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Financial PlanningNet Worth CategoryWhat is Liquid Net Worth & Why It Is Important For You?

What is Liquid Net Worth & Why It Is Important For You?

Are you truly secure in your financial future? The answer may lie in a term you might not be familiar with: Liquid Net Worth. This crucial metric is more than just a buzzword; it’s a barometer of your financial health and a key indicator of your financial security.

In simple terms, your Liquid Net Worth is the value of your liquid assets—those possessions that can be quickly converted into cash. This includes the money in your savings account, your stocks, and even bonds.

Understanding this figure is essential for effective financial planning and building a robust emergency fund.

As someone with decades of experience in financial planning, I can’t stress enough how vital it is to be aware of your Liquid Net Worth. It’s not just about knowing your total assets; it’s about understanding how quickly you can acess your assets in times of need.

So, why should you care about your Liquid Net Worth? Because it’s the safety net that can catch you when life throws its curveballs. It’s the quick cash that can bail you out of sudden financial crises, and it’s the cornerstone of a well-balanced investment portfolio.

Ready to dive deeper into understanding your Liquid Net Worth and how to improve it? Keep reading to unlock the secrets to a more secure financial future.

I hope this has piqued your interest and provided you with valuable insights. Your financial well-being is too important to leave to chance. Take action now by continuing to read this article and taking steps to calculate and improve your Liquid Net Worth.

Key Takeaways & Defining Liquid Net Wroth

  1. Liquid Net Worth is a crucial metric that measures your financial health and security.
  2. It comprises liquid assets like cash, savings accounts, and easily convertible investments like stocks and bonds.
  3. Knowing your Liquid Net Worth is essential for effective financial planning and for building a robust emergency fund.
  4. Liquid Net Worth is different from total net worth; it focuses on assets that can be quickly converted to cash.
  5. A strong Liquid Net Worth provides a safety net in times of financial crises and is a cornerstone of a well-balanced investment portfolio

Liquid Net Worth Definition – The total of your liquid assets (assets that can be quickly converted to cash) may provide information about how well prepared you are for a financial emergency or loss of income

Liquid Net Worth Meaning

When people talk about a person’s liquidity or liquid net worth, they are referring to that person’s financial health. Liquid net worth is a good indicator and is a measure of a person’s ability to convert their assets into cash quickly, and it includes both personal assets (such as savings and investments) and intangible assets (such as stock options and privileges). 

A person’s liquid net worth is often represented by two ratios: the quick ratio and the current ratio.  The goal is to have more assets than liabilities, and to be able to convert your assets into cash quickly (known as your “quick ratio”) and easily (known as your “current ratio”).

I just touched on how having a “liquid net worth” is a good indicator of your financial health. This simply means the total value of your financial assets (including your personal assets and intangible assets) minus any debts you may have. 

What Do The Financial Experts Have to Say?

  1. “Cash is king. It’s all about liquidity and flexibility in the modern age.” – Suze Orman
  2. “Liquidity is oxygen for a financial system.” – Ruth Porat, CFO of Alphabet Inc.
  3. “Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent.” – Warren Buffett

What is Liquid Net Worth?

Money Faucet

When you hear the term “liquid net worth,” you might think it refers only to the value of your cash assets, such as your checking and savings accounts. But liquid net worth actually refers to the value of ALL of your liquid assets (minus liabilities).

This can include certain investments, could include your home equity, and possibly even your retirement savings. 

Your liquid net worth is important because it can help you weather financial hardships. If you lose your job, for example, you can use your liquid assets to cover your living expenses for a few months while you look for a new job.

And if you have an unexpected expense, such as a medical bill, you can use your liquid net worth to pay for it without going into debt. 

Building up your liquid net worth is a smart financial move because it gives you a safety net to fall back on in times of need.

So if you don’t have much in the way of liquid assets, start working on building up your savings. And if you already have a healthy savings account, consider investing some of your money so you can grow your liquid net worth even more.

Net Worth Vs Liquid Net Worth

When it comes to personal finance, there are a lot of terms that get thrown around. Two of those terms are “net worth” and “liquid net worth.” It’s important to understand the difference between the two, because they represent very different things.

Net worth is the total value of your assets minus the total of your liabilities. So, if you own a home worth $200,000 and you have a mortgage of $150,000, your net worth would be $50,000.

cash liquid net worth chart

Liquid net worth, on the other hand, is a measure of your liquid assets. Liquid assets are things like cash, savings accounts, and investments that can be easily converted to cash. Non-liquid assets, such as real estate and retirement accounts, are not included in this number. 

Why is it important to know the difference? Because your liquid net worth is what you have available to you in an emergency. If you lose your job or have a medical emergency, your liquid net worth is what you can rely on to get by until you can get back on your feet. 

So, while your net worth is a good measure of your financial health, your liquid net worth is a better measure of your financial security.

Good Examples of Liquid Net Worth

Individuals with high net worth often have little liquid net worth, compared to the average liquid net worth. This is because most of their assets are in the form of investments, real estate, and other illiquid assets. While these assets may be worth a lot of money, they can’t be easily converted into cash. This means that if someone with a high net worth were to suddenly need a large amount of cash, they would have to sell some of their assets. 

This can take time and may not get them the full value of the asset. Liquid net worth is the portion of an individual’s net worth that is easily converted to cash. This includes savings, investments that can be easily sold, and other liquid assets. Liquid net worth is important because it is the money that can be used in an emergency or for other unexpected expenses.

“Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent. When bills come due, only cash is legal tender. Don’t leave home without it.”

Let’s look at two examples of the liquid net worth of two individuals we would all consider to be slightly wealthy.

Elon Musk Liquid Net Worth

As of October 2023, Elon Musk’s approximate liquid net worth is over $234 billion according to Forbes real-time billionaires index. This includes cash and investments that can be easily converted to cash. 

His net worth has grown significantly over the years due to the success of his companies and his ownership stakes in them. Musk’s net worth peaked in November 2021 at $340 billion.

His net worth is almost $250 billion, but he didn’t have enough liquid net worth to buy Twitter!!  Poor guy… the majority of Musk’s net worth has been tied up in Tesla and SpaceX stock.

Jeff Bezos Liquid Net Worth

How much of Jeff Bezos net worth is liquid?  Jeff Bezos’ approximate liquid net worth is estimated to be $145 billion as of late 2023. This includes cash and investments that can be easily converted to cash. The majority of Bezos’ net worth is tied up in Amazon stock, which is not considered to be liquid.  A few years ago it was reported that Jeff Bezos keeps 5% of his liquid net worth in cash!

average liquid net worth by age
average liquid net worth by age

What is My Liquid Net Worth? – How To Calculate Net Worth?

Let’s look at how to calculate liquid net worth.  It’s actually quite simple, if you remember this one formula.  Your liquid net worth is the value of your liquid assets minus your liabilities.

In order to determine your Liquid Net Worth, you need to add up all of your liquid and non-liquid assets and then subtract any debts and other liabilities. This will give you a clear picture of your total net worth and how much liquid cash you have on hand. It is important to have a strong understanding of your Liquid Net Worth so that you can make smart financial decisions and plan for unexpected expenses or financial hardships.

liquid net worth formula equals liquid assets minus liquid liabilities

Remember, your liquid assets are your cash and investments that can be easily converted to cash. This includes money in checking and savings accounts, money market accounts, and investments in short-term bonds and mutual funds.

Your liabilities are your debts and obligations that must be paid in cash. This includes credit card balances, student loans, and any other outstanding loans.


To calculate your liquid net worth, simply subtract your liabilities from your assets.

For example, let’s say you have $10,000 in cash and investments, and $5,000 in outstanding debts. Your liquid net worth would be $5,000.

It’s important to remember that your liquid net worth is only a snapshot of your financial health. It doesn’t take into account your long-term assets, such as your home equity or retirement savings.  But it is a good way to measure your short-term financial security and it can give you a goal to work towards.

If you want to increase your liquid net worth, you can do so by either increasing your assets or decreasing your liabilities.

  • To increase your assets, you can save more money or invest in assets that will grow in value. 
  • To decrease your liabilities, you can pay off your debts or negotiate with your creditors for lower payments.

Liquid Net Worth Calculator

A Liquid Net Worth Calculator is a tool that can be used to help you assess your financial health. To use the Liquid Net Worth Calculator, you will need to input only your liquid assets and liabilities. This information can be found on financial statements. Once all of the information has been inputted, the calculator will provide your individual liquid net worth.

Individuals can use the Liquid Net Worth Calculator to assess their financial health and make informed decisions about their finances. The calculator is a valuable tool that can help individuals understand their financial situation and make informed choices about their money.

*be sure to only include LIQUID assets for this calculator. See below the liquid net worth calculator for a list of liquid and non-liquid assets.

Liquid Net Worth Calculator

List of Liquid and Non-Liquid Assets

Liquid assets are important because they can be used to cover short-term needs, such as paying bills or buying inventory. Non-liquid assets, on the other hand, are important because they can be used to generate income or grow in value over time.

liquid assets cash
Liquid Assets

A liquid asset is an asset that can easily be converted into cash within a short amount of time.

Cash & cash equivalents: 

  • liquid savings for living expenses or emergency savings funds for unexpected expenses or financial hardship
  • actual cash, checking and savings account, cash management accounts, money market accounts, money market funds, credit unions etc.
  • A certificate of deposit is NOT considered liquid because you will be penalized for breaking the CD early to convert it to cash.  It can still be considered for your emergency fund though.

Marketable securities:

  • May requires a few days to convert to cash, but there is liquidity such as common stock through the stock market
  • Typically an investment account held at financial institutions 
  • Investment assets in brokerage accounts,stocks, mutual funds, bonds, index funds or ETFs.

Accounts Receivable

  • This is when you are owed money, either through a business invoice, or personal loans.  The point is, you know you will be able to access the cash shortly.  This is where we start to get into the gray area or questionable parts of liquidity.

Long Term Investments

  • These are investments that may be part of your retirement savings and retirement planning, such as individual retirement accounts.  If you are of retirement age, these assets are certainly considered liquid.  
  • If you are not near retirement, there may be penalties but you may be able to access some of these funds. 

Also called illiquid assets, are difficult to convert to cash quickly and get full value.  Most Illiquid assets take a longer time to sell, and have transaction costs and liquidation costs.  It can sometimes take months or even years to find a buyer of a non-liquid asset, and selling them quickly tends to devalue them.

  • Primary residence
  • Land, Investment Real estate or Real Estate Investment Trusts
  • Equipment and Vehicles
  • Jewelry, Art, and Collectible


How much of your net worth should be liquid?

The only reason you would need a large percentage of your net worth in liquid assets is if you are highly leveraged. Shoot for 5% – 10% of your net worth in Liquid assets.

Does Liquid Net Worth Include 401k? 

It depends whether you have reached retirement age or not.
Once you have reached retirement age, retirement accounts are fully accessible and considered liquid – depending on what specific investments are in your retirement accounts and IRA.
If you have not yet reached retirement age, retirement accounts are not considered liquid yet.  The reason is most retirement accounts have restriction for early withdrawals such as a 10% penalty and taxes.

Does Liquid Net Worth Include stocks?

Usually, yes – common stocks trading on a major stock market are considered a liquid asset.  If the stock trades frequently, it will be liquid and quickly accessible.  But not all stocks are accessible immediately without restrictions.  Keep the rule of thumb in mind – if I can convert this to cash in a few days, it is considered a liquid asset.  
Also, if you’re young and your stocks are in your 401 k account – it may not be accessible either.

Is a Car a Liquid Asset?

Yes and no, but I will explain.
There are companies such as Carmax and car dealerships now that will inspect your cash and within an hour cut you a check to buy your car.  In that situation, a car is VERY liquid.  Assuming you don’t need to replace the car you just sold.
But in situations where you plan to sell the car on your own, it can easily take you several weeks and your car is not a liquid asset.  

Next Steps

So, what’s the real deal with Liquid Net Worth? It’s not just a financial term; it’s a lifeline. Your Liquid Net Worth is the sum of your liquid assets, like cash, savings accounts, and stocks, minus your liabilities. It’s the money you can quickly tap into when life throws you a curveball, be it a job loss or an unexpected medical bill.

As an experienced financial expert, I’ve seen firsthand how a strong Liquid Net Worth can be a game-changer. It’s not just about accumulating wealth; it’s about having quick access to your assets when you need them the most. It’s the cornerstone of a well-balanced investment portfolio and a robust emergency fund.

Why does this matter to you? Because your Liquid Net Worth is your financial safety net. It’s the quick cash that can bail you out of sudden financial crises. It’s the metric that can either make or break your financial future.

Thank you for investing your time in understanding this crucial aspect of personal finance. Sign up for our newsletter for more exclusive financial content and tips to secure your financial future.

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Michael Ryan
Michael Ryanhttps://michaelryanmoney.com/
Who Am I? Wondering who's behind the financial wisdom you're about to receive? I'm Michael Ryan, a retired financial planner. My journey didn't stop at retirement; it pivoted. Now, I serve as your personal financial coach, dedicated to guiding individuals and entrepreneurs through the financial maze. Why Listen to Me? Why should you heed my advice? Simple. My expertise is not just academic; it's forged from years of hands-on experience. But don't just take my word for it. I've been quoted and featured in esteemed outlets like US News & World Report, Business Insider, and Yahoo Finance. For more proof, feel free to check out my press accolades 'here'. What's in It for You? Got burning questions about money? Whether it's budgeting, investing, or retirement planning, I've got you covered. Through my 'blog', I'm on a mission to democratize financial literacy for all.
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