calculating liquid net worth

How To Calculate Your Liquid Net Worth?

Filife team

    We all go through our finances monthly for our daily budget. We get to have an idea of our financial status every month but is it enough? Do you know the current worth of liquid net? 

    You might say that you are not running a business nor are you interested in things that require you to be meticulously aware of your financial standing. Don’t worry, calculating what your networth is not mentally taxing, it is simple yet it will surely help you get a better view of your current financial standing. 

    For sure we have all heard of the term ‘net worth’ especially when topics for celebrities and prominent people come up, but what are net worth? That one is easy, it’s just the total of all your assets after subtracting your current liabilities or debt. 

    You may not be eight or nine digit worth but knowing your liquid net worth will save you from filing for bankruptcy and that’s surely worth something, right?

    What Is Liquid Net Worth?

    Liquid Net Worth is the value of your assets if it was all liquidated, and by liquidated we do not mean turned into liquid, we mean those assets you own that can be immediately turned into cold hard cash. The difference of liquid net worth from net worth is that your net worth means all your assets including non-liquid assets.

    Alright, did we lose you for a bit there? Here’s a quick refresher for those who has forgotten these financial terms:

    • Assets – Property owned deemed valuable. Including cash.
    • Liabilities – Something you owe, a result of past transactions committed by an entity.
    • Liquid Assets – Assets easily converted into cash.
    • Non-liquid assets – Assets that would take some time to convert into cash.
    • Net worth – Value of all financial and non-financial assets minus outstanding debt.

    The easiest formula for calculating your liquid net worth is to get the value of all your liquid assets, calculate for the sum total and subtract the total of all your outstanding debts or assets liabilities, compare them if you may.

    Here is an example for calculating your Net Worth:

    Real Estate$400,000Car Loan$5,000 
    Stocks and Bonds$200,000Credit Card$5,000 
    Jewelry$10,000Student Loans$15,000 
    Bank Savings$50,000   

    Here is the same example but for calculating your Liquid Net Worth:

    Stocks and Bonds$200,000Mortgage$200,000 
    Bank Savings$50,000Car Loan$5,000 
      Credit Card$5,000 
      Student Loans$15,000 

    In calculating your liquid net worth, you only need to remove your non-liquid assets, as you will see in the example above, we removed the worth of the car, real estate home, and even jewelry. 

    These are non-liquid assets as they either take a long time to be converted into cash or you will not be able to get the exact amount of cash as appraised. 

    On your liabilities category, you can always bundle the same debt, like in the example, you can bundle your credit cards. In retrospect, non-liquid assets possess instability in its value therefore making it a shaky determiner of your liquid net worth. Calculating for your net worth is easy, right?

    Why Is Liquid Net Worth Important?

    In all of our responsibilities in our daily lives, some of us view our finances as something mandatory, far from anything leisurely. Not everyone is adept in finances especially when we are all trying to enjoy our lives to the fullest as our mortality has yet been challenged by the COVID-19 pandemic. 

    However, we believe that everyone, the rich, the middle-class, and poor people especially should aim for financial stability and financial freedom. One of the first steps to take on your road to financial stability and even prosperity is to know where you currently stand.

    Knowing your liquid net worth enables you to evaluate your finances in its biggest picture. Pretty much like knowing when to walk, when to climb, when to swim, and when to run. Fixing your finances of course starts with evaluating your financial security. It is knowing if you will be able to pay-off that loan you just took, or do you have to renegotiate your terms. 

    Being aware of your current financial standing will give you the proper tool you need to forecast your financial needs, even. It determines if your current income and assets are good enough. It even humbles you, to know where you stand, if we are all feeling a bit philosophical, I am sure we all do sometimes.

    Liquid Asset

    Like we have discussed earlier, these assets are those that should be easily withdrawn or sold like your current stocks and bonds investments, your current total bank savings, or even the lump sum of cash you stored somewhere. Anything that is already cash is your liquid asset.

    These type of assets are liquid assets because of the minimal time period it requires to be converted into cash. Your retirement accounts or 401 k do not count however, so do not mix them with your liquid assets when computing!

    Non-liquid Assets

    Non-liquid assets on the other hand are properties you own that can also be converted into cash but takes a considerable amount of time to be turned into cash.

    Examples of non-liquid assets are your real estate, your automobile, that old family heirloom jewelry set at home, and even your retirement accounts or 401 k. 

    Properties like your house and car are assets that may take some time to be sold. People rarely, if not at all, impulse buy real estate. Plus, these assets are also sometimes appraised at a higher value than its actual market value. 

    Even your Mother’s jewelry set at home that you inherited may seem to be more valuable to you than to an actual jeweler. Even your retirement funds or 401 k are assets, sure, but to be able to withdraw it, it will cost you some penalty fees and might take some paperwork to be able to do so.

    Some non-liquid assets, however, can be included in your liquid net worth by undervaluing them. For example, if you have finished paying off your house or your car, you can then have it appraised. 

    Take the 20 percent of the appraised value and price your asset at that amount. So when the dreaded desperate times comes, you are ready with desperate measures and well on your way to your financial freedom.

    How To Track Your Net Worth?

    Finances, especially taxes, for some of us, are a nerve-racking job every one of us need to follow-through for the rest of our lives.

    Your net worth should be part of that process and while computing for your net worth and liquid net worth is fairly easy, it’s still a process that might be taxing for those of us whose job or jobs drains us every day. Good thing phone apps are a thing now!

    Are you always on your phone? Or maybe you downloaded a phone application that lets you track every financial move you make, every cash flow up to your daily expenses? Here’s an easy and affordable application for tracking your net worth! WorthTracker, it is affordable because it is free. 

    Like every other finance-driven application out there, it is easy to use as you essentially just need to input your information in there and voila! Your worth net is computed for you.

    increasing net worth

    How To Increase Your Liquid Net Worth?

    Even if you have been diligent with your financial responsibilities for years and were able to save a hefty sum, your liquid net worth can still be off target or unfavorable for you, still. 

    Especially when you are trying to aim for that neat looking net worth, right? It may be rude to brag about for ethical reasons, sure, but it is one of those things that will make us feel good just by looking at it, a six-digit isn’t bad after all, right?

    Below are some tips we listed to increase and improve your liquid net worth, of course, it would not be that easy but the first steps (even baby-steps) are easiest taken one at a time.

    1. Review Your Current Liabilities

    Reviewing your financial responsibilities is one of the best ways to board that freight train to financial stability. It may come off as an extra hassle at first since you know and committed in all that previously but maybe there are some liabilities you miscalculated, or maybe your bank offered a new package that you are qualified to avail to lessen your debt. 

    Always renegotiate your debts to your capabilities and convenience, most banks nowadays are lenient to their valued customers, you are the one providing them their business after all so always be assertive when it comes to your hard-earned money.

    After reviewing your liabilities, of course you will be able to see some things that marketing talked you into buying or subscribing. Check-out those monthly subscriptions that you can cancel, internet is our friend and though we pay for our data services and internet service providers, most information is free, including those that you think are not. Research on your own, capitalize on freebies!

    2. Lower Expenses

    Saving will literally save you. Check up on your monthly budget and compare it to your monthly income. Do not get comfortable with paying things out of habit. Do you really need that meal upgrade? Or that premium membership you availed? 

    As a mantra, we should always be mindful of our expenses up to those tiny costs. Sure, it may be just $5 but buy whatever that thing daily for a month and that is already $150 plus taxes off your monthly budget.

    Ever tried the 50-30-20 saving rule? If not it’s as easy as calculating for your liquid net worth! Calculate your monthly income after taxes and divide them by 50-30-20 percent. Allocate 50% of your income after taxes to your necessities at home, 30% for your wants and pleasure, while saving up the 20%. It may be hard at first but if you make ends meet and keep doing this 50-30-20 rule for at least three months then that’s already a habit forming. Keep at it!

    3. Review Annual Cost Of Financial Responsibilities

    Be sure to check and compare your insurances. It may be your health insurance or car insurance. Maybe you can get a better deal at another company. It may require diligence and a certain amount of time and research but if you can lower your liabilities while getting even better services then who may say it was not worth the trouble?

    4. Start A Side Hustle

    You may have a stable job or balancing two jobs, no matter what it is, I’m sure you can find a space for a side hustle. Side hustles, whether it may be walking your neighbor’s dogs or reselling things on ebay, profit is profit no matter how small so don’t worry too much about what you are doing as long as you are not conning anyone.

    5. Start Investing

    Investments are often seen as something only for those who have that extra cash and those whose financial stature are not a mess. This perception is heavily misinformed in our opinion. 

    Investments come in different shapes and sizes. Your house in itself is an investment. Your car, too, is an investment. You yourself getting your job done is investing your time. So investments like stocks and bonds are not extras, we should see them as a way of being a functioning member of a society and/or community. Not only shareholders help starting companies, they will help you, too once they can. 

    If you are really not into investing in stocks, then mutual funds can be your cup of tea. Do not be afraid to ask about investments especially in your bank, these financial institutions often give great packages. Ask now!


    What did we tell you? Computing for your net worth and liquid net worth is easy, right? Whatever your current financial position is now, you can always improve by reading articles after articles so be sure to check us out often!