What Is Liquid Net Worth: Definition and How to Determine your Worth

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Many people enjoy learning about famous people who have a high net worth, but liquid net worth is an entirely different metric. Both net worth and liquid net worth are measurements of someone’s financial health and how much money they have, but their liquid net worth is much smaller than their net worth because it reveals how much liquid assets they own. The net worth includes the market value of their total assets, but the liquid net worth excludes any assets that can’t be easily converted into cash.

Cash, savings accounts and checking accounts, stocks and bonds, exchange-traded funds and mutual funds, Treasury bills and bonds, certificates of deposit, and money market accounts are examples of liquid assets. In this article, we will define liquid net worth, explain which assets are liquid assets, and help you with calculating your liquid net worth.

What is Liquid Net Worth?

If you’re looking for the liquid net worth definition, you’ve found it. Liquid net worth is an important metric in personal finance. Net worth and liquid net worth both show the fair market value of your financial assets, but liquid net worth includes only assets that are cash or cash equivalents.

Your financial assets include anything you own that has value. In both cases, you subtract your total liabilities, which may include things like car loans, personal loans, student loans or credit card bills. To calculate liquid net worth, you also subtract any non-liquid assets. We’ll explain more about non-liquid assets below.

Since your total liquid net worth includes only liquid assets, it tells you how much cash you can easily have on hand because it reveals how much of your assets you can turn into cash quickly. It is also a measure of your financial freedom. Liquid net worth matters because it shows you the cash value of your holdings that can be quickly converted into cash..

Net Worth vs. Liquid Net Worth

The difference between your net worth and your liquid net worth plays an important role in calculating both metrics. When sitting down to determine the total value of your assets and liabilities, it’s important to categorize each asset as either liquid or non-liquid.

To calculate liquid net worth, you must be able to subtract the value of your non-liquid assets after calculating your total net worth. The greater the value of your liquid assets, the more financial freedom you have because you can access cash easily in a pinch.

Financial freedom also means you can quit your job suddenly if an unsatisfactory situation arises. Financial freedom also allows you to go back to school and change careers if you wish to do so. However, if you are bogged down by a lot of assets that can’t be converted into cash easily, you won’t be able to do such things. This is why liquid net worth is sometimes a much more useful metric than your total net worth. Your liquid net worth can quickly be calculated by subtracting the value of any assets that can’t be easily converted into cash from your total net worth.

Why Do You Track Your Net Worth?

Does your net worth matter? Does your liquid net worth matter? Some investors aren’t too worried about them, but it is important to know these metrics and to determine if you have positive net worth or negative net worth. Calculating your liquid net worth involves putting your liquid assets and non-liquid assets into hard numbers so that you have a complete understanding of what your financial picture looks like.

After calculating your net worth, it’s important to go a step further and make that liquid net worth calculation so that you won’t be surprised if a situation comes up that requires you to have a lot of cash suddenly. It’s also important to know your liquid net worth because it allows you to evaluate your financial security, which could convince you of the need to save money and establish an emergency fund. If it turns out that you have negative liquid net worth, then there is much work to be done on your personal finance to improve your financial health.

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newhouse / Pixabay

What are Liquid Assets?

It’s important to know your total liquid assets because it enables you to quickly figure out how much cash you can have on hand in a short time. Some examples of liquid assets are stocks and bonds and a savings account. On the other hand, real estate is not a liquid asset, and neither are most retirement accounts unless you are in retirement.

Equity in a Brokerage Account

Investing in the stock market through your brokerage accounts is a great way to build your net worth and liquid net worth. Stocks and bonds are both liquid assets because, in most cases, you can sell them easily for cash within three business days. However, you may have transaction costs for selling them, and you may have to pay capital gains taxes. On the other hand, you could also end up with capital losses if you have to sell before the stocks or bonds made you a profit.

However, stock investments in a retirement account may not be considered liquid assets because digging into your retirement accounts before you retire comes with stiff penalties.


The most liquid asset type of all is cash, which can be held in a checking or savings account or in other places. It is a good idea to seek financial advice to learn how to put your cash to work for you to make even more money.

Non-Liquid Assets

Non-liquid assets include real estate, including your primary residence, your car and retirement accounts. It can take months to sell your home, and you might not be able to find a buyer at the selling price you need or want. Additionally, realtor commissions, fees like closing costs and taxes mean you won’t walk away with the full amount you sold your home for.

Real Estate

As already stated, real estate is not a liquid asset because it will take some time to sell it. Additionally, there are other costs associated with real estate transactions, and if you are selling your primary residence, you will have to move and find another house to buy or an apartment to rent.

Retirement Investments

Retirement savings are generally not considered liquid assets because the money cannot be turned into cash quickly unless you reach retirement age. However, one exception is the Roth IRA because you can access the funds you deposited before you reach retirement age.

You just can’t take out the investment gains on those funds you deposited until you enter retirement. However, it may still take some time to access the cash you deposited in your Roth IRA, which means it might take more than a few days to pull cash out of it.

How Do You Figure Out Your Liquid Net Worth?

There are a couple of methods you can use to calculate your liquid net worth. Both require you to know the value of your assets, and one requires you to know your net worth, while the other does not.

Calculating liquid net worth after calculating net worth is simple and provides you with both metrics. To calculate net worth, add up the value of all your assets and liabilities, including credit card balances, personal and student loans, mortgage balances and other money owed. Subtract the amount of your liabilities from the value of your assets to determine your net worth.

After you calculate your net worth, you will have determined the total value of all of your assets, including both liquid and non-liquid assets. To calculate your liquid net worth, you go a step further by subtracting the value of all your non-liquid assets from your net worth.

If you haven’t figured out your net worth, you can calculate your liquid net worth by adding up the value of your liquid assets and then subtracting the value of your liabilities. As already stated, your liquid assets include cash in hand and in a savings account, bonds and stocks, and other investments that can easily be sold, while your liabilities can include credit card debt, loans and mortgages, and any other money you owe.

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StockSnap / Pixabay

Best Net Worth Tracker

There are many ways to track your net worth. The most basic way to track it is to use a spreadsheet, but that may require a higher level of financial knowledge. Some well-known trackers like YNAB, Mint and Personal Capital provide an easy way to track your net worth with less work on your part.


Using a spreadsheet to track your net worth can be difficult because you have to enter everything manually on a regular basis. However, some people who are financially savvy may wish to do it this way because they know that they have a complete understanding of where they stand financially.

Before you start filling out the spreadsheet, you need a list of all your assets and debts and the value of each. Once you have that list, you can add each one of them to the spreadsheet under column A. Next, enter the value of each in column B.

It’s a good idea to keep assets and liabilities separate so that you can easily calculate the value of each. The spreadsheet will even do the math for you if you use the auto-sum button or formulas. Depending on how good you are at working on spreadsheets, your formulas can be easy or simple.

Below your list of assets, you will need a cell for total assets and another cell for percent change. Then you can do the same thing for your list of liabilities. At the top of the column in which you enter the values of your assets and liabilities, be sure to note the date on which the value was taken.

You may want to calculate your liquid net worth when you first start your spreadsheet so that you know where you’re starting. For every month after the first month, you’ll fill out the percent change cell, which displays the progress you are making on your net worth. You can create a similar spreadsheet for your liquid net worth.

If you want to use a spreadsheet but want a little extra help with it, you could always try a spreadsheet net worth tracker like Tiller Money to help you. Here are some of the other popular platforms used to track net worth.

YNAB (You Need a Budget)

It’s important to realize that YNAB’s main purpose is to help you create a budget, but it does also calculate your net worth. The website is designed to help with three goals, which are to stop living paycheck to paycheck, get out of debt and save money.

Unlike the other options on this list, YNAB is not a free app. You can use it free for 34 days, but after that, it costs $84 to keep using it, which amounts to about $7 a month. You’ll have to decide whether it’s worth it to you to keep paying that $7 a month or if you would be better off saving it and using one of the free options below.


One app that offers arguably the simplest way to track your net worth is Mint. The app’s Trends tool enables you to see how your net worth has changed over time. It enables you to place your expenses and spending into different categories and will send you reminders when the due dates for bills are approaching.

You can use Mint to track not only your net worth but also all of your bank accounts, investment accounts and other aspects of your net worth. When you sign up for mint, you simply enter all the information for your bank and asset accounts and liability accounts.

Personal Capital

This app pulls access to all of your financial accounts into one place, enabling you to keep track of your investments as you plan for retirement and other financial goals. Personal Capital will also reveal previously hidden fees and allow you to categorize and manage all of your expenses.

After entering all the information for your accounts, Personal Capital will calculate your net worth and keep you up to date on your account balances and expenses. The site will not allow you to transfer money between accounts, which adds a layer of security.

How to Increase Your Liquid Net Worth

It will require some financial planning to increase your liquid net worth. Some ways to increase your liquid net worth are obvious, like getting a job that pays more, while others might not seem as obvious, like paying down debt or watching your expenses more closely.

Get a better-paying job

The first step in increasing your liquid net worth is to make more money, which can include not only getting a higher-paying job but also getting a second job. If neither of these two options is possible, there are a few other steps you can take to increase your liquid net worth.

Pay down debt

Paying down debt will also help you increase your liquid net worth. It’s generally wise to pay off smaller debts first because it’s easier to see yourself making progress. You should also pay off debt with higher interest rates, like that owed to credit card companies.

As a side note, paying down debt will also help you improve your credit score.

Trim Your Expenses

Another way to boost your liquid net worth is to cut your expenses. This will enable you to save a larger portion of your paycheck every month, increasing the amount of cash you have on hand or in a savings or checking account.

Review Annual Costs

Not every bill is paid every month, so it’s also important to look at your expenses on an annual basis in addition to a monthly basis. Some bills that might not be paid every month include car insurance, home or renters’ insurance, and property taxes. A regular annual review of your costs will enable you to look for less expensive options for those yearly costs.

Start Investing

Finally, you can also bump up your liquid net worth by investing in securities that are liquid assets, like stocks or bonds. If you’re especially concerned about your liquid net worth more than your net worth, it’s especially important to invest in places where the assets will be liquid, meaning that you can convert them to cash easily without drastically reducing their value.


Does liquid net worth include retirement accounts?

Retirement funds are not included in your liquid net worth unless you are past the legal age of retirement. Retirement accounts are an important part of your financial picture, but you should not touch them until you are retired.

Is a 401k considered a liquid asset?

A 401k is a type of retirement account, which means it is not a liquid asset unless you are of the correct age for retirement. If you access the money before retirement, you will have to pay ordinary income tax and other penalties associated with tapping into it early.

Is a car a liquid asset?

No, a car is not a liquid asset because it usually will take more than just a few days to sell it, converting it into cash.

Final Thoughts

It’s important to track your liquid net worth on a regular basis because it gives you a good picture of where you stand financially. You can see how much money you would be able to gather in a few days’ time if an emergency arises, and you can track your progress to figure out how well you are doing on executing toward your financial goals.

It may seem a bit intimidating to calculate your liquid net worth, but the formula is simple and requires just a few inputs. You will spend more time gathering the necessary information to add up your assets and liabilities than you will spend actually doing the calculation.

Understanding your liquid net worth is an important part of knowing where you stand financially. The more you have in liquid assets, the better off you are financially.