How (And Why) To Calculate Your Liquid Net Worth

5 min read

There are two financial metrics that I recommend everyone should track:

Net worth: The difference between your assets and your liabilities.

Monthly cash flow: How much you earn and spend each month.

I like to think of net worth as “where you are financially” and cash flow as “where you’re headed financially.” If you know these two metrics, you’ve got a pretty good idea of your overall financial health.

Related: I’ve personally found that Personal Capital offers the easiest free way to track both of these metrics.

However, there’s another financial metric that is less discussed that you should also be aware of: liquid net worth.

What is Liquid Net Worth?

Your liquid net worth can be defined as:

The amount of cash that you would have if you liquidated everything immediately.

For example, if you had to sell your house, your car, and all of your investments immediately, how much cash would you have available? This is your liquid net worth.

In nearly every case, your liquid net worth will be less than your total net worth because there are transactions costs, fees, and taxes associated with liquidating investments. Also, when selling something like your house or a personal business, you’ll likely get less than market value if you need to sell it immediately.

Why Is It Important to Know Your Liquid Net Worth?

It is important to know your liquid net worth because this represents the amount of money that you would have on hand to pay for things like:

  • A surprise medical emergency
  • To lend money to a family member or friend in need
  • To start a new business
  • To pay for any major unexpected expense

While your net worth gives you an idea of the total value of your assets minus your liabilities, your liquid net worth tells you how much cash you could actually have on hand immediately to use for these types of expenses.

How to Calculate Liquid Net Worth: An Example

To illustrate how to calculate liquid net worth, I’ll use my own finances as an example. Here’s a look at my various account balances along with how much each account would be worth if I liquidated it immediately:

Account Balance Liquidated Balance
Cash $11,500 $11,500
Brokerage Accounts $61,000 $50,000
Retirement Accounts $56,000 $40,000
Private Investments $550 $275
Cryptocurrencies $1,500 $1,500
Car $8,000 $6,000

Total Net Worth: $136,550

Liquid Net Worth: $109,275 (80% of total net worth)

Here’s a brief explanation of how each liquidated balance was calculated:

Cash: My cash is already liquid, so this amount wouldn’t change.

Brokerage Accounts: Since most of my investments in my brokerage account have been held for over a year, I would simply have to pay the 15% long-term capital gains tax for selling my positions.

Retirement Accounts: Most of my investments in my retirement accounts have also been held for over a year, and because I would be withdrawing them early I would have to pay the 10% early-withdrawal penalty.

Private Investments: I have one $550 private investment through Republic. Because this investment is illiquid, I would have to try to sell it on some secondary market. To be conservative, I assume that I would only be able to get 50% of this investment’s total value if I had to liquidate it immediately.

Cryptocurrencies: About two years ago I invested a couple thousand bucks in bitcoin, ethereum, and litecoin. If I needed to, I could sell these cryptocurrencies for market value and have cash deposited in my checking account overnight.

Car: Based on the KBB Private Party sale price, my Honda Civic could be sold for about $8,000. In a crunch, I assumed that I could sell it immediately at a 25% discount.

For most people, their liquid net worth will be equal to around 75% – 85% of their total net worth, depending on what types of assets they own.

Considerations for Calculating Liquid Net Worth

The amount of cash you could get your hands on immediately varies based on the type of asset you own. Here are a few examples.

Cash & Cash Equivalents

For cash and cash equivalents, you could get your entire balance since it’s already liquid. Examples of cash and cash equivalents include:

  • Physical cash
  • Savings accounts
  • Checking accounts
  • Money market accounts

There’s a reason why many people hold emergency funds in these types of accounts – they offer quick and easy ways to access money in case of an emergency. However, some people like Big ERN argue that holding any money in an emergency fund is unnecessary

Personal Possessions

There is a reason that flipping items for profits has become so popular in the last few years: it can be a quick and easy way to generate income. However, selling items that you own in a crunch can mean that you’ll only be able to get 25% – 50% of what you think they’re worth.

That trinket that you think you can sell at any time for $5,000 might only be worth $2,000 or less if you need to sell it to the first person available in 24 hours or less. Keep this in mind when including personal possessions, furnishings, and trinkets in your liquid net worth calculations.

Real Estate

Real estate is arguably the most complicated and annoying type of asset to turn liquid. Depending on the type of housing market, it can take anywhere from weeks to months to liquidate a property.

If your research tells you that your house is worth $200,000, you may only be able to get $175,000 or less if you need to find a buyer as quick as possible.

Along with the market environment, there are transaction costs involved with real estate that can add up. A real estate agent could charge a 4-6% commission to sell your home for you. You could pay another 1-2% in closing costs, attorney fees, and transaction fees at the state or local level.

Keep each of these fees in mind when calculating the liquid net worth of your property.

Retirement Accounts

While retirement accounts can be relatively easy to liquidate compared to real estate, they still involve taxes and potential penalty fees if you choose to withdraw your money before a certain age.

For example, consider someone who has $100,000 sitting in a 401(k) plan. Because a 401(k) is tax-deferred, it means you avoided paying taxes on your contributions, but you still have to pay income taxes when you make withdrawals.

If you want to liquidate your entire account balance of $100,000 and you’re younger than 59.5 years old, you will have to pay ordinary income taxes on the entire $100,000 along with a 10% early withdrawal penalty in most cases. This amounts to tens of thousands of dollars in taxes and fees.

Keep this in mind when calculating the liquid balance of your retirement accounts.

Personal Businesses

Another type of asset that you could potentially liquidate is a personal business. 

One example of this is a website. In general, websites sell for 25 – 30 times monthly revenue. For example, a site generating $1,000 per month will typically sell for $25,000 – $30,000 on website marketplaces.

Related: If you’re interested in starting your own website, check out my quick-start guide here.

However, if you need to liquidate your website immediately, you may only be able to find a buyer if you offer to sell your site for 10 – 15 times monthly revenue. Even in cases where you’re able to get someone to pay full price for your site, you’ll likely have to pay 5-10% in commissions to the marketplace you list it on, unless you communicate with the seller directly.

For most personal businesses, whether it’s a website or some other asset, you’ll only be able to get 50 – 80% of the true value of the business if you have to sell it in a crunch.


Net worth is a convenient financial metric to track because it’s easy to calculate. You simply add up the value of all your assets and subtract the value of all your liabilities.

However, your liquid net worth gives you a better idea of how much money you would actually have at your disposal if you needed it immediately.

While you should periodically check your net worth (I personally calculate mine once per month using Personal Capital), you should keep in mind that it doesn’t represent the full amount of cash that you could use in a crunch.

Further reading:

How to Manage Your Money
Is Net Worth the Wrong Metric to Track?
The Math That Explains Why Net Worth Goes Crazy After the First $100k

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