Liquid net worth is a calculation that helps determine the health of your financial safety net. It measures your ability to handle regular and short-term financial needs — and how well you meet your long-term money goals.
Have you heard the saying that someone is house poor? This is because the monthly costs of owning a home can sometimes drain so much household income that there’s little money for anything else.
Or maybe you’ve heard people — even with high incomes — complain that they’re living paycheck to paycheck.
These can be the symptoms of financial challenges brought on by having too little ready cash for the day-to-day costs of living. The money squeeze can also hamper the ability to save for future financial goals, such as vacations, major repairs and retirement.
If you spend most or all of what you earn and find it hard to save, improving your liquid net worth can be an important first step to breaking out of financial insecurity.
What is liquid net worth?
This article was written by Hal M. Bundrick, CFP® and originally published on www.nerdwallet.com