Liquid Net Worth vs Net Worth: Which One Is Better?

I’ve formally tracked my net worth in little notebook with a pen and paper since 2009, which means I’ve been tracking my liquid net worth vs net worth for 10 years.

I’ve been tracking my net worth very month for 10 years.  I’ve kept the methodology that I calculate my net worth pretty consistent for the past ten years.  It has really helped me keep track of my finances and kept me going, aiming for continued positive gains to my net worth.

It has been very motivating to see consistent gains (minus a few months of stagnation or decrease) to get to my ultimate goal of $1,000,000 by 40.  What I haven’t tracked regularly, is my liquid net worth.

Liquid Net Worth vs Net Worth: Which One is Better to Use

What is the net worth of a person?  What is the true net worth?  With my net worth calculations, I use my assessed value from the municipality to calculate my home equity for my net worth.  However, recently, with the real estate market downturn, properties have been selling at below assessed value.  Although it was a nice stroke for my ego to include the municipality assessed value of my home for my net worth, I have come tor realize that this is not so accurate even though I thought it might be.  This made me think about liquid net worth, and how calculating liquid net worth would be a more ideal and accurate way to measure true net worth.

What is The Net Worth Definition?

You might be wondering what does net worth mean.  What is total net worth?  In a nutshell, a net worth definition is equal to a simple net worth formula.  Calculating the net worth of a person is similar to reviewing the net worth of a company.  Here’s how to calculate net worth:

Net worth = Assets – Liabilities

Assets include:

  • Real estate
  • Primary residence
  • Cash in Savings Accounts such as
  • GIC’s (Guaranteed Income Certificates)
  • Registered investments (like the TFSA and RRSP and RESP)
  • Non-registered investments
  • Car (some people include this in here)
  • Mutual funds

Liabilities Include:

  • Mortgage Debt
  • Home Equity Line of Credit Debt
  • Credit card debt
  • Car loan debt (e.g. financing a car, which is what we did even though we could pay for it in cash)
  • Student loan debt

People calculate net worth differently and include different things in their assets column.  For example some people don’t include their home, some people don’t include their cars, some people don’t include their pension contributions, some people include their cars but at the original purchase price, and some people even include their engagement ring (I personally don’t because appraised value is wildly off from what you would be able to resell it at, if you’re able to resell it at all).

From an even more technical standpoint, some people reduce the estimated taxes from their RRSP account (because the RRSP is a tax deferral strategy) when calculating their net worth.  A few years ago, I’ve had a reader send me an email to tell me that I should be calculating my true net worth in this way.  I thought about it, but I responded with a polite no thanks, I’ll keep doing my own thang.  I don’t know what my tax situation will be when I withdraw my RRSPs.  Maybe I’ll do it in my 50’s before the pension kicks in, who knows.  I don’t have a crystal ball for 20 years from now, so I’ll just keep it consistent (with myself).

I personally don’t think it matters what you include in your own net worth update, because personal finance is personal, as long as you keep consistent month to month when you are calculating your net worth.  That’s why it can be difficult if you’re trying to compare your net worth to others- and probably why you shouldn’t!


One of my favourite non-profit websites is Get Smarter About Money and they have a ton of great calculators that spew out fantastic looking graphs and charts.  They have a net worth calculator that helps you calculate your net worth, and they are Canadian-centric which is great.  The net worth calculator is geared towards Canadians with Canadianesque assets, like TFSAs, and RRSPs and the like.

Related: TFSA vs RRSP Which One to Invest in First

This is what Get Smarter About Money’s Net Worth Calculator looks like.

What is Liquid Net Worth?

Liquid net worth is net worth but a more toned down version of it.

Anything that you cannot dispose of readily (e.g. within a few days) is considered to be illiquid, according to The Nest.

So your liquid net worth is what you would have it you liquidated everything today, almost like you had to suddenly leave the country and needed cash ASAP.

Like a huge FIRE SALE of sorts.


What Are Some LIquid Assets Examples?

As a reminder, liquid assets are assets can be turned into cash readily (e.g. within a few days).  Here’s how to calculate liquid net worth.

Here are a few examples of liquid assets according to Investopedia:

  • Cash (cash is king, this is as liquid as you can get, liquid = cash)
  • Stocks
  • Bonds
  • Whatever is in the TFSA
  • Mutual funds
  • GIC’s (I would categorize them here because many you are able to cash out but you just will lose the interest earned)

Non liquid asets include::

  • House or real estate (unless you mark down the price heftily)
  • Car (unless you mark down the price heftily, even using the Canadian Black Book is not that accurate)
  • Jewelry (again, good luck selling a diamond engagement ring at the appraised value)
  • Investments in the RRSP (because you you to pay taxes on your withdrawal and it is dependent on your tax rate)
  • Collections such as a coin collection (or my mint condition $2 banknote bill collection, lol)

Financially Simple says that you can include your house or real estate in your liquid net worth as long as you discount it by 20-25% which would hypothetically encourage someone to buy the home within days.


However, if you live in an area that is not in much demand, like a rural location where there are no prospective buyers, even if you discount it by 20-25%, there likely wouldn’t be much appetite for a real estate purchase.  Does liquid net worth include house?  As you can see above, not really.  So in a way, a home/ real estate property perhaps shouldn’t be included in a liquid net worth calculation.

Liquid Net Worth Vs. Net Worth:  Which ONe to Use?

Should you use liquid net worth or net worth to calculate your true net worth?  Which one should you use?  In my opinion, I think the key is consistency.

Now that we know what the difference is between a regular net worth formula and calculation and what is included in a liquid net worth calculation (and what actually are liquid assets), this begs the question, should you use a liquid net worth to calculate your true net worth?

Or should you continue using your net worth value like you normally do?

Again, the answer is, since personal finance is personal, I think it doesn’t matter, but the key is to keep your net worth calculations consistent.

To be honest, I think the truer net worth calculation is the liquid net worth.  It gives your ego a good kick in the pants and a good reality check (especially those in red hot real estate markets like Vancouver).  Although there isn’t a liquid net worth calculator in the Internet, I think using a regular net worth calculate should suffice, with perhaps a deduction of the 20%-25% for your property values if you choose to include real estate in your net worth calculation and you choose to calculate your liquid net worth.

Since we like to stroke our own egos (it’s human nature to do so), given that a regular net worth can make us feel better about our home purchases, you can use the regular net worth but take it with a grain of salt depending on whether you’re in a seller’s market or a buyer’s market in real estate.

It’s so important to make sure that you have cash flow, because net worth means nothing if you don’t have cash flow.  Liquid net worth is king.

If you calculate your net worth regularly, do you use liquid net worth to calculate it?

Which one do you prefer?  Liquid net worth vs net worth?

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12 thoughts on “Liquid Net Worth vs Net Worth: Which One Is Better?”

  1. I use a hybrid approach including my house (net of selling costs) and my retirement accounts in my calculation. Our cars and personal possessions aren’t for sale and are virtually worthless anyway aside from the value they provide day to day. I then break my net worth summary into 3 subtotals. Liquid + retirement accounts + home equity = total. I think this provides the best view of our money: accessible today, accessible at retirement and accessible when we sell our house to downsize or rent. Tom

    • @Tom- Your approach is very reasonable. When you calculate your retirement accounts do you subtract estimated taxes paid in retirement or just leave it as is? I once had a reader tell me I was doing it wrong and should subtract estimated taxes paid in retirement.

      • I leave it as is. GYM I understand your reader’s point, but here is my counterpoint. The taxes are not due for years. So technically they should be discounted back to present value if you are going to make a deduction. And now if we are going to start projecting liabilities far into the future, to be fair we should project the value of the portfolio into the future too. By doing neither, we are getting a realistic view of net worth today and actually more conservative than making projections into the future since taxes should be less than growth in the accounts. Tom

  2. I basically calculate most of the assets we have to come up with our net worth. We just traded in our Prius C for a SUV so the car value isn’t factored in because we plan to have it for the long term. So for us it’s liquid assets plus retirement accounts for our net worth. I probably calculate mines about once a month or every other month. And it’s simple for me since we don’t have any debts to deduct from it

    • @Kris- Congrats on selling your Prius C!! Did you guys end up getting a Nissan? Good point about not including the car when you plan to keep it for a while.

  3. i don’t really put ours out there but would estimate we’re 2/3 liquid and 1/3 paid off house. the house could be an asset if we rented a couple of rooms, which we could. we could also choose to rent it and probably make money over what we would pay in rent elsewhere. i mostly just keep track of the investment accounts and put those out for public ogling.

    • @freddy- Hah public ogling. 2/3 liquid is a good place to be, many people are much less than that (including me, but hope that will change soon).

  4. I am 61 and I have been retired for seven years. For all of my working life I included all my assets (mostly real estate) in my net worth calculation. However, since effectively retiring in 2014, it took me six years to unwind my property investments. Despite that lengthy period the amounts I realized were far below the amounts I (and my bank appraisers) projected. The lesson to me was you want to focus on liquid net worth; everything else is funny money.

    • @Elliot A.- Sorry to hear and congrats on your retirement. That’s exactly what I have concluded too, I was fixed on what my condo’s assessed value was but it did not sell for that price and it was tough to get my ego to let go of that notion.


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