What Is Liquid Net Worth and Why Does It Matter?

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Updated on Tuesday, October 12, 2021

Liquid net worth is a snapshot of an individual’s financial health, and reveals how much cash or equivalent assets are readily accessible. In the event of an emergency, liquid assets are the money you could quickly tap into.

Liquid net worth is essentially a combination of two key financial terms: Net worth, and liquidity. Net worth refers to the total value of your assets — cash, investments, your home, your car, etc. — minus your debts, or liabilities. Liquidity, on the other hand, refers to how easily an asset can be converted to cash, if need be.

What is liquid net worth?

Liquid net worth is a combination of both net worth and liquidity. Net worth is a measure of the total monetary value of all your assets. It’s calculated by adding up everything you own, then subtracting everything you owe, or your debts. The resulting number is your net worth.

Liquidity refers to how easily you can convert an asset into cash. For example, your car is an asset, but it may take a few days to sell — it’s not incredibly liquid, but it’s more liquid than, say, a house, which may take months to sell. Conversely, stocks or exchange-traded funds (ETFs) can be sold almost immediately, meaning they have higher levels of liquidity.

Your liquid assets, minus your liabilities, determine your liquid net worth. Generally speaking, these assets include cash, short-term investments (assets held in a brokerage account, like stocks, bonds and ETFs), and possibly even your credit, or how much money you are able to borrow.

What’s the use of calculating and knowing your liquid net worth? The short answer is it tells you how much money you can get your hands on in the immediate future, should the need arise. You never know when you might need a cash infusion, after all, and having an idea of your liquid net worth will give you a ballpark figure to keep in the back of your head.

By contrast, your overall net worth is a measure of your entire estate, or financial situation, minus what you owe. Your overall net worth includes those assets that aren’t liquid, like real estate, because it takes some time to market, sell and collect any money from selling property.

In a pinch, illiquid assets don’t do you much good, which is why your liquid net worth can be a more useful number to know than your broader net worth. Below are some examples of various assets, and whether they’re considered to be liquid assets or not:

Which assets are included in liquid net worth?


Included in liquid net worth

Not included in liquid net worth

Retirement accounts
Real estate
Checking accounts
Antique furniture

Liquid assets vs. fixed assets examples

In the above table, you can see an example of a liquid asset (a checking account, and its contents), which is included when calculating liquid net worth. The other assets are instead considered to be “fixed assets” — they may have little or variable levels of liquidity, even though they may be valuable types of personal property.

Here are some more examples of liquid assets versus fixed assets:

Liquid assets

  • Checking and savings accounts and cash: This includes all of the money you have in the bank that can be withdrawn, plus the cash in your wallet or elsewhere.
  • Certificates of deposit (CDs): Money deposited in a CD that can be liquidated on short notice.
  • Stocks and other securities: Securities or assets that you can sell quickly and easily.

Fixed assets

  • Real estate: Homes or investment properties that you own.
  • Retirement accounts: This includes IRAs and 401(k)s, which may be liquid to a degree because you’ll incur taxes and penalties to withdraw money.
  • Vehicles: Cars, motorcycles, boats — you can sell them, but it’ll probably take some time.
  • Personal possessions: Own any valuable jewelry? Or a coin collection, perhaps? Those assets would belong in this category, along with other things, like art, or antiques.

You may be more familiar with looking at liquid assets versus fixed assets from a business perspective. Fixed assets, in that respect, refer to property, materials and equipment. But you can apply the same mindset to personal fixed assets, too, if it’s helpful to think of it that way.

How to calculate liquid net worth

Now that you understand what is (and is not) included, it’s time to calculate liquid net worth. While you may be able to track down a liquid net worth calculator, the process is more or less the same as calculating your overall net worth and excluding some assets when crunching the numbers.

For example, let’s say this is your list of total assets:

  • $1,000 in a checking account (liquid)
  • $5,000 in a savings account (liquid)
  • $15,000 invested in stocks in a brokerage account (liquid)
  • A 1998 Ford Mustang, valued at $1,900
  • Your house, valued at $300,000
  • An old barn full of antique furniture, valued at $3,000

And these are your liabilities or debts:

  • $10,000 in student loan debt
  • $1,000 in credit card debt
  • $2,000 in medical debt

With all of this in mind, calculating liquid net worth requires adding up your liquid assets (the money in your two bank accounts, plus the value of stocks if you were to sell them) and subtracting your liabilities.

In this hypothetical example, your liquid net assets add up to $21,000. Subtract the $13,000 in liabilities, and you land at $8,000 — or your liquid net worth.

Overall net worth vs. liquid net worth

Understanding the difference between your standard net worth versus your liquid net worth really boils down to being able to distinguish between liquid assets and fixed assets. Calculating net worth versus liquid net worth is a similar undertaking because you will need to know the difference between various assets you own, and whether they’re liquid or fixed.

Using the same assets from the above example, the difference in overall net worth versus liquid net worth is:

Overall net worth: $312,900 (The sum of all of your assets, minus your liabilities)
Liquid net worth: $8,000 (The sum of your liquid assets, minus liabilities)

How to increase liquid net worth

It can be a good idea to increase your liquid net worth if you’re anticipating a life change (having a baby, for example), or even if you just want to be prepared in the case of an emergency (like losing your job). Here are a few ways you can increase your liquid net worth:

1. Add to your savings account or emergency fund
If you have money in the bank, it never hurts to add more! Perhaps the easiest way to increase your liquid net worth is to stockpile more of the most liquid asset: cash. If you have an all-cash emergency fund (which you should), consider adding more money to it. There are other options for storing a liquid emergency fund, too, if you want to explore further options.

Similarly, you can keep more money in your checking or savings accounts that you don’t intend to spend.

2. Attack your debts
Since your liabilities, or debts, factor into your net worth and liquid net worth equations, it may be smart to pay down those debts, to the best of your ability. Doing so will free up additional cash and liquidity, increasing your liquid net worth.

3. Reconfigure your portfolio
Finally, you can increase the liquidity of your investment portfolio to increase your liquid net worth. Investing can get complicated, of course, so it may be best to talk to a professional before making any moves. Generally speaking, it might be a good idea to keep some money in cash in your brokerage account, or at least in less volatile assets.

The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.