Should your home and car count in net worth?
Your home and car have value, so technically they are part of your net worth. But you cannot spend them. Tracking net worth in two ways, depending on the question you are asking, gives a clearer picture.
Two different questions
"How much do I own in total?" includes your home and car. "What money can I reach in an emergency or for a goal?" does not. Keeping the two figures apart stops one from hiding the other.
Always subtract the remaining loan
If you include an asset, subtract the debt tied to it. A home worth $400,000 with $150,000 left on the mortgage adds $250,000 to net worth. A car worth $30,000 with $10,000 left on the loan adds $20,000.
Value it realistically and rarely
Use the current value of similar homes and cars rather than the purchase price. These values do not change every month; updating them once or twice a year is enough. Remember that cars lose value over time. An optimistic value makes net worth look higher than it is.
Keep monthly progress apart from fixed assets
A higher estimate for your home does not mean you saved more that month. Measure monthly progress with liquid assets and track fixed assets on a separate line.
This article is for general education and is not personal financial, investment, tax, or legal advice.