What Does Liquid Net Worth Mean And How Do You Calculate It?

What does liquid net worth mean

Financial wellness is an ongoing game, which means you regularly need to pause and check in on your accounts to see how things are going. One way to do this is by assessing your liquid net worth. But what does liquid net worth mean?

We've got you covered in this article.

If you follow the personal finance community, then you've probably read up on net worth before. But have you ever considered what it really is?

Moreover, have you ever asked yourself, "What is my liquid net worth?" If not, it's time to start thinking about it.

Understanding this is key to understanding your current state of financial health so you can determine what you're doing well and what changes you might need to make to reach your financial goals.

What does liquid net worth mean?

It's how much cash and/or cash equivalents you have on hand at a given moment.

Types of net worth

Importantly, liquid net worth is different than your overall net worth because it only takes your liquid assets into account.

In other words, while your net worth is the complete value of all your assets (i.e., what you own) minus your liabilities (i.e., what you owe), the liquid amount you own is only the total value of your liquid assets minus your liabilities. This means that it will likely be less than your total net worth.

But what does liquid net worth mean next to total net worth? After all, why should you take the time to calculate both your total net worth and your liquid net worth?

It's simple: Each value gives you a different perspective on your money.

On the one hand, your total net worth is a complete bird's-eye view of your finances. On the other hand, your liquid net worth is a snapshot of your financial situation at a specific time.

What counts as liquid assets?

Liquid assets include both cash and cash equivalents. And when we say cash, we don't just mean the green stuff.

Cash can be:

  • Cash
  • Savings accounts
  • Checking accounts
  • Money market accounts
  • Certificates of deposit

Meanwhile, cash equivalents are investments that can be sold for cash relatively quickly and easily while still maintaining their market value.

Cash equivalents can be:

  • Mutual funds
  • Bonds
  • Stocks
  • ETFs

What doesn't count as liquid assets?

While tallying up your finances, remember that not all your assets are liquid assets. For example, your so-called "non-liquid" assets can include:

  • Real estate
  • Retirement accounts
  • Cars
  • Jewelry
  • Other valuables and collectibles

Notably, these non-liquid assets may be your most valuable possessions. In fact, a special report from the Research Institute for Housing America reveals that, on average, an American's home is 36% of their total household wealth.

However, although highly valuable, you can't easily convert some assets into cash. This means you wouldn't include them when determining, "what does liquid net worth mean" in your finances.

What are highly liquid assets?

Among liquid assets, bear in mind that some assets are more liquid than others.

Highly liquid assets, then, are the assets that you can most easily and quickly convert into cash.

A highly liquid investment is one that:

  • Is in an established liquid market
  • Maintains a large number of readily-available, interested buyers
  • Can be transferred easily and securely

How to calculate liquid net worth

So, still wondering, "What is my liquid net worth?"

Figuring out how to calculate liquid net worth is as simple as doing a quick math equation:

Liquid assets - liabilities = liquid net worth

For example, suppose your liquid assets are:

  • $3,000 in your checking account
  • $12,000 in your savings account
  • $6,000 in stocks

And your liabilities are:

  • $15,000 in students loans
  • $2,000 in credit card debt

Your total liquid assets are $21,000 and your total liabilities are $17,000.

So, $21,000 - $17,000 = $4,000.

Your liquid net worth would be $4,000.

Positive vs negative

In the above scenario, you're left with a positive money situation, where you have more assets than you do liabilities.

Conversely, a negative liquid net worth means you have more liabilities than you do assets, which means it may be time to make some financial changes in your life.

Use a liquid net worth calculator

Don't worry—there is an answer to the question, "What is my liquid net worth" that doesn't involve solving math equations.

You can still figure out how to calculate your liquid net worth with a free online liquid net worth calculator:

  • CalculateStuff.com offers an organized approach to net worth, including assets, liabilities, and savings.
  • Bankrate will show you your projected net worth, which is helpful for financial planning.
  • Ramsey Solutions calculator has a simple design with columns for assets and liabilities.

Remember, if you use a liquid net worth calculator, only input your liquid assets (i.e., skip adding your real estate, retirement accounts, etc.).

Why should you calculate your liquid net worth?

What does this mean for your life, really?

For one, while knowing your overall net worth can be useful, it doesn't necessarily give you an idea of how much cash you actually have on hand.

On the other hand, calculating your liquid net worth may help you take stock of your progress on both long-term and short-term financial goals.

For example, knowing this can help you figure out if you're ready to take on new money ventures.

Suppose you want to make a down payment on a home or take advantage of a big, new investment opportunity. Knowing your numbers can reveal whether or not you have the cash available to take the plunge on such a long-term investment.

Besides saving for a big goal, calculating your total net worth can give you some idea of where you stand with your monthly spending right now.

For instance, if you've slipped into a negative net worth, you may want to revamp your current monthly budget.

Why are liquid assets important?

When you calculate your finances, you may be surprised by what the results reveal. Do you have more or fewer liquid assets than you thought?

You probably already know that opening a retirement account(s) is a must-have for creating long-term financial wellness, but don't neglect the importance of also maintaining a sufficient amount of liquid assets.

Liquid assets are important to help you:

  • Prepare for emergencies and unexpected expenses
  • Save for big-money goals like a down payment on a house or a car
  • Make investments like buying more stocks for your investment portfolio

Where to keep your liquid assets?

There are many different ways to hold your liquid assets. Some top options include:

Savings accounts

Ideally, you should strive to have three to six months of basic living expenses in a savings account. This emergency fund will give you a cushion in the event that you need to use liquid assets to cover your living expenses.

Pro tip: To get the best bang for your buck, look for a high-yield savings account.


Alongside a savings account, an investment portfolio is another option for holding liquid assets. This can include stocks, mutual funds, ETFs, etc.

The perk of an investment portfolio is that you can make your money go to work for you by accruing interest and taking home dividends.

While it's less immediately accessible than a savings account, your investment portfolio still offers easy access to your funds when you need them.

How do you build up your liquid net worth?

If you're feeling a little disappointed after calculating your finances—don't sweat it! There are plenty of ways you can build up cash, now that you know the answer to, "what does liquid net worth mean".

1. Pay off your debt

Unfortunately, the interest on debt is usually (a lot!) more substantial than the interest you'll get on your assets. This means that debt has a huge impact on your liquid net worth (and your overall net worth).

For this reason, paying off debt should always be a priority and the first step in increasing your money.

2. Reevaluate your budget

If your net worth is in the negative, it may be time to minimize your expenses.

Start by taking a look at your monthly expenses. Where can you free up some extra money to save and/or invest each month?

For example, this could mean canceling subscriptions you don't use or eating out at restaurants less frequently.

3. Remember to pay yourself first

Don't fall into the trap of, "Oh, I'll just save whatever money I still have at the end of the month."

Instead, make saving a priority! As soon as you get paid, immediately send a percentage of your income to your savings and/or investment portfolio.

4. Build up your investment portfolio

Building up your investment portfolio can have a profound impact because it can help you develop multiple different income streams.

For example, by investing in dividend stocks, you increase your returns through passive income.

5. Boost your income

Another way to build up your liquid net worth is to try to boost your monthly income.

Ask yourself what you can do to take home a little bit more cash each month (it may be easier than you think!). For example, you can:

  • Pick up an extra shift
  • Start a side hustle
  • Rent out a room
  • Negotiate a pay raise

6. Sell your stuff for quick cash

If you're not in a position to increase your regular income, there are still other ways you can find some extra cash. Selling your old, unused items is one of the easiest ways to get a little extra green in your pocket.

For example, your old clothes, books, toys, electronics, etc. can bring home a few hundred bucks if you sell them online or at a yard sale.

Knowing about liquid net worth can help your finances!

Don't worry—you don't have to track your finances obsessively! Maybe you want to check in every quarter or maybe just every six months.

Either way, simply being more aware by knowing the answer to, "what does liquid net worth mean?" will help you better understand your finances so you can keep yourself on the course for long-term financial success.

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