What is the definition of liquid net worth?

Answer

Liquid net worth refers to the amount of an individual's assets that he is able to draw on at any given moment. It includes cash or assets one is able to quickly convert to cash, such as stocks. The Nest reminds investors that most net worth is not liquid, so it is essential to plan for emergencies with those that are as a part of overall financial planning.

Liquid net worth includes checking and savings accounts at banks and savings and loan institutions. It also includes treasury bills; however, the Houston Chronicle reminds investors that the liquid value of these instruments is their present and not their face value, which includes total interest paid at maturity.

Net worth is a snapshot of an individual or business. It is the difference between the value of one's assets and liabilities. Properties including real estate, vehicles and antiques increase the individual's net worth, but are less liquid. Such non-liquid assets appreciate or depreciate over time. Automobiles are more likely to depreciate, while fine art and real estate tend to appreciate. Increasing net worth is important for businesses that are looking to continue. The Houston Chronicle says professional fundraisers use a rule of thumb that a potential donor has a net worth of approximately three times his real estate holdings.

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Liquid net worth only includes assets that can readily be turned into cash without a major loss in value; therefore, do not include real estate or business equity, personal property
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