liquid net worth is liquid net worth means your cash and other easily convertible liquid assets like stocks and bonds

What is Liquid Net Worth and how do I calculate it?

Liquid net worth is a term that describes how much money you would have if you were to sell all of your assets right now. This includes cash, stocks, bonds, as well as any other investments and property.

Liquid net worth sounds complicated but the good news is that it isn’t too scary. 

Put another way, it’s how much you would have left if your house caught on fire and you had to pay off all your debts. It’s a metric for understanding your financial health so we’ve created this guide to help anyone understand what it means and how they can calculate their own liquid net worth!

How do I calculate my liquid net worth?

To make sure that your investments are good, you need to calculate your liquid net worth. This will help you avoid making mistakes with investments and spending money on things that are not what you want or need. If you have less than $100K, then this is important.

Your Assets – Your Liabilities = Your Net Worth

Liquid net worth is the “true” value of your assets. It accounts for all sources of income, including retirement funds and passive investments as well as any home equity you might have. 

Liquid Net Worth (LNW) is calculated by subtracting liabilities from Assets and dividing this number by Liabilities plus Asset Value. 

So your Assets – your Liabilities = your net worth


For example, if you owe $1000 on a credit card and have cash in a bank account for $3000 then: Liquid Net Worth = Cash – Debt ($3000 – 1000) = 2000

What are assets?

 These are basically anything you own that has value. This can be personal belongings and any investments such as stocks or bonds.

  • Investments – stocks, bonds, Certificate of Deposits, etc.
  • Vehicles
  • Cash
  • Homes
  • Retirement accounts e.g. 401K
  • artwork
  • antiques
  • passive income streams like stock dividends, rents on property owned by others, or proceeds from the sale of real estate.
Graphic depicting assets and liabilities

What are my liabilities?

Your liabilities are items you owe to others. These could be:

  • debts such as loans or credit card debt
  • outstanding mortgage balance
  • alimony paid
  • child support payments made by either spouse
  • taxes owed for the year (due at tax time)

Why does liquid net worth matter?

A high level of liquid net worth can help to provide security for yourself in old age, pay off debts or finance large purchases such as a car or home renovation.

A high level of liquid net worth can also help you quit your job, retire early or take a year off to travel.

A low level of liquid net worth can put your family in jeopardy if you have an emergency, such as a job loss.

In the event that one spouse loses their income and there is no other source for support (e.g., pension), you may use your savings more quickly.

Calculating the liquid asset value of your home

You can calculate the liquid asset value of your home by subtracting any mortgage debt from its market-value. The liquid asset value represents the equity that would remain if you sold your property and paid off all mortgages on it. It will also include other items such as a pool or garage.

However you need to consider these things:

  • Selling fees – fees paid to realtors in the US are approx 5-6% (UK – 1-2% +VAT)
  • The buyer could pay you the asking price, or even above if you are lucky. But there are no guarantees, so they could offer you less.
  • Equity in the property
  • Mortgage balance

It’s wise to add between 15-30% on the value of your home, when you calculate the liquid net worth, so that you are accounting for the costs and also the time it takes to sell.

How to calculate the liquid net worth of stocks

You can calculate your stock’s liquid net worth by adding up the value of all the shares that you own and subtracting any debt (including loans on margin) from your brokerage account.

The result will be a number in dollars, which can then be used to assess whether or not you have enough money to cover emergencies

How to calculate the liquid net worth of cars

The liquid net worth of any asset is what it would sell for in cash right now. The sale price may be higher than the car’s market value, but that doesn’t matter. What you need to know is how much money you could get if you needed to sell your car in a hurry. 

I used a figure of 20% lower than my car’s value online, as a rough estimate.

Total Net Worth vs. Liquid Net Worth

Total net worth includes other assets like property, cars, or stocks. Liquid net worth is just what you can sell in cash right now—your liquid wealth.

So if you had an emergency and you needed to sell your stuff, your liquid net worth would be the money you could get from your liquid assets.

The total net worth includes all of the property, cars, stocks and more that can’t be sold for cash in a hurry.

Overall net worth example


House:   $150,000

Car:        $   8,000

Savings: $3,000

401K:     $20,000

Total:  $181,000


House: $100,000

Car: $2,000

Loan: $3,000

Credit card: $2,000

Total: $107,000

Total net worth = $181,000 – $107,000 = $74,000

Overall liquid net worth example

Smart asset gives a great example of this:

For instance, let’s say you’ve got $20,000 in cash, $150,000 in brokerage accounts and $101,000 in a 401(k) account.

 If these are your only liquid assets, the total sum of your liquid assets is $271,000. 

If you only owe $5,000 in credit card debt and $42,000 in student loans, the total sum of  your liabilities is $47,000. Subtract that from $271,000, and your liquid net worth is $224,000.

How to build your liquid assets

You can build your liquid assets easily by saving money in a checking account.

Another way to do it is by saving up your tax refunds and other large checks that come through for you throughout the year. You can also save money on groceries, clothes and gas at any time of year!

You could use this savings as an emergency fund or have some extra spending cash when the opportunity arises.

Number one in my opinion is to save for an emergency fund.This can be anything from $500 to whatever is six months of your income. When I first started building our liquid net worth, I aimed to save $1000. This helped us pay easily for things such as:

  • replacing appliances
  • fixing the leaky roof
  • paying some of our tax bill (higher than expected one year)

Budget regularly to build your assets generally.

Another great way of building your liquid and net worth is to create a budget. Whether you choose to use a printable budget planner or a spreadsheet is up to you. However you do this, it will help you keep track of your money plan, so you can see your progress over time.

Piggy bank and things to save for like a care, holiday and a house.

Use a banking app to help you build your liquid assets

Find the app that works best for you. Some banking apps have separate savings pots that you can assign for each area of your budget.

I use Starling, but many banks in the US and the UK are now offering this function.

Set up an amount based on what your budget allows. Then transfer it to your savings pots when you get paid. This way, you won’t be tempted by using it for other things.

In conclusion

For budgeting purposes, it is probably better to look at your net worth, because this gives you the overall picture. Liquid net worth is useful to know, as it gives you a figure of how much money you have that is quickly accessible.

Building each of this is really important so that you become more and more financially secure over time.