Do you include home value in your FIRE number?

[jamesbond007]

I have been doing this mistake for the longest time. I used to look at my net worth number in Mint and used to calculate my FIRE date for the longest time. Then it struck me that I should not include my home value in my net worth to calculate the FIRE number because it is not something that I withdraw from. Sure, I don't pay rent, but it does not help me with my expenses.


What do you do?

[terran]

Yes and no. If you plan to keep the house after you retire then you should include it to the extent that it reduces expenses through lack of rent/mortgage, but not as part of your 25x (or whatever multiplier) calculations. If you plan to move when you retire then you can include the equity in your home in your 25x calculations, but make sure subtract the expected cost to purchase a new home or include expected rent in the expense side of your calculations. Just make sure you don't include it in both net worth increase and expense reduction -- that would be a good way to underfund your retirement.

[Metalcat]

You can include it in your NW calculation, but of course you don't factor it into your 'stache amount, that would make no sense.

[NotJen]

Since I do plan to sell my house and rent in the near-term, I do 2 calculations in my spreadsheet.  One that only includes my investments and cash (with lower expenses since my home is paid off), and one that includes my assumed home value (minus transaction costs) and higher expenses because of rent.

[Paper Chaser]

It should only be included in your FIRE number if you're planning to sell the house and move someplace cheaper (harvesting equity) in FIRE. Of course only the equity should be used, which may be different from the current value.

I do include home equity in net worth calcs, but that's mostly just used as a general gauge to monitor overall financial position as I think it's important to have an idea what assets are worth.

[jamesbond007]

Understood. I have been doing it all wrong. It is not that bas all things said and done. My FI date got pushed by another 2 years. Not the end of the world. On the up side, I am glad I realized this mistake early.

[Greystache]

I did not include home equity in my FIRE number, but I did consider it as part of my safety margin if everything goes horribly wrong. It is comforting to know that I have $700k that I can tap into if I need to.

[Ichabod]

I include my home value and my mortgage. If you don't include your home value, shouldn't you also exclude the mortgage?

If you've paid off the house and you're planning to stay in it or move somewhere similar, excluding it makes sense. If you just started a 30-year-term, it also seems fine to exclude it.

My mortgage is my biggest expense, and it'll be paid off five years or some from my FIRE date.  But refinancing it to a longer term, selling, or turning it into an investment property are all possible options. It would seem an oversight to leave it out of my numbers.

Isn't the best way to think of this as the home as an investment that pays implied rent?

[CCCA]

It’s an important number to keep track of. Especially if you live in a HCOL area or have any possibility of downsizing/geoarbitrage. But I don’t include it in my FIRE number. That should only include money that you can use to live on.

[alcon835]

I track it as part of my overall FIRE number. That may change as I get closer to FIRE, but when I look at its value, it's not a significant part of my FIRE number and I live in an area where I could sell it pretty easily if I needed to. If that started to change (the neighborhood going downhill or something), I could sell it early and move somewhere pretty easily.