Count it. Just count it. It's really, really, painfully simple, and MMM agrees. Net worth = your assets less your liabilities.
Yes. Every single person in this thread has said to count it in your net worth. Not a single person disagrees (some hardcore Kiyosaki follower with an incorrect definition of asset would disagree, but no one here, so far).
We all agree: count your house in your net worth.
That's a separate question from counting assets for retirement income (aka your "stache," your investment portfolio, etc.)
And for THAT, most of us are arguing that no, you don't count it in that number.
Also count your imputed rent as an expense.
This just seems unnecessarily complex, to count an asset that doesn't produce income, for an expense that doesn't exist.
Much simpler is to calculate your real expenses, and the portfolio you have to cover that.
If you want a number to compare to someone, sure, you can impute rent, and see what your budget would be if you didn't have the paid off home. But for a real scenario in determining your spending, doing imputed rent doesn't make sense.
I agree that it's up to individual circumstances and modelling sophistication whether to count home equity towards FIRE stash, but I think it makes a hell of a lot more sense for most to account for it in some manner.
Yes, it's accounted for in the lower budget, as we've said.
And if you model more complex, you may count it another way, based on how you plan to access it.