back when we became millionaires according to the standard definition of assets minus liabilities. But I always had my eye on the REAL prize, millionaire status as defined by assets minus liabilities minus our dwelling.  Because we live in a low cost of living place, oir real estate doesnt take up a high percentage of our assets. It didnt take much longer to reach the second status.

And then, because we like cheap real estate, we bought a few properties to play with, none produce income. So that was another goal, millionaire status minus all real estate holdings because
I dont really like real estate for investment purposes.

Car Jack

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Re: So, am I a millionaire?
« Reply #78 on: January 21, 2019, 12:35:20 PM »
I have a couple suggestions.....made in jest....just to lighten this up a bit.


If you have to ask if you're a millionaire, you're not.


Look at your present assets.  I would submit that you are almost there.  To cross over that line.......you have to sell that bottle of wine that you plan to celebrate with.....

bluebelle

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Re: So, am I a millionaire?
« Reply #79 on: January 21, 2019, 01:27:59 PM »
I use #1 (don't have kids, so #2 is the same) to declare we're millionares....and we needed 2 million to claim I'm a millionaire, since DH has half.  He wouldn't let me call us millionaires until we had a net worth greater than $2 million.

For my retirement planning I use #3 since our retirement house will be approximately the same value as current home, but I assume I'm selling my house at 90, so I add a $ amount back in then.

I think DH has a good point.  You might be able to claim a household net worth of a $1 million but the term "millionaire" is clearly referring to an individual.
https://en.wikipedia.org/wiki/Millionaire

"While statistics regarding financial assets and net worth are presented by household, the term "millionaire" is also often used to describe only the individual who has amassed the assets as millionaire. That is, even though the term statistically refers only to households, common usage is often in reference only to an individual."
I actually agree with his definition.....kind of like all the news lately about Bezos' $137 billion net worth being split in the divorce.....it was never all his anyway, the couple had a net worth of $137 billion, she always had half since they were married, now she'll really have half!

DreamFIRE

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Re: So, am I a millionaire?
« Reply #80 on: January 21, 2019, 04:22:07 PM »
Ultimately, to answer AlexMar's questions, the difference between putting money into bonds compared to a house is that I fully expect to sell my bonds whereas I don't expect that I will sell my house without buying another.

That's what I told him also.  I don't include my house because I live in it and don't plan to sell it.  I don't consider it an investment.

I can understand some people want to include it just so that they can call themselves millionaires sooner, although I would not recognize them as millionaires unless they had a million in actual stash.

I also agree with the comments in previous posts that for a couple, it takes two million for them to be millionaires.

frugalnacho

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Re: So, am I a millionaire?
« Reply #81 on: January 22, 2019, 07:26:10 AM »
Ultimately, to answer AlexMar's questions, the difference between putting money into bonds compared to a house is that I fully expect to sell my bonds whereas I don't expect that I will sell my house without buying another.

That's what I told him also.  I don't include my house because I live in it and don't plan to sell it.  I don't consider it an investment.

I can understand some people want to include it just so that they can call themselves millionaires sooner, although I would not recognize them as millionaires unless they had a million in actual stash.

I also agree with the comments in previous posts that for a couple, it takes two million for them to be millionaires.

I think alex is being a bit belligerent, but I still find your reasoning a bit silly.  The house is providing you with imputed rent.  If you sell it you will have to rent some place.  And it's crazy to me that selling your house pushes you over millionaire threshold by shifting your assets from a house to cash. I don't intend to ever sell all of the stock investments I currently hold; I fully expect to hold several hundred thousand dollars worth of it when I die.  Should I exclude those from my millionaire status calculations?

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Re: So, am I a millionaire?
« Reply #82 on: January 22, 2019, 07:57:16 AM »
Ultimately, to answer AlexMar's questions, the difference between putting money into bonds compared to a house is that I fully expect to sell my bonds whereas I don't expect that I will sell my house without buying another.

That's what I told him also.  I don't include my house because I live in it and don't plan to sell it.  I don't consider it an investment.

I can understand some people want to include it just so that they can call themselves millionaires sooner, although I would not recognize them as millionaires unless they had a million in actual stash.

I also agree with the comments in previous posts that for a couple, it takes two million for them to be millionaires.

I think alex is being a bit belligerent, but I still find your reasoning a bit silly.  The house is providing you with imputed rent.  If you sell it you will have to rent some place.  And it's crazy to me that selling your house pushes you over millionaire threshold by shifting your assets from a house to cash. I don't intend to ever sell all of the stock investments I currently hold; I fully expect to hold several hundred thousand dollars worth of it when I die.  Should I exclude those from my millionaire status calculations?

So a renter with a million dollars in a 401k is a millionaire, but the owner of a 10 million dollar house is not a millionaire by your definition.  That's silly.

BookLoverL

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Re: So, am I a millionaire?
« Reply #83 on: January 22, 2019, 08:52:58 AM »
Ultimately, to answer AlexMar's questions, the difference between putting money into bonds compared to a house is that I fully expect to sell my bonds whereas I don't expect that I will sell my house without buying another.

That's what I told him also.  I don't include my house because I live in it and don't plan to sell it.  I don't consider it an investment.

I can understand some people want to include it just so that they can call themselves millionaires sooner, although I would not recognize them as millionaires unless they had a million in actual stash.

I also agree with the comments in previous posts that for a couple, it takes two million for them to be millionaires.

I think alex is being a bit belligerent, but I still find your reasoning a bit silly.  The house is providing you with imputed rent.  If you sell it you will have to rent some place.  And it's crazy to me that selling your house pushes you over millionaire threshold by shifting your assets from a house to cash. I don't intend to ever sell all of the stock investments I currently hold; I fully expect to hold several hundred thousand dollars worth of it when I die.  Should I exclude those from my millionaire status calculations?

So a renter with a million dollars in a 401k is a millionaire, but the owner of a 10 million dollar house is not a millionaire by your definition.  That's silly.

I admit I don't really get the point of imputed rent. I compare all my lifestyle options to being a homeless dumpster diver. ;)

aspiringnomad

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Re: So, am I a millionaire?
« Reply #84 on: January 22, 2019, 05:21:34 PM »
I think it's frustrating for the mathematically-minded because if you don't accept simple, commonly held terms, then math ceases to be a useful language for those discussing it.

The simplest, commonly held definition of net worth (worldwide) is assets minus liabilities. The simplest, commonly held definition of millionaire (in the US) is having a net worth greater than or equal to 1 million USD. Ergo, if you live in the the US and your assets - liabilities >= 1 million USD, then you're a millionaire.

A separate question is what is the most useful way to slice and dice our net worth for FIRE planning purposes, of which I'm sure there are hundreds of variations just across these forums. I acknowledge that that is a more interesting question for many here, but it's not really a mathematical one in the sense that there is any hope of achieving a simple, commonly accepted way of calculating it.

Using some of the definitions proffered here, I am either a millionaire because my liquid investments plus my rental property put me well over a million US dollars, or I am not quite a millionaire because my rental property (held entirely for investment purposes) is not considered liquid. But, to complicate things a bit more, it will all become moot when I sell my house in April and start paying actual rent instead of imputed rent for my primary residence. At that point, I'll have well over one million USD in liquid investments and cash so I look forward to receiving my official Certificate of Recognition as a "DreamFIRE Millionaire."

although I would not recognize them as millionaires unless they had a million in actual stash.
« Last Edit: January 22, 2019, 05:23:15 PM by aspiringnomad »

DreamFIRE

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Re: So, am I a millionaire?
« Reply #85 on: January 22, 2019, 05:24:23 PM »
Ultimately, to answer AlexMar's questions, the difference between putting money into bonds compared to a house is that I fully expect to sell my bonds whereas I don't expect that I will sell my house without buying another.

That's what I told him also.  I don't include my house because I live in it and don't plan to sell it.  I don't consider it an investment.

I can understand some people want to include it just so that they can call themselves millionaires sooner, although I would not recognize them as millionaires unless they had a million in actual stash.

I also agree with the comments in previous posts that for a couple, it takes two million for them to be millionaires.

I think alex is being a bit belligerent, but I still find your reasoning a bit silly.  The house is providing you with imputed rent.  If you sell it you will have to rent some place.  And it's crazy to me that selling your house pushes you over millionaire threshold by shifting your assets from a house to cash.

Your argument mentions me selling me house twice when I already said more than once that I am not going to sell it.  If your argument depends on me doing something that I said I'm not going to do, then we are getting no where.  If you want to include your home's value so that you can call yourself a millionaire, feel free to do so.  I've reached that milestone already strictly from stash, so it doesn't matter to me.

aspiringnomad

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Re: So, am I a millionaire?
« Reply #86 on: January 22, 2019, 05:43:50 PM »
Coined in 1821, the same amount would be worth nearly $20 million today.  So, you have a ways to go to meet the original definition.

To me, this is the most compelling case for adjusting the formula, and it's one that we can apply consistently across all Americans over time. If it makes sense to index personal financial metrics to inflation, like the government does when calculating poverty thresholds, why not also do so at the higher end of the spectrum?* So then $22,233,008.85 is where I would recognize you as a millionaire :) **

*One counterargument to this logic is that the term "millionaire" references a specific number rather than a construct like poverty. An example of a similar term is "six-figure salary," which in America still means at least 100k USD even though it was coined four decades ago when having one was much, much rarer than it is today.

**https://www.officialdata.org/1800-in-2016-dollars?amount=1


DreamFIRE

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Re: So, am I a millionaire?
« Reply #87 on: January 22, 2019, 05:44:32 PM »
At that point, I'll have well over one million USD in liquid investments and cash so I look forward to receiving my official Certificate of Recognition as a "DreamFIRE Millionaire."

But remember, I'm not the one who came up with that definition.  I linked to one article discussing it ways to define it, and there are others, and some members posting in this thread view it as I do as well.  I'm really not concerned with net worth, either, and I use my stash for calculations involving SWR.

But congrats in advance.  Don't forget though, for a couple, it takes 2M to be millionaires.
« Last Edit: January 22, 2019, 05:47:56 PM by DreamFIRE »

AlexMar

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Re: So, am I a millionaire?
« Reply #88 on: January 22, 2019, 06:02:43 PM »
Whew, this thread has gotten heated... We may want to take a step back and realize that we are all on the same team here. We all are working together to buck the consumerist narrative in order to break away from NEEDING to work (regardless of if we want to quit work. Let's put our pitchforks away, everyone.

Anyway, to address some reasonable questions:

AlexMar, the definition of millionaire isn't set in stone. There is no universal standard and is the cause for this question. If I understand correctly, you suggest taking the approach of Assets-Liabilities=Equity and Equity>$1,000,000 means you are a millionaire. Seems reasonable and the equation makes me happy as a CPA. I don't think this definition is very useful though in the grand scheme of the FIRE movement as the value of the home is locked until sold. I get your argument that you could sell if needed. Fair 'nuff.

Nereo, I agree with your definition and that is how I will determine my own millionaire status; not as Net Worth or Equity >$1M but instead having $1M in liquid assets. I don't factor in my future house or my future mortgage into my calculations of FIRE, though I would include them in my Net Worth calcs. Ultimately, to answer AlexMar's questions, the difference between putting money into bonds compared to a house is that I fully expect to sell my bonds whereas I don't expect that I will sell my house without buying another.

I appreciate the thoughtful response.

Assets - Liabilities = Net Worth.  Over $1M and you are a millionaire.  It's a standard, simple, and really non controversial thing.

Having alternate definitions is fine, but you are defining a "Liquid Asset Millionaire" and not "Millionaire" - if that makes sense.  Are you a real estate millionaire?  Stocks millionaire?  etc.

And again with the house.  I'll use myself as an example.  I have my fire money in my house.  I did that on purpose.  I have a $1.5M house.  Where I live, your homestead is fully protected against creditors.  So instead of getting 4% in bonds, I paid off my 4.5% mortgage for a better return AND asset protection.  I like real estate and don't mind being long on real estate.  When I'm ready to retire, we'll sell the house and put the money in to the market accordingly (whether other real estate deals or stocks/bonds) and downsize in to our second home which is much, much cheaper (and also paid off).  You then say it's not liquid, currently, and not a millionaire.  You see how that doesn't make sense, right?  Judging someone only by liquid assets doesn't really tell you anything.  For example, I have several hundred thousand in crowdfunded real estate deals.  My primary residence is FAR more liquid than those deals.  So these deals don't count towards me being a millionaire, either?  Again, you see how that makes no sense, right?  If you are curious about liquid assets and you value them differently, that's cool.  But that has nothing to do with whether someone is a millionaire or not.  You are just curious about what people have in liquid assets, which tells you just about nothing when it comes to someones wealth.  Some investors aren't nearly as concerned about liquidity as others. To me, it sounds like you guys are saying that real-estate investing can't make you a millionaire, that's obviously ridiculous.

nereo

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Re: So, am I a millionaire?
« Reply #89 on: January 22, 2019, 06:04:27 PM »
Can I be a millionaire if I exchange ~$100k USD into Japanese Yen?  What about $1,500 into Chilean pesos?  Almost everyone in Iran seems to be a millionaire these days...

AlexMar

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Re: So, am I a millionaire?
« Reply #90 on: January 22, 2019, 06:07:34 PM »
I think it's frustrating for the mathematically-minded because if you don't accept simple, commonly held terms, then math ceases to be a useful language for those discussing it.

The simplest, commonly held definition of net worth (worldwide) is assets minus liabilities. The simplest, commonly held definition of millionaire (in the US) is having a net worth greater than or equal to 1 million USD. Ergo, if you live in the the US and your assets - liabilities >= 1 million USD, then you're a millionaire.

A separate question is what is the most useful way to slice and dice our net worth for FIRE planning purposes, of which I'm sure there are hundreds of variations just across these forums. I acknowledge that that is a more interesting question for many here, but it's not really a mathematical one in the sense that there is any hope of achieving a simple, commonly accepted way of calculating it.

Using some of the definitions proffered here, I am either a millionaire because my liquid investments plus my rental property put me well over a million US dollars, or I am not quite a millionaire because my rental property (held entirely for investment purposes) is not considered liquid. But, to complicate things a bit more, it will all become moot when I sell my house in April and start paying actual rent instead of imputed rent for my primary residence. At that point, I'll have well over one million USD in liquid investments and cash so I look forward to receiving my official Certificate of Recognition as a "DreamFIRE Millionaire."

although I would not recognize them as millionaires unless they had a million in actual stash.

You are a substantially better writer than me, lol.  It's beyond me why this is even a controversial topic! 

Boofinator

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Re: So, am I a millionaire?
« Reply #91 on: January 22, 2019, 06:44:37 PM »
Can I be a millionaire if I exchange ~$100k USD into Japanese Yen?  What about $1,500 into Chilean pesos?  Almost everyone in Iran seems to be a millionaire these days...

Absolutely! Though think of the prestige that could be had in becoming a billionaire in Venezuela (~$4,000).

aspiringnomad

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Re: So, am I a millionaire?
« Reply #92 on: January 22, 2019, 06:50:38 PM »
Can I be a millionaire if I exchange ~$100k USD into Japanese Yen? 

No, sorry. You'd be a milli-yen-aire.


nereo

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Re: So, am I a millionaire?
« Reply #93 on: January 23, 2019, 05:35:20 AM »

Assets - Liabilities = Net Worth.  Over $1M and you are a millionaire.  It's a standard, simple, and really non controversial thing.
...

That's multiple times you've tried to write off your preferred method as non-controversial, despite multiple other people in this very thread saying that's now how they view it.*  You've also referred to other methods as 'absurd' and 'clearly' your method is the 'obvious' and 'standard' one.    Frankly your dismissal of others is insulting.
Certainly many NW as the defining threshold for a millionaire.  Maybe even a majority.  But it's not universal, particularly among the broader non-mustachian public.

Consider another view.  In many parts of the country even modest homes can approach or exceed a million bucks. People who live there often have home equity in the high six figures  with years remaining on their mortgage.  On paper their NW shows they have over $1M in assets, but if you ask them if they consider themselves a millionaire they typically laugh and say no way.  Why?  Because they don't feel rich, they say they can't move because of their job, they have to car loans on newish cars (also adding to the NW). They can't FIRE because they're not mustachian and their expenses are ~$80k, and they've got three kids,  and no clear plan how or if they'll pay for college.  In short, they are still living paycheck to paycheck. This kind of situation is disturbingly common in HCOL areas.  There's even a popular term for this - paper/house millionaire.  As in, a millionaire by net worth but not someone who has a lot of money at the end of the day.

It's not the only way, and there doesn't have to be a consensus - that was the underlying driver for this thread - and that's ok.  But please stop telling people that their opinions are absurd and the your definition is the clear, simple, obvious and only acceptable one - and all others are absurd.

*about a dozen posters chimed in to say they personally exclude NW when determining whether someone has hit the millionaire mark.  Several others have said it's when whatever metric you choose crosses 7 figures.

frugalnacho

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Re: So, am I a millionaire?
« Reply #94 on: January 23, 2019, 06:32:50 AM »
Ultimately, to answer AlexMar's questions, the difference between putting money into bonds compared to a house is that I fully expect to sell my bonds whereas I don't expect that I will sell my house without buying another.

That's what I told him also.  I don't include my house because I live in it and don't plan to sell it.  I don't consider it an investment.

I can understand some people want to include it just so that they can call themselves millionaires sooner, although I would not recognize them as millionaires unless they had a million in actual stash.

I also agree with the comments in previous posts that for a couple, it takes two million for them to be millionaires.

I think alex is being a bit belligerent, but I still find your reasoning a bit silly.  The house is providing you with imputed rent.  If you sell it you will have to rent some place.  And it's crazy to me that selling your house pushes you over millionaire threshold by shifting your assets from a house to cash.

Your argument mentions me selling me house twice when I already said more than once that I am not going to sell it.  If your argument depends on me doing something that I said I'm not going to do, then we are getting no where.  If you want to include your home's value so that you can call yourself a millionaire, feel free to do so.  I've reached that milestone already strictly from stash, so it doesn't matter to me.

What about the second half of my post?  If I don't intend to ever sell a portion of my stocks, should I exclude that as well?  Does only net worth I am actively planning on spending count towards millionaire status?

nereo

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Re: So, am I a millionaire?
« Reply #95 on: January 23, 2019, 07:13:55 AM »

What about the second half of my post?  If I don't intend to ever sell a portion of my stocks, should I exclude that as well?  Does only net worth I am actively planning on spending count towards millionaire status?
Admittedly I am trying to imagine a scenario in which I had a portion of stocks which I never planned on selling nor using its dividends (including as a 'safety net'). 
But that brings up the question of what is an asset, particularly if you aren't willing to ever part with it.   An heirloom, for example.  It might be worth a pretty penny, but that's meaningless if you absolutely, categorically will not part with it. Of course one could argue it would get sold if the alternative was destitution, but barring that - it's basically a consumable; you've taken possession but its value won't ever be realized again.

talltexan

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Re: So, am I a millionaire?
« Reply #96 on: January 23, 2019, 07:38:02 AM »
I like to just use mint.com's number for determining my millionaire status.

As far as this discussion about other currencies, there's a nice alternative: when does your 'stache permit you to permanently withdraw the median HH income for your area via the 4% rule. For example, some google searching tells me that the average HH income in Charlotte, NC, is $53,200. So, I'm going to call myself a "millionaire" when I have a set of assets that allow me to safely spend that per year. The sum total market value of those assets would probably approach $1,330,000.

This measure has the advantage of implying a standard of living rather than an arbitrary number that would be different in different currencies.

It's up to me to find a mix of housing, cash-flow real estate, businesses, and passive investments that would reliably create that flow.

frugalnacho

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Re: So, am I a millionaire?
« Reply #97 on: January 23, 2019, 07:47:22 AM »

What about the second half of my post?  If I don't intend to ever sell a portion of my stocks, should I exclude that as well?  Does only net worth I am actively planning on spending count towards millionaire status?
Admittedly I am trying to imagine a scenario in which I had a portion of stocks which I never planned on selling nor using its dividends (including as a 'safety net'). 
But that brings up the question of what is an asset, particularly if you aren't willing to ever part with it.   An heirloom, for example.  It might be worth a pretty penny, but that's meaningless if you absolutely, categorically will not part with it. Of course one could argue it would get sold if the alternative was destitution, but barring that - it's basically a consumable; you've taken possession but its value won't ever be realized again.

You can't live in your heirloom though.  Merely owning a high value heirloom doesn't reduce your expenses like owning real estate does.  My house provides me very real "dividends" by allowing me to live rent free.  I am realizing its value every month I live there even without selling it.

What if I spent my entire stache starting a business?  I have very little other assets outside of the business, but the business is valued at $10M.  Would I be a millionaire? Or just a run of the mill non-millionaire that owns a $10M business?


bbates728

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Re: So, am I a millionaire?
« Reply #98 on: January 23, 2019, 10:22:27 AM »

What about the second half of my post?  If I don't intend to ever sell a portion of my stocks, should I exclude that as well?  Does only net worth I am actively planning on spending count towards millionaire status?
Admittedly I am trying to imagine a scenario in which I had a portion of stocks which I never planned on selling nor using its dividends (including as a 'safety net'). 
But that brings up the question of what is an asset, particularly if you aren't willing to ever part with it.   An heirloom, for example.  It might be worth a pretty penny, but that's meaningless if you absolutely, categorically will not part with it. Of course one could argue it would get sold if the alternative was destitution, but barring that - it's basically a consumable; you've taken possession but its value won't ever be realized again.

You can't live in your heirloom though.  Merely owning a high value heirloom doesn't reduce your expenses like owning real estate does.  My house provides me very real "dividends" by allowing me to live rent free.  I am realizing its value every month I live there even without selling it.

What if I spent my entire stache starting a business?  I have very little other assets outside of the business, but the business is valued at $10M.  Would I be a millionaire? Or just a run of the mill non-millionaire that owns a $10M business?

That is an interesting point. Let me pose a quick rebuttal.

Do you value your home as 25x the imputed rent or do you value your home based on how much it costed on purchase or how much you (or an appraiser) thinks you could sell it for?

Same with the business. Do you value the business as Assets - Liabilities = Net Worth or do you value it as what an ownership interest would cost or what you (or an investor) think an ownership interest should cost?

frugalnacho

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Re: So, am I a millionaire?
« Reply #99 on: January 23, 2019, 11:02:15 AM »

What about the second half of my post?  If I don't intend to ever sell a portion of my stocks, should I exclude that as well?  Does only net worth I am actively planning on spending count towards millionaire status?
Admittedly I am trying to imagine a scenario in which I had a portion of stocks which I never planned on selling nor using its dividends (including as a 'safety net'). 
But that brings up the question of what is an asset, particularly if you aren't willing to ever part with it.   An heirloom, for example.  It might be worth a pretty penny, but that's meaningless if you absolutely, categorically will not part with it. Of course one could argue it would get sold if the alternative was destitution, but barring that - it's basically a consumable; you've taken possession but its value won't ever be realized again.

You can't live in your heirloom though.  Merely owning a high value heirloom doesn't reduce your expenses like owning real estate does.  My house provides me very real "dividends" by allowing me to live rent free.  I am realizing its value every month I live there even without selling it.

What if I spent my entire stache starting a business?  I have very little other assets outside of the business, but the business is valued at $10M.  Would I be a millionaire? Or just a run of the mill non-millionaire that owns a $10M business?

That is an interesting point. Let me pose a quick rebuttal.

Do you value your home as 25x the imputed rent or do you value your home based on how much it costed on purchase or how much you (or an appraiser) thinks you could sell it for?

Same with the business. Do you value the business as Assets - Liabilities = Net Worth or do you value it as what an ownership interest would cost or what you (or an investor) think an ownership interest should cost?

I value my home as the market value I could sell it for*.   I don't include imputed rent in my expenses, but I also don't use my total net worth to determine how much income my stache will generate.   I consider those separate situations, but I am aware of them.  If I were to sell my house and move I would have to budget either purchasing a new house, or keeping the proceeds in my stache and factoring in rent with my expenses.  Either way if my stache + my house's market value > $1M I would consider myself a millionaire. 

The business was hypothetical, and just to make a point. It would depend on the specifics of the business and the situation on exactly how you would value it.   

*I don't think it makes sense to value your home as 25X imputed rent, or the cost you purchased it for.  You can figure out how much imputed rent you are saving by owning the house, but then it really becomes a separate exercise of determining if that is worth the price of the home.  You can always sell it and rent if that works out to be a mathematically better deal.