Assets are both your liquid assets, such as cash in your savings account, stocks and bonds, and illiquid assets, such as your house, a partnership in a business, and your pension plan. The formula for calculating your net worth is Net Worth = Assets – Liabilities. Let’s unpack everything you need to know about calculating your liquid net worth. Your liquid net worth is the current value of your assets after you deduct the expenses involved with liquidating them into a cash position. Your net worth is the value of all of your assets, minus your liabilities. What is liquid net worth and how to calculate it? Liquid assets, on the other hand, are those you hold in cash or can readily convert to cash, like stocks. It’s much of your net worth, but can’t be converted to cash readily. That business is a perfect example of the difference between net worth and liquid net worth. What is the difference between liquid and net worth? Because you can withdraw the contributions without any taxes or penalties, a Roth IRA may be considered a liquid asset, particularly if it is invested in a bank savings account or a money-market mutual fund. It’s very similar to net worth, except that it doesn’t account for non-liquid assets such as real estate or retirement accounts. When you determine your net worth, you add up all your assets, including non-liquid assets, such as your house, car, and retirement accounts, and then subtract all of your liabilities. So that includes cash (of course), as well as money you have in savings accounts, checking accounts, money market accounts, CDs, mutual funds, bonds, and even stocks – phew! Pretty much anything that can be quickly turned into cash while holding onto its market value is considered a liquid asset. If your assets exceed your liabilities, you will have a positive net worth. You can calculate your net worth by subtracting your liabilities (debts) from your assets. Your net worth, quite simply, is the dollar amount of your assets minus all your debts. Liquid net worth includes investments like stocks and mutual funds, but not assets like real estate. Your liquid net worth is the part of your net worth that can be easily turned into cash. However, if you want to sneak some of your fixed assets into your liquid net worth, a good rule of thumb is to undervalue those assets by at least 20% when you make your calculations. ![]() You can’t depend on so many factors outside your control. 7 What is included in liquid net worth?. ![]()
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