One of the steps that every woman should take for financial empowerment is to know how much money she has. The best way to know this is by keeping a simple Own and Owe statement that lists, of course, everything you own and everything you owe. Many financial experts don’t think your home and mortgage should be included in this net worth equation, but I disagree.
A home can be one of your largest investments, and not to include it in your net worth equation discounts your net worth, unless you owe more on your mortgage than the value of your home, in which case it would overstate your net worth. Either way, it affects your financial picture. By having the value of your home listed as an asset, you are more open to options regarding your home if you want to explore alternatives for changing your current financial journey.
It may be that you have a large home that you no longer really need if you are an empty nester. Large homes are expensive and time-consuming to maintain. You may consider that a smaller home makes more sense for you, especially when you look at the numbers. Home ownership offers several different possibilities, including leasing, selling, or refinancing. Given the favorable capital gains from the sale of your primary residence, the business of buying homes, remodeling them over two years and selling them has been a very profitable business for some individuals and couples, especially those who consider the real estate cycle in their strategy.
Emotions are often tied to the home because of memories, but your memories and your heart are still with you wherever you live. I know of one couple who sold their large home after the kids left for college and are renting a townhome until they decide where they want to live. Hearing them talk about this, something about getting rid of a lot of my stuff and living in a smaller home felt very liberating to me, especially since I’m on the brink of an empty nest. Besides, I hate walking by that already empty bedroom my older son occupied. All I am suggesting is to be open; look at all of your assets. Stir things up; consider changes to get you to your financial goals.
Anything that has financial implications as large as most people’s homes do simply must be considered as part of your financial picture, emotions or not. Is a big home that is expensive to maintain on your list of why money really matters to you, or, your money reasons, as I like to call them? If not, try some tough love with yourself and consider unloading it so that you can have the things that are on your list, that really matter to you.
In my upcoming course, Create Your Roadmap to Financial Success; Simple Steps to Move from Confusion to Clarity, participants will each receive a fill in the blank template for their Own and Owe statements. This is something that I encourage everyone to do on a regular basis, even if you work with a financial advisor, since you may have some assets that are outside of the advisor’s management; get “in the trenches” and get to know your own numbers. The first action every woman must take to financial independence is to know where she is starting, or her real financial net worth. Do you know yours?