Financial freedom also allows you to go back to school and change careers if you wish to do so. The greater the value of your liquid assets, the more financial freedom you have because you can access cash easily in a pinch.įinancial freedom also means you can quit your job suddenly if an unsatisfactory situation arises. To calculate liquid net worth, you must be able to subtract the value of your non-liquid assets after calculating your total net worth. When sitting down to determine the total value of your assets and liabilities, it’s important to categorize each asset as either liquid or non-liquid. The difference between your net worth and your liquid net worth plays an important role in calculating both metrics. Liquid net worth matters because it shows you the cash value of your holdings that can be quickly converted into cash. It is also a measure of your financial freedom. Since your total liquid net worth includes only liquid assets, it tells you how much cash you can easily have on hand because it reveals how much of your assets you can turn into cash quickly. We’ll explain more about non-liquid assets below. To calculate liquid net worth, you also subtract any non-liquid assets. In both cases, you subtract your total liabilities, which may include things like car loans, personal loans, student loans or credit card bills. Your financial assets include anything you own that has value. Net worth and liquid net worth both show the fair market value of your financial assets, but liquid net worth includes only assets that are cash or cash equivalents. Liquid net worth is an important metric in personal finance.

If you’re looking for the liquid net worth definition, you’ve found it. Does liquid net worth include retirement accounts?.How Do You Figure Out Your Liquid Net Worth?.

Meaning of liquid net worth