What Is Liquid Net Worth?

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You’ve probably heard of net worth and wondered what yours is. When it comes to assessing your net worth, you always want to compare the value of your assets to that of liabilities.

Net worth gives you a panoramic view of your total assets minus total liabilities, but liquid net worth narrows this down to the total liquid assets minus total liabilities. Liquid net worth is perhaps the most telling measure of your current financial health.

Here’s an overview of liquid net worth, how it differs from total net worth, why it matters, and tips to improve your liquid net worth.

What Is Liquid Net Worth?

Liquid net worth is the amount of money you have in cash after subtracting liabilities from liquid assets. To put it simply, it’s money that you can tap into for bills, emergency expenses or high-ticket items.

The term “liquid” describes cash at hand or assets that you can convert into cash within a short period. Liquid net worth is often confused with total net worth, but these terms have distinct meanings.

Total Net Worth vs. Liquid Net Worth

When calculating liquid net worth, you subtract total liabilities from your total liquid assets. On the other hand, total net worth is the gross value of your assets minus total liabilities.

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Liquid net worth considers the amount of money you have at hand: cash, cash equivalents, and other liquid assets less liabilities. Liquid assets are assets that you can quickly turn into money without a significant loss 一 this includes stocks, bonds, mutual funds, checking accounts, certificates of deposit, money market accounts and more.

Total net worth factors in the value of your liquid assets and non-liquid assets minus liabilities. Non-liquid assets, also known as illiquid assets, are assets that take time to convert into cash, such as real estate, vehicles, private equity and even retirement accounts.

Why Does Liquid Net Worth Matter?

Liquid net worth is important because it helps you measure your financial stability. Consider a situation where you’re in a financial crisis and you have money in your savings and retirement accounts. Which one would be easier to tap into? You can’t take money out of your retirement account easily due to the rules and regulations put in place by the Internal Revenue Service. However, you can easily withdraw money from your savings account. This makes your savings account a liquid asset.

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Liquid net worth is typically considered an accurate measure of your financial stability since you can rely on it to cover your expenses. Plus, your liquid net worth acts as an emergency fund whenever you urgently need money.

Calculating Liquid Net Worth: An Example

Here’s the formula used to calculate liquid net worth.

How To Calculate Net Worth

Liquid Net Worth = Liquid Assets – Total Liabilities

To calculate your liquid net worth, you need to list your liquid assets 一 cash, cash equivalents and, any other assets that you can quickly convert into money. The next step is to list your non-liquid assets. You can then subtract your total liabilities from your liquid assets 一 the resulting number is your liquid net worth.

Let’s say you’ve got $90,000 in your savings accounts, $150,000 in brokerage accounts, and $60,000 in bonds. Your total liquid assets would be $300,000. If you have a car with a fair market value of $30,000, $143,000 left on your mortgage, you owe $42,000 in student loans and $5,000 in credit card debt the sum of liabilities is $220,000. When you subtract your total liabilities from your liquid assets, your liquid net worth is $80,000.

Factors That Affect Liquid Net Worth

Several factors can impact your liquid net worth. These factors vary based on the types of assets you own and whether they are liquid or non-liquid.

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Liquid Assets

The most common liquid assets are cash and cash equivalents. These assets typically have no market value, so they won’t lose value upon liquidation.

Non-Liquid Assets

When it comes to liquidating non-liquid assets to build liquid net worth, significant value loss can occur.

For example, if you have $100,000 in your 401(k) plan and decide to liquidate it today, you won’t receive the total amount it’s worth. Even though retirement plans grow tax-deferred, they are subject to income tax. However, there are exceptions for Roth IRA, provided that you meet specific requirements that include being at least 59 ½ years old.

Generally speaking, liquidating 一 selling an asset to convert it into cash 一 takes longer for non-liquid assets than liquid ones.

How To Increase Your Liquid Net Worth

If your liquid net worth is negative or not where you’d like it to be, you can take a few steps to increase it. Here are some suggestions.

Reduce Your Expenses

The less money you spend every month, the faster you can accumulate liquid net worth. To achieve this, you need to create a budget and review areas you can cut back on, such as canceling subscriptions you don’t need or lowering your food expenses.

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Pay Down High-interest Debt

Debt can lower your liquid net worth because it reduces the amount you save each month. High-interest debt is even more harmful. If you’re drawing in debt, you need to consider options like debt snowball or debt avalanche approaches to pay it down faster.

Increase Your Income

Investments can be excellent sources of wealth, translating to high liquid net worth. You can invest in stocks, mutual funds, exchange-traded funds, or real estate. You can also take advantage of the power of compounding interest by saving your money in a high-yield savings account.


Liquid net worth is a vital metric that you can use to measure your financial stability. Your liquid net worth may be low or even negative, but that doesn’t mean you can’t get back on track. You can do this by trimming your expenses, paying off debt, and investing to increase your liquid net worth.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.


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