[Shelly]

I’m working on finding my FI number but am a little confused. I know some people include their house equity in their net worth, but I plan to live here. So I wouldn’t include that, correct?

What about my kids’ 529 plans that are in our names?

For expenses, do we include things like family vacations for the whole family if our kids won’t be at home when we retire?

[Ellie]

hi! Best suggestion is to include liquid assets when calculating your net worth. So, if your house is worth $200,000 and you have $50k in a 401k and $10k in an emergency fund, your net worth is not $260k because you would have to sell your house to get that value.

Your net worth is $60k.

If later you sell the house and net $100k and buy a new place for $60k, you could then include that new $40k in your net worth.

There are numerous techniques to set your net worth, but I personally prefer this one because it’s simple and clean.

Don’t include the 529s unless you intend to not use them for the kids’ education.

For expenses, include all expenses that you expect in your lifestyle.

If you imagine taking family vacations indefinitely, include that expense in your planning.

Good luck!

[Christopher]

Net worth is different from your FI number, so you’re right in omitting things you are unlikely to sell.

The 529 funds won’t be used directly, but may offset college costs that you’re planning on paying anyway.

I’d omit them just because I don’t factor in college costs anyway, but if you do factor it in this these funds would lower those costs.

[Rick]

#1 no you don’t count your house as an fiworth asset if you plan to stay in it. If it is paid off or will be during fire, it is an expense reducer.

#2 basic easy answer is no. It can be considered a prepaid liability. See below for more advanced.

#3 current life expenses can be similar to all the way to nearly irrelevant to fire expense projecting.

Mine was the latter back in 2022. Sold my house. Changed to renting.

Sent youngest kid off to college. So, most kid expenses went away or really shifted to college account funded.

So, my expenses dropped easily by 1/3. Had I used the former as my expenses, it would have led to wildly over saving and therefore over working.

Consider a paid fire projection software like Boldin.

You can have something like #1 a house payment into fire that ends say 4 years into fire, you can include your kids college funds #2 but do the opposite as housing as you can add a period certain number of years of college expenses going out, etc etc.

[Stan]

Net worth is not the same as your FI calculation. I do not include my house, autos or 529 plans in calculating FI unless you plan on not having a house, but then you have to calculate rent or something for housing.

And autos or other personal property doesn’t account unless you plan on liquidating.

Same for 529 as it has a “special designation”.

Then based on what is in your “liveable” assets minus liabilities you know how much you have.

Vacations, etc have to come out of that amount.

[Peter]

FI number is 25x your yearly expenses. So, if you spend 100k a year, you’d need 2.5 million.

That would allow you a 4% safe withdrawal rate on a 60/40 portfolio.

Net worth is all of your assets minus all of your liabilities.

[Author]

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