When you hear the words “net worth,” images of highly wealthy icons from Bill Gates to Beyoncé probably cross your mind, but you don’t have to be rich to have a net worth of your own. In fact, everybody has one. Not only does everyone have a net worth, knowing what yours is can be an extremely valuable tool for understanding the big picture of your financial situation.
Factoring home ownership into your net worth not only helps you understand if your assets outclass your liabilities, it also helps you responsibly gauge your budget when you’re in the market for a new house.
Tip
There aren’t any rules explaining how much your net worth should exist in home ownership, but the general percentage should be from 20 to 30 percent.
How Home Ownership Affects Net Worth
For many Americans, especially those who don’t hold stock or other major investments, owning a home is one of the most direct, significant and effective ways to increase net worth.
According to the New York Times in 2017, the average homeowner in the U.S. has a net worth of $195,400. To put that figure in perspective, the average American renter only has a net worth of $5,400 – 36 times less than that of the typical homeowner.
Speaking to CNBC in 2017, financial adviser David Bach calls buying a home “an escalator to wealth.”
