Robert Kiyosaki has been telling people that their homes are not an asset since 1997: the year Rich Dad Poor Dad was published. The book has sold millions of copies but the message is still controversial. Not because it is wrong but because certain groups benefit from the majority of the population buying homes with large 30 year mortgages.

I am not a homeowner. I have never been a homeowner. The math just never made sense. I was previously an engineering manager at a publicly traded technology company so I could have afforded a house by all conventional measures.

In Me, Inc by Gene Simmons, of KISS fame, Simmons presents a simple and sound heuristic for determining how much house you should buy. He advises it should be no more than 25% of your net worth.

How many people buy homes that are 25% of their net worth? I would guess close to zero. Most people buy houses with the inverse heuristic: the house is valued at 4x their net worth.

Buying anything this way makes little sense. Your house is not liquid. It does not generate income. It may or not gain in value after inflation. And you’ll have paid nearly twice the price of the house from interest over 30 years. This is closer to irresponsible shopping than investing in an asset.

It doesn’t mean you should not buy a house. Just remember that you are shopping. Not investing. If you still choose to spend irresponsibly knowing that you are shopping then you have bigger problems.

The most important part is understanding what an asset is. Your house fits the dictionary definition for both an asset and a liability. It is something of value like real estate but it is also something disadvantageous since it costs you significant money every month.

If you’ve read Rich Dad Poor Dad then you’ll know that Kiyosaki has a simple definition for an asset: anything that puts money in your pocket. A liability is the opposite: anything that takes money from your pocket.

They are overly simplified definitions but they get across the important point: if your asset will cost you money every month then what the hell kind of asset is it? Sounds more like a liability.