Liquid Net Worth Is Absolutely Not Net Worth, Right?
You don’t have to make a seven-figure salary to be considered a millionaire. Your net worth just needs to be worth at least a million dollars. But, what about your liquid net worth?
What is Liquid Net Worth?
The net worth definition is the difference between a person’s assets and debt. Hence, calculating net worth is taking the total assets minus their debt.
Assets are anything that can convert into cash, such as stocks and real estate. On the other hand, debt is usually student loans, car payments, credit card balances, or any other credit card debt.
What Are Considered Liquid Assets and Non-Liquid Assets?
Liquid assets are assets that can liquidate into cash quickly. If an asset cannot convert into cash quickly, then it is NOT a liquid asset.
Checking accounts, savings accounts, money market accounts, and cold hard cash are the purest forms of liquid assets. These assets are not tied to any market and will not fluctuate in value.
Bonds, mutual funds, and stocks are also considered liquid assets. They can be liquidated into cash quickly (usually within a few days).
Real Estate - investment properties cannot quickly convert into cash. It could take weeks to sell and close on a property, no matter how good a real estate agent is.
Cars Cars are depreciating assets that lose value over time, especially within the first five years. Anyone planning to purchase a used-car never expects to buy the vehicle at its original price.
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