The Value of Liquid Net Worth [How to Calculate Yours]

Liquid Net Worth Defined

Liquid net worth is the amount of money you’ve got in cash or cash equivalents after you deducted your liabilities from your liquid assets. It’s quite similar to net worth, but the only difference is that it doesn’t account for non-liquid assets such as real estate or retirement accounts.

Your total net worth, however, is affected by both liquid and non-liquid assets. This means you’ll have to add up the value of all your assets, including vehicles, property, retirement accounts, securities, cash and anything else of monetary value. You’ll then subtract the value of your liabilities from this sum. If your liabilities exceed your assets, you’ll have negative net worth. You’ll have positive net worth if your assets have more monetary value than your liabilities.

Liabilities are financial debts one must pay. These might include student loans, car loans, credit card balances, taxes or mortgages.


Increasing Liquid Net Worth

So, now we know what liquid net worth is and how we can calculate it. But how can we increase liquid net worth? So, now I am going to tell, how we can increase the Liquide net worth with some Tips:

1.Increase Your Earning

The most obvious way to increase liquid net worth is by earning more. When we start making more money, our assets become higher and so does the liquid net worth.

You can also earn more by finding a better job or investing in something that will generate passive income.

In both cases, it helps if you’re disciplined about saving and not spending your money on unnecessary things.

Passive income might be the easiest way to increase your liquid net worth. If you have a job that pays well but requires lots of time and effort where there is no opportunity for growth – it’s probably best to start looking into passive opportunities.

Review Your Annual Costs

Start by looking at your annual costs. The easiest way to increase your liquid net worth is if you have an expense that can be eliminated or a lower quality product that can be replaced with something higher quality. In other words, if you’re spending $300 on cable every month, you’re spending $3600 a year on that cable service. Wouldn’t it be better to invest in your liquid net worth by taking the money and investing?

There are many small changes we can make each day or week that will have a significant impact over time. For example:

  • Use reusable water bottles instead of buying bottled water
  • Eat out less
  • Use a filter to save money on coffee and tea

These three small changes will have saved you $1200 this year. Imagine what an impact it would make if we were able to apply these types of principles over the course of days, weeks, or months? It might be time for some liquid net worth investment planning!

Start Investing More

You can also increase liquid net worth by investing more. If you’re not an active investor, it might be a good idea to start looking into what your options are in terms of stocks and bonds. You should invest enough money that the returns on investment will outweigh the costs associated with them over time.

A lot of people have made their liquid assets grow by investing in stocks and bonds. You can do so by cutting on your expenses and then investing those savings in the market or in bonds.

Reduce expenses

Reducing expenses is another way to increase liquid net worth. Not only does this mean you have more money to invest, but it also means that you’re paying fewer taxes on the profits because of what’s known as a lower taxable income.

If your debt load is too high and is causing anxiety or stress in your life – reducing expenditures might be the only option.

Review and Reduce Your Liabilities

You can also increase liquid net worth by reducing your liabilities. This is a simple but not easy way to do it, because you have to work on paying off what you owe and get those debts out of the picture.

It will take time for this method to generate results – probably at least a few months unless you are aggressively trying to pay off your debts. But the good news is, once you get them paid off, this liquid net worth strategy will be really effective.

Liquid net worth vs. net worth

Total net worth is calculated by subtracting your total liabilities from your total assets. The amount leftover is your overall net worth. This means that total net worth accounts for all of your assets, which consist of your liquid and non-liquid assets. However, liquid net worth doesn’t include your non-liquid assets and is determined by subtracting your total liabilities from your liquid assets.

Both are great tools to use to measure your financial health. Net worth gives you an entire scope of your overall financial position, while liquid net worth shows you a realistic idea of the amount of money you have available to cover your lifestyle expenses such as your day-to-day purchases, unexpected life events, emergencies, and any financial challenges that may come up. Since liquid net worth only focuses on a specific portion of your assets, it generally will be less than your total net worth. So, what exactly counts as liquid assets and non-liquid assets?

What Are Liquid Assets?

Liquid assets refer to any asset that you can easily and quickly turn into cash, or to the cash that you have. Basically, cash is a good example of a liquid asset. Other examples include checking accounts, amounts receivable, stocks, savings accounts, money market accounts, bonds, mutual bonds, and anything of the sort. The most important aspect is the possibility of having them readily converted into cash.

What’s the Difference Between Liquid and Non-Liquid Assets?

Liquid Assets

As mentioned previously, liquid assets are those that can be quickly turned into cash and what you’ll receive will be close to the market value of your asset. This could be:

Stocks & Bonds

Stocks and bonds you hold in a brokerage account are also considered liquid assets. Although you may have to pay capital gains tax if you make a large profit, you’ll usually be able to access that cash within a few days (or faster, pending your broker). 

Precious metals

Precious metals such as gold and silver are considered liquid assets since you can usually sell them within a few days. If you hold your gold in a brokerage account (like a mutual fund), you’ll be able to sell whenever the market is open.

And if you hold your precious metals in a safe, you’ll need to make sure a gold or jeweler dealer is open — but you’ll still get your cash relatively quickly.

Non-Liquid Assets

Non-liquid assets are the opposite: those are assets that cannot be converted into cash quickly and may charge large fees when going through the selling process. Some non-liquid assets are:

Real estate

Real estate is a complex asset to hold: it can take months to sell and fees vary depending on where you are and the type of property you are selling. If you want to sell quickly, you may need to reduce the price – which means you don’t really know the value of your property until it’s sold.

You might also be investing in real estate crowdfunding platforms as well, like Fundrise or DiversyFund. These are usually illiquid investments too, as they are long-term investments.

However, you may be able to request your money with some platforms, however you may only have a certain amount of days and/or you only recoup like 95-98% of your initial funds. But if you are strapped for cash, you may be able to get your money back in a few days with a penalty fee. 

Business equity

Business equity is another illiquid asset that can be complicated to measure. You’ll need an industry expert to appraise the value of your business equity, and once again, it depends on how “saleable” your business is.

It’s likely you won’t know the true value of your business equity until you sell what you own and that can take time. Plus, you might not be able to do anything with your equity if it has not properly “Vested,” pending the terms of your employment or business. 

Retirement accounts

Although you will be able to access your accounts and sell for cash quickly, you won’t be able to access those until you reach the specific age of retirement.

Of course, there is the option to withdraw early, but you will need to pay a penalty and potentially reduce the value of your retirement accounts. This is something you should consider as the last resort, because taking this money can set you back when it comes to your retirement goals and value. 

Why Is Liquid Net Worth Important?

The most important reason why you should care about your liquid net worth is that it represents the number of funds you can access under short notice. Liquid net worth is based on what’s available to you right now. It’s not what you would own if you took extreme action and liquidated every asset, but the amount of money you can sensibly expect to hold under a short period of time.

So, should you face an immediate, unexpected need for money such as a medical crisis, equipment malfunction, lawsuit, or business opportunity, your liquid net worth is where you’ll confide in. Thus, the measurement is a reflection of your business’s financial security and ability to react to challenges and opportunities. Even if there isn’t any immediate emergency, calculating your liquid net worth can help you feel confident about your cash flow and avoid financial stress.

Calculating your liquid net worth

To find your liquid net worth, total up your liquid assets and subtract the liabilities you identified above. 

The big question here is: What exactly is considered liquid? This is more complex than it seems at first. Some things are obviously liquid, like the money in your wallet and anything in an account that gives instant access (such as a checking account or money market account).

But you can also include assets you can quickly sell, known as cash equivalents. Mutual funds, exchange-traded funds (ETFs) and cryptocurrencies fall under this category, but your antique furniture doesn’t. 

For example, you might have:

  • $5,000 in your checking account

  • $100 in your wallet 

  • $500 in a savings account

But also have:

  • $1,500 of credit card debt 

  • A student loan balance of $3,000

In that case, you’d have a liquid net worth of $1,100 ($5,600 minus $4,500).

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Why Are Liquid Assets Important?

Liquid assets are important because a company consistently needs cash to meet its short-term obligations. Without cash, a company can't pay its bills to vendors or wages to employees. A company may not always have a lot of cash on hand, but it better make sure it has sufficient amounts of liquid assets that can quickly be converted into cash if needed should an immediate need for money arise.

Liquid Net Worth Calculator

Wondering what your liquid net worth is? It’s actually relatively easy to calculate. The basic formula is:

Liquid assets minus liabilities = liquid net worth

Remember, your liquid net worth does not take into account real estate, retirement accounts, stock accounts (like an IRA or mutual funds), or even your car, because those aren’t cash options that you can easily tap right now.

The key to calculating your liquid net worth is to only include those assets that you would be able to sell for cash today in order to meet any unplanned expenses or obligations.  

Here’s how it works.

First write out your liquid assets, which may include:

  • Checking accounts
  • Savings accounts
  • Money market accounts
  • Certificates of deposit
  • Jewelry or collectibles
  • Others

Add them up. Then subtract your liabilities:

  • Mortgages
  • Credit card debt
  • Personal loans
  • Student loans
  • Car loans
  • Other 

The remainder will be your liquid net worth.

Why Are Assets Called Liquid?

Assets may be described as liquid to explain that they have fluidity, have flexibility, and can easy change. As opposed more rigid assets that can't be easily exchanged for cash, fluid assets can easy change form and be quickly traded.

Why is building liquid net worth important

Cash is king, which is a big reason why building your liquid net worth is so important. Of course, overall net worth is a great way to build wealth however, having a liquid net worth is important if you need to get access to cash quickly. 

For instance, for an emergency or an investment opportunity. Liquid net worth matters because it enables you to have access to cash fast.

Why liquid net worth matters

Knowing your liquid net worth can help you protect yourself against the unexpected. It’s similar to having an emergency fund but extends the concept to include all liquid assets.

Typically, emergency funds are just the money held in your checking and savings accounts, though a money market account can also be a good choice for your emergency fund. Emergency funds are typically held in these accounts so they can be accessed with relative ease and little-to-no loss in value.

Stocks, on the other hand, could potentially be worth less than the price at which you bought them, depending on stock market conditions. However, stocks held in a brokerage account often have high liquidity and can usually be sold more easily.

By keeping a portion of your assets liquid, you can still build your wealth and cash out any of them on short notice easily if needed. Calculating your liquid net worth can give you a clear picture of how much cash you have access to when the unexpected arises.

Final Thoughts on Liquid Net Worth

Calculating your liquid net worth will give you an idea of where you stand financially. In addition, knowing your current money situation will help you establish appropriate goals to work toward achieving financial wellness. And achieving good financial health is a stepping stone to financial freedom.  

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What is liquid net worth?

Liquid net worth is the monetary amount by which an entity's liquid assets exceed its liabilities. A liquid asset is cash or an asset that you can convert into cash quickly. Cash that you store in a checking account or savings account is also a liquid asset. Other examples of liquid assets include money market assets and inventory assets. Certain investments, like stocks, bonds, mutual funds, exchange-traded funds (ETFs), are also liquid assets because you can sell them quickly in return for cash. Both individuals and companies may hold liquid assets.

Nonliquid assets might include physical objects like jewelry, precious metals, cars or art. To convert these items into cash, the owner first needs to find a buyer, negotiate a price and make the sale. Money in a retirement fund or a trust that's only accessible when you reach a certain age are also examples of nonliquid assets. For some savings accounts of this type, there may be financial drawbacks to withdrawing cash from the account early to dissuade individuals from doing so.

Read more: A Guide to Liquidity (With Definitions, Distinctions, Formulas and Examples)

What is Your Liquid Net Worth by Age?

According to, the median liquid net worth for a 35 to 44-year-old is $91,300. For a 45 to 54-year-old, it’s $168,600. And for a 55-64-year-old, the median liquid net worth is $212,500. The average liquid net worth is much higher at $436,200, $833,200, and $1,175,900 respectively.  

The average liquid net worth is much higher because those numbers become skewed by people with extremely high net worth. So use the median numbers when comparing your liquid net worth because those numbers are more common and realistic for most people.  

What if I have a negative net worth?

So, what happens if your total net worth is negative? You could have more debt than assets which would result in your net worth being negative.

For instance, student loans, credit card debt, etc. could result in you owing more than you actually have in cash and assets. However, you are able to improve your total net worth and increase your liquid net worth by taking the initiative with the following steps!

An Example of How to Calculate Liquid Net Worth

Let’s do a quick example to demonstrate the difference between total net worth and liquid net worth.

The total value of your assets is $600,000, and your liabilities are $300,000. That gives you a total net worth of $300,000.

But to determine liquid net worth, let’s look at each asset individually:

  • Primary Residence: The fair market value is $400,000, with an outstanding mortgage balance of $250,000. To sell the house quickly, you might drop the value to $380,000. If it sells at that price, there will be another 10%, or $38,000, in transaction costs. After paying off the mortgage, the net cash from selling your house will be $92,000.
  • Cars: You have two vehicles, with a fair market value of $50,000. (You should verify the value with Kelley Blue Book or another respected auto valuation service.) There are outstanding loans of $30,000, making the net value of your cars upon sale $20,000.
  • Retirement Savings: The total value is $100,000. You’d have to pay 30% in taxes and penalties plus 1% in transaction costs to fully liquidate the plan. That drops it to $69,000. But you also have a 401(k) loan of $10,000 against the plan. Since that would have to be paid back upon liquidation, the cash value of your retirement plan is $59,000.
  • Furniture and Trinkets: You assign a value to these based on retail cost of $50,000. But upon sale, they only bring $10,000. But since you also have $10,000 in credit card debt – largely used to purchase those possessions – the net cash value of your furniture and trinkets is zero.

Based on all the factors above, your liquid net worth looks like this:

  • Primary Residence: $92,000
  • Cars: $20,000
  • Retirement Savings: $59,000
  • Furniture and Trinkets: $0
  • Total liquid net worth: $171,000

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