Liquid net worth is an essential part of your financial status. However many people have not given it much thought.

The term net worth refers to the value of assets an entity has (including a person) after any kinds of liabilities such as debts have been subtracted. Essentially net worth is how much you are worth if you paid off all of your debts.

It is crucial to know your net worth as it helps you to know and understand your net worth as it allows you to know your financial health. Knowing how much you are worth can help you with various aspects concerning your finances, including helping you make better financial decisions.

While it is nice to know your net worth, the concept of net worth isn’t the only number that you need to know. Net worth has one problem, it takes into account your total worth, not the capital that you can access at any moment. You could have assets that will take days or weeks to convert to cash. Some may even take months to convert to cash.

These assets are not necessarily ones that you are concerned about when you want to know your value. If you want to know the net worth you have available to you at the moment, then you are looking for your liquid net worth.

Knowing Your liquid Net Worth

Liquid net worth is the same calculation. Instead of including all assets in the total, you only count liquid assets.

Knowing your liquid net worth is an even more critical number to know. Your liquid net worth is what you have available to you should you need cash in an emergency or quick cash for an investment opportunity due to stock market volatility. In other words, your liquid assets tend to have more of an impact when it comes to unforeseen events.

The concept of liquid assets is critical because many of us have a high net worth when assets are included, but not when they aren’t. Assets such as antiques, cars, land, and jewelry may be worth a lot of money, but they won’t help you out in an emergency. Realizing this can be uncomfortable and make you think.

A great term that has been coined to describe when you have many assets, but very little liquid worth is: asset rich cash poor.

Calculating Net Worth

Calculating net worth is relatively easy. Simply add up all of your assets from bank accounts to property and collectibles. Also, add up the debts that you may have. Once you have both numbers subtract your debts from the total of all of your assets. The remaining number is your net worth.

Net Worth Equation
Net Worth = Total Assets – Total Debt

Calculating Liquid Net Worth

As we mentioned, calculating liquid net worth is very similar to calculating your regular net worth. Take a look at your assets and determine how easy it is to use them as money should you have an emergency. Only include assets that are readily available or that you can access within a day. Your total debt is also calculated, just like in the above section. With both numbers, you can then subtract your debt from your liquid assets.

Liquid Net Worth Equation
Liquid Net Worth – Total Liquid Assets – Total Debt

What are Liquid Assets?

Liquid assets are those that you can readily get access to. You probably have a savings account and checking account. Those, along with cash, are the most common liquid assets. What are other liquid assets that you can count?

  • Cash Equivalents
  • Accounts Receivable
  • Tax Refunds
  • Deposit Certificates
  • Promissory Notes
  • Government Bonds

What are Illiquid Assets

Exact liquid assets may vary if you have a business. There are also some more rare forms of liquid assets, but these are the most common. Some examples of items that are not liquid assets include:

  • Property
  • Antiques
  • Land
  • Furniture
  • Vehicles
  • Business Equipment
  • Collectibles

To determine the difference between the two asset types, just think about how long it would take you to get a fair value for the item. If it would take more than a few hours to convert the asset to an appropriate value, it probably isn’t a liquid asset.

Monitoring Your Liquid Net Worth

To keep an eye on your financial health, it is crucial to monitor your liquid net worth. A few different services out there can help you monitor your wealth and debt, making it easier to calculate your liquid and regular net worth. These are services like Mint, DebtMiner, Personal Capital, and Quicken. Because these services require access to your bank accounts, some people wish to monitor their liquid net worth themselves.

To monitor your liquid net worth yourself, you can simply calculate out the numbers with the equation above. The only complicated part of this process is gathering all of those numbers. You will search your bank accounts, investment accounts, and anywhere else you might have assets to compile an accurate total. The same with your debts.

As you regularly monitor your net worth, you will probably find yourself quite surprised by how often your net worth changes, including your liquid net worth. There is a lot of fluctuation based on how much you spend, how much you save, the stock market’s state, and much more. How frequently the numbers change means that you should calculate your net worth at least once a year.

A Note About Monitoring Services

The concern over using services like Mint to monitor your net worth and debt comes from being worried about giving the service access to your bank account. In most cases, these services get read-only access to your bank accounts and investment accounts. At no time are these services able to make any kind of transactions.

With everything on the internet, there are always potential concerns. Before deciding to use any website, financial app, or service, we highly recommend doing your research to ensure the safety of your money and, through that, your future.

Improving Your Liquid Net Worth

Your liquid net worth is the money that you can rely on when an emergency happens. It is also one way that lenders determine if it is safe to lend to you. With a high liquid net worth, you will have a higher level of peace of mind. But how exactly do you go about getting a better liquid net worth? Let’s take a look at some essential steps you can take.

Reduce Investments in Non-Liquid Assets

To increase your liquid assets, you want to reduce the amount of money you invest in non-liquid assets and instead invest them in liquid ones. You don’t want to altogether remove any investments in non-liquid assets but simply reduce the amount in favor of liquid ones. Non-liquid assets can be significant for retirement and long-term savings, just not for emergencies.

Use A Financial Monitoring Service

Financial monitoring services can help you to ensure that you have all of your ducks in a row. We talked about some people’s concerns about these services, but many people have started to use them. These services can take information from a wide range of places, and you can add to it by filling in your own non-digital information. You may be able to find assets you didn’t know about.

Beyond finding, coordinating, and tracking assets, financial monitoring services can provide you with suggestions to cut debt, increase savings, and reduce spending. Not to mention that most of these services track within a day or two when it comes to activity. This, of course, depends on the accounts that are being synced.

Pay Off Debt

Debt is a significant hindrance to those who are trying to increase their liquid net worth. It can also have many other consequences on your life, like making it complicated to get a mortgage. You should focus heavily on paying off your debt. Every bit of debt that you pay off is less money to subtract from your assets to calculate your net worth.

It is vital to pay off your debt strategically. You want to start with paying off debt with higher interest first. Interest adds up quickly, and you will end up paying more in the long run if you keep high-interest accounts adding up. By paying off high-interest accounts first, you will be able to pay off your debt quicker.

Keep in mind that paying off some debts, such as car loans, too fast can result in making it harder to get a mortgage for a while.

Avoid Spending

The more you spend, the less liquid net worth you have. Start keeping track of your spending, and you can see where you have unnecessary expenditures. To truly understand your spending, you need to look at every transaction you make. It is easy to pass by subscriptions if you only take a brief look at your spending.

Making a budget will help you reduce your spending and increase the amount of money you can save from every paycheck.

Every time you make a purchase, you are going to want to determine if it is necessary. Consider what the purchase will do for you, and if it is something that can wait. If you do not need to make the purchase, you shouldn’t, until you get your liquid net worth up to a point where you can save for another spending.

Optimize Your Savings

Savings accounts typically have meager interest rates but are relatively safe. Examining your current savings account is a good idea if you want to increase your liquid net worth. Find out how much interest you are earning and see if you can find any savings accounts that have a better rate.
Some accounts only make .1% interest so take a look at all of the options that you have available to you. Unless you did this before you set up your savings account, you are likely to be able to find a savings account with a higher interest rate.

Get A Second Job

A second job obviously means that you will be working more, but it also means that you will be bringing in more money. Money that you can start saving and use to pay off debt. A second income is a great way to start increasing your liquid net worth and pay off your debt quicker.
When you work a second job, you also have less time to spend money on things you don’t need. It keeps you busy and improves your financial state at the same time.

You don’t have to have a regular second job. You can do freelance work such as teach a class here and there or write. There are also plenty of freelance artists out there as well as web developers.

Sell Unwanted Items

We all have possessions of one kind or another. A good number of those items we need, but then there are ones we don’t. Instead of throwing away things you don’t want, sell them to get cash, which can then be saved. That cash that you get is liquid net worth that you are accumulating.

Primarily focus on collectible items that you might have bought as an investment or bought when they weren’t worth as much. These can get you a large amount of cash to add to your liquid net worth.

Maintain Everything In Your Life

Maintaining the items in your life and your health is a great way to ensure that your liquid net worth is maximized and stays that way. The better you maintain everything in your life, the less likely it is to breakdown. This means taking your car in for regular maintenance and performing regular inspections on your household appliances.

Going to your regular doctors and dentist appointments will help keep your body in tip top condition. This typically means that you are less likely to have large unexpected medical expenses. Medical conditions are hard to plan for. Hence, it is always a good idea to have savings to help with sudden medical expenses.

Other Things To Consider

You need to take into account your whole financial status. Do not start building liquid net worth. It is at the risk of harming other aspects of your financial well-being. For example, if you are trying to pay off a large amount of debt, you may want to focus on that first to get rid of excess interest.

While you want to have a high liquid net worth, another thing to pay attention to is your credit score. Credit scores are a number assigned by three different agencies that are based on your credit-worthiness. Your credit score is how people and companies make a lot of financial decisions concerning you. If you want a loan, a mortgage, or a credit card, your credit score is what determines if you will be approved or not. A credit score is also used to determine whether or not you can rent most apartments.

Raising your credit score involves paying off debt and having credit experience. Maintaining a high credit score is something that all adults should monitor. Most banks offer credit card holders free credit score reporting. Keeping track of your credit score is also a great way to detect
if anyone is stealing your identity.


If you want to truly build a plan for building your liquid net worth customized to your needs, you will want to speak with a financial counselor. These professionals are well trained and experienced in the financial world. They will cover all of your finances and assets with you and make a plan. Everyone has different financial details, so we all need a customized plan for our specific needs. Otherwise, you can come up with your own plan.

Knowing your financial details is essential to maintaining financial well-being. Two of the most critical numbers to know are your net worth and your liquid net worth. Both numbers will help you determine whether you are prepared for whatever life might throw at you. In the end, it comes down to reducing your financial liabilities.


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