Liquid Net Worth: What Is It, And How Do You Calculate It

If you decided to sell everything you own to invest in a business, pay for a major emergency, or leave it all behind and move to Tahiti next week, how much money would you have left after you paid all of your current liabilities? This amount is called your liquid net worth.

Liquid net worth is the amount of your net worth that you could turn into cash today if you needed to, minus your liabilities. This number can be tricky to calculate if you have investments such as real estate, but after reading this article, you should have a pretty good idea of how to start.

Why should you know your liquid net worth?

Your liquid net worth is a good number to know for several reasons. First, it keeps you motivated to continue making good financial choices, like saving for an emergency fund or investing in your retirement account.  

Second, it helps you evaluate your financial security. In case of a major emergency, you’ll have a good idea of what you need to do to pay for everything. You’ll be able to see where you can quickly access the most money as well as develop a plan for the worst-case scenario.

Calculating the liquid value of your assets


Cash is the easiest asset to calculate since its value won’t change. Add up any money that you have on hand in your wallet, checking accounts, savings accounts, or buried in your backyard. You can also include items that might not be cash but can be liquidated quickly, such as CDs.

Retirement accounts

There will be taxes and penalties on your retirement accounts if you withdraw funds before you’re retired, so the current amount in these accounts isn’t the same as cash. A good rule of thumb is to take off about 30% of the current value to account for penalties and taxes due.

The exception to this rule is the Roth IRA, which will allow you to withdraw funds you’ve contributed without penalties. You’ll only pay the penalties on the gains, so penalties on these accounts are substantially smaller.

Other investment/brokerage accounts

This type of account will also be subject to income tax and possibly capital gains taxes as well, so when calculating your liquid net worth, be sure to reduce the value by as much as 50% depending on your tax bracket. 

Real estate

Your home value counts towards your liquid net worth.

The value of your home is nice to know, but if you suddenly need to sell it as soon as possible, you’ll probably have to discount the price to get a quick sale. You’ll also need to pay closing costs (usually around 1% of your home’s selling price) as well as a commission to the real estate agent (about 6% of the selling price). When you’re calculating the liquid value of your home, reduce the value by 20 to 30% to take these reductions into account.


This is another area where getting a quick sale will probably cost you some money. To calculate your liquid assets for a vehicle, reduce the current value by about 20%. You can use a source like Kelly Blue Book to help you get an estimate of the current value if you’re not sure.

Other physical assets

Our “stuff” is usually not very valuable, and most of what we own, we probably wouldn’t want to sell anyway. Even if you move to Tahiti, you’ll still need silverware! The exceptions to this are items such as jewelry, fine art, or other objects that have a high market value and would be easy to sell. It’s your choice if you include these items when calculating your net worth. If you choose to include them, keep in mind that requiring a quick sale might mean you to reduce the price below the actual value for these calculation purposes.

Once you’ve adjusted each of these items, add everything together to get an idea of the value of your assets.


Liabilities are, in short, what we owe. Here are a few that you might have:

  • Mortgage
  • Credit cards
  • Auto loan
  • Student loans
  • Private loans
  • Any other debt

All of these combined are equal to your liabilities.

Final Calculation

Now that you have your assets and liabilities, find out your liquid net worth with this simple formula:

Assets – Liabilities = Liquid Net Worth

Once you have this number, you’ll have a good idea of where you stand financially. It’s a good idea to check in with this number once a month or so to get a big-picture view of your financial situation. You only need to update the value of your home and cars once a year or so. Checking on your liquid net worth numbers each month will encourage you as you see the assets go up and the liabilities going down, leading to an overall increase in your liquid net worth.