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“What Is My Liquid Net Worth?” Here’s How To Calculate It.

Posted by Billy Hufnell on November 30, 2020

“What Is My Liquid Net Worth?” Here’s How To Calculate It.

Even if you’ve never considered it before, “What is my liquid net worth?” is a question worth asking. Understanding your current financial situation is essential to determining how you’ll reach your future objectives—for example, whether you’ll have enough money to fund your ideal retirement.

In this article, we’ll answer the question, “What does liquid net worth mean?” We’ll also explain which assets count as liquid net worth and which don’t, as well as how to calculate liquid net worth.

Are you ready to discuss your liquid net worth with an advisor to create a plan for your financial future? Schedule a call with Bay Point Wealth today.

What does liquid net worth mean?

Your liquid net worth is the total sum of your assets that are either already readily accessible cash or assets that you could immediately turn into cash—minus your liabilities.

To know how to figure out liquid net worth for yourself or your family, you first need to understand which assets to classify as “liquid” in your calculation. Let’s break this down.

What Liquid Net Worth Does Include

Cash and assets you could quickly turn into cash contribute to your liquid net worth. These assets could include:

  • Non-retirement savings accounts
  • Money market accounts (high-interest bank accounts)
  • Certificates of deposit (an even higher-interest savings product from your bank)
  • Investments, such as stocks and bonds

There’s one caveat to counting stocks and bonds toward your liquid net worth: if it’s an inopportune time to sell, because then you’ll likely lose money.

For example, the market crash at the beginning of the COVID-19 pandemic in March 2020 was a bad time to sell stocks and bonds because their value had sharply decreased (luckily, only in the short term). If you needed to liquidate those assets at that time (sell them for cash), you probably would have had to sell at a loss.

It’s also important to note that in certain instances, you may be required to pay capital gains on securities when you sell them. You must account for this when calculating your true liquid net worth. If you are currently in a certain income bracket, depending on your tax filing status, and you are selling appreciated stocks from a regular brokerage account, you will owe between 15 and 20% tax on the amount of the portion of the gain.

What Liquid Net Worth Doesn’t Include

You shouldn’t typically count assets that would take you more than a few weeks to liquidate toward your liquid net worth. In addition, don’t count assets on which you’d lose money if you liquidated them, due to early withdrawal fees or depreciating value. These assets could include:

However, if you do choose to count these assets toward your liquid net worth, ensure that you discount their value by approximately 30% (or the percentage applicable to your income tax bracket, including income from the withdrawal), as we’ve done for the IRA account in the chart below.

The Gray Area

Have you ever wondered, “Does liquid net worth include retirement accounts?” The answer isn’t a straight yes or no. You can sometimes consider the following assets as part of your liquid net worth:

  • Post-tax retirement accounts, such as Roth IRAs
  • Your home

Although you can withdraw your contributions tax-free from a Roth IRA, you may incur taxes and/or a 10% penalty on your earnings in the account, which is why it’s important to have a financial plan in place to determine the best time for you to access these funds. Learn the rules related to Roth IRA withdrawals.

In addition, you can likely consider your home a non-liquid asset unless you plan to sell it within the next year. When you are ready to sell, remember to account for closing costs so you don’t overestimate how much money you’ll earn from the sale.

Why It’s Important To Understand Liquid Net Worth

You now have a clear sense of what liquid net worth does and doesn’t include. This is helpful knowledge because it’s crucial to understand your cash needs—as well as how much cash is available to you at any given moment—so you can be prepared for unexpected costs as they inevitably arise.

For example, you may own a home that is likely to need a new roof in the next year or so, or another major expenditure. If you calculate your liquid net worth and realize that you won’t have enough cash available to cover the renovation within that timeline, this should signal that it’s time to rework your financial plan.

You may need to sell some assets to free up cash for your new roof or to draw on in retirement. When you consider selling any asset, be aware of the potential implications, including fees and taxes—depending on the accounts from which you withdraw the money and when you withdraw it—which could impact your plan of action and your financial future. For example, you may not be able to take that family vacation you had on the books for next year.

Pro Tip: If you’re looking for guidance around the fees and taxes associated with your various accounts, a financial advisor can walk you through this information. They’ll help you decide on the appropriate next steps, then work with you to adjust your financial plan as necessary to ensure you can still reach your goals.

What is your liquid net worth?

Grab a pen and paper—it’s time to put your newfound knowledge into practice and calculate your personal or family liquid net worth.

How To Calculate Liquid Net Worth

  • Step 1: Make a list of your liquid and non-liquid assets and their value. Refer to the examples provided earlier in this article to help you. Everyone’s list will look slightly different.
  • Step 2: Discount certain assets to account for the costs associated with liquidating them. For example, subtract at least 25% from the value of your home to account for realtor and legal fees associated with the sale, as well as moving and repair costs.

Pro Tip: It’s always better to assume that your home has less cash value than you would otherwise think. This way, you may be pleasantly surprised instead of disappointed when the sale is complete.

  • Step 3: Make a list of all your liabilities (debts). These could include your mortgage, car loan, student debt, credit card debt, and even a loan from a family member to help you start a business.
  • Step 4: Subtract your non-liquid assets and your liabilities from the total sum, and you’re left with your liquid net worth.

Here’s an example of what this calculation could look like:


% Discount








Non-Retirement Savings Account








Roth IRA


















Auto Loan



Student Debt



Credit Card





Net Worth



Liquid Net Worth (without home and car)



Create Your Financial Plan With Bay Point Wealth

Once you’ve calculated your personal or family liquid net worth, a smart next step is to work with a financial advisor to create or adjust your financial plan.

Whether your goals include starting a business or preparing for retirement, our team at Bay Point Wealth can guide you to ensure you approach these objectives the right way. We’re here to understand your needs and to help you save as much money as possible on fees and taxes associated with making withdrawals from your accounts.

Schedule a call with us to learn more about how we can work together to enable you to achieve your financial goals.

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Topics: Financial Planning