You may have heard someone proudly say, “Our family has a $1 million net worth.”

It's an impressive milestone and an excellent measure of long-term financial progress. But it also raises an important question:

How much of that money could they actually use if they wanted to change their life today?

That's where liquid net worth comes in.

While net worth measures your overall wealth, liquid net worth measures how much of that wealth is readily available to support your life before retirement. The distinction may not matter much if you're simply tracking your progress toward retirement. But if you're thinking about changing careers, starting a business, taking a sabbatical, or simply creating more financial flexibility for your family, understanding your liquid net worth can be just as important.

In this article, we'll explain the difference between net worth and liquid net worth, walk through practical examples, and discuss why I believe both numbers deserve a place in your family's financial plan.

What Is Net Worth?

Net worth is one of the simplest and most widely used ways to measure your financial health. It represents the value of everything you own minus everything you owe.

In other words:

Net Worth = Total Assets − Total Liabilities

Your assets are everything you own that has financial value, including:

• Checking and savings accounts
• Investment accounts
• Retirement accounts (401(k)s, IRAs, etc.)
• Home equity
• Vehicles
• Business ownership
• Other valuable property

Your liabilities are everything you owe, such as:

• Mortgage
• Auto loans
• Student loans
• Credit card balances
• Personal loans
• Other outstanding debt

Subtract your total liabilities from your total assets, and what's left is your net worth.

If the result is positive, you've built wealth. If that number grows over time, you're making financial progress.

That's why I encourage families to track their net worth regularly. It's an excellent long-term scoreboard because it captures the combined impact of your income, saving, investing, debt payoff, and financial decisions over time.

One of my favorite segments on the Marriage Kids and Money podcast is our “Net Worth Win“ because every number tells a different story.

Consider these three families:

• Shang Saavedra built a $2 million net worth before age 40 by living on one income, investing aggressively, and creating a work-optional lifestyle.
• Anthony Rojas grew an $868,000 net worth by age 39 after overcoming childhood poverty and homelessness through education, discipline, and intentional investing.
• Blake Edwards reached an $865,000 net worth by age 31 by steadily increasing his income, avoiding lifestyle inflation, and staying committed to long-term investing.

Their journeys are very different, but they all have one thing in common: they tracked their progress. Knowing your net worth gives you a clear picture of where you stand today and helps you make smarter decisions about where you're headed tomorrow.

But while net worth does an excellent job measuring how much wealth you've built, it doesn't necessarily tell you how much financial flexibility you have today.

That's where liquid net worth comes in.

What Is Liquid Net Worth?

While net worth measures your overall wealth, liquid net worth measures how much of that wealth you could realistically access without selling major assets or tapping into retirement savings.

Unlike net worth, there isn't one universally accepted definition of liquid net worth. Financial professionals may calculate it differently depending on the situation.

For this article, I'm using a practical household definition that focuses on financial flexibility.

Your liquid assets include money you can generally access relatively quickly, such as:

• Checking and savings accounts
• Money market accounts
• Taxable brokerage accounts
• Certificates of Deposit (CDs)
• Treasury bills
• Cryptocurrency

It excludes assets that may be valuable but aren't easily available for everyday financial decisions, including:

• Home equity
• Retirement accounts (401(k)s, IRAs, etc.)
• Business ownership
• Vehicles
• 529 college savings plans
• Health Savings Accounts (HSAs)
• Collectibles and other illiquid assets

When calculating liquid net worth, I also take a practical approach to debt. Rather than subtracting every long-term liability, such as a 30-year mortgage that's tied to an asset you've already excluded, I focus on debts that are more likely to affect your financial flexibility today, including:

• Credit card balances
• Auto loans
• Personal loans
• Other short- and medium-term liabilities

This isn't the only way to calculate liquid net worth, but I believe it's one of the most useful ways for families to evaluate how much financial flexibility they have today.

One final distinction is important: liquid net worth tells you what you can access, not what you should spend.

For example, you could sell investments in your taxable brokerage account to cover an emergency or take advantage of a life-changing opportunity. That doesn't mean you should. Those investments may still be earmarked for long-term goals like financial independence or early retirement. Liquid net worth simply measures the resources you have available if you need them.

Net Worth vs. Liquid Net Worth: An Example

Let's look at a hypothetical family to see how these two numbers can tell very different stories.

Meet the Johnson family.

Over the years, they've worked hard to build wealth. They own a home, contribute consistently to their retirement accounts, maintain an emergency fund, and invest for the future.

Here's a snapshot of their finances:

Johnson Family Assets

• Home Equity: $400,000
• 401(k)s and IRAs: $650,000
• Taxable Brokerage Account: $150,000
• Checking & Savings: $40,000
• Vehicles: $35,000

Total Assets: $1,275,000

Johnson Family Liabilities

• Mortgage: $250,000
• Auto Loan: $15,000

Total Liabilities: $265,000

That means their net worth is:

$1,275,000 − $265,000 = $1,010,000

Congratulations! The Johnson family are millionaires on paper.

But let's calculate their liquid net worth using the practical framework from this article.

Liquid Assets

• Taxable Brokerage Account: $150,000
• Checking & Savings: $40,000

Total Liquid Assets: $190,000

Near-Term Liabilities

• Auto Loan: $15,000

Liquid Net Worth = $175,000

So while the Johnson family has a $1.01 million net worth, they have a $175,000 liquid net worth.

Neither number is more “correct” than the other. They're simply measuring different things.

Their net worth tells us they've built substantial long-term wealth.

Their liquid net worth tells us how much financial flexibility they have today without selling their home or tapping into retirement savings.

That distinction becomes incredibly important when you're making decisions about changing careers, starting a business, taking a sabbatical, handling a financial emergency, or simply sleeping better at night knowing you have options.

Why Net Worth Doesn't Tell the Whole Story

Growing your net worth is one of the best financial goals you can have. It means you're saving, investing, reducing debt, and building long-term wealth.

But net worth has one important limitation:

It doesn't tell you how much financial flexibility you have today.

For example, imagine two families with the exact same $2 million net worth.

The first family has:

• $1.5 million in retirement accounts
• $400,000 in home equity
• $100,000 in cash and taxable investments

The second family has:

• $800,000 in retirement accounts
• $400,000 in home equity
• $800,000 in cash and taxable investments

On paper, both families are equally wealthy.

In reality, their financial options are very different.

The second family has significantly more flexibility to change careers, start a business, take a sabbatical, help aging parents, fund a child's opportunity, or simply weather an unexpected financial setback without disrupting their long-term retirement plan.

That's why I don't think of liquid net worth as a replacement for net worth.

I think of it as a second scorecard.

One tells me how much wealth I've built.

The other tells me how much freedom I've created.

That distinction gave me a new way to think about money.

How Liquid Net Worth Changed the Way I Think About Wealth

For years, I focused almost exclusively on growing my net worth.

Like many personal finance enthusiasts, I maxed out retirement accounts, invested consistently, and celebrated every milestone along the way. Watching that number climb was motivating because it represented years of discipline and smart financial decisions.

Today, my family's net worth is around $2.4 million.

I'm incredibly grateful for that.

But over the past couple of years, I've realized something surprising.

Despite technically being a multimillionaire, I don't always feel like one.

The reason is simple.

Much of our family's wealth isn't available to Current Andy.

It's set aside for Future Andy.

Our retirement accounts are meant to support us decades from now. Our home equity helps build our net worth, but we're not planning to sell our home anytime soon. Even the value of my business isn't money I can simply move into our checking account.

Those assets absolutely matter, and I'm thankful we've spent years building them.

But they don't create flexibility today.

That's what changed my perspective.

Instead of asking only, “How is our net worth growing?” I started asking, “How much freedom does our family have right now?”

That's a very different question.

When I look at our liquid net worth, I know how much flexibility we have if life changes.

• Could we weather a long period without income?
• Could I take a chance on building Marriage Kids and Money?
• Could we help a family member in need?
• Could we slow down work for a season if we wanted to?

Those questions aren't answered by my total net worth.

They're answered by my liquid net worth.

Looking back, I probably would have directed a little more of our long-term investing into taxable brokerage accounts instead of maximizing every available retirement account. I still believe retirement accounts are one of the best tools for building long-term wealth, and I'd never tell someone to ignore an employer match.

But I also wish I had spent more time building wealth that could improve our lives before age 59½.

For me, net worth still measures progress.

But liquid net worth measures freedom.

The Freedom Fund Ladder

I don't think there's a single “right” liquid net worth goal.

The amount your family needs depends on your lifestyle, your monthly expenses, your job stability, and the level of flexibility you want in life.

Instead of chasing a specific dollar amount, I like thinking about liquid net worth as a series of milestones. As your Freedom Fund grows, so do your options. The ladder below is simply a framework that has helped me think differently about building accessible wealth.

For a household spending approximately $10,000 per month, the Freedom Fund milestones would look something like this:

• Level 1: $30,000-$60,000
• Level 2: $60,000-$120,000
• Level 3: $120,000-$240,000
• Level 4: $240,000-$360,000
• Level 5: Approximately $1.05-$1.35 million invested in a taxable portfolio designed to bridge the years before retirement accounts become accessible. Diversification and asset allocation are incredible important here.

Your own milestones will likely be different, and that's okay. A family spending $5,000 per month doesn't need the same Freedom Fund as one spending $15,000 per month.

The important thing isn't reaching a specific dollar amount. It's steadily increasing your financial flexibility over time.

Every dollar you add to your Freedom Fund expands your options.

For readers pursuing financial independence or an early retirement, the final stage represents a bridge between leaving full-time work and accessing retirement accounts. If you're interested in that strategy, check out my guide to Coast FIRE, where I explain how building wealth today can help you work less long before traditional retirement age.

Should You Prioritize Liquid Net Worth Over Retirement Accounts?

After reading this article, you might be wondering whether you should stop prioritizing retirement accounts and focus entirely on building your liquid net worth.

My answer is no.

Retirement accounts remain one of the best wealth-building tools available because of their tax advantages, employer matching opportunities, and decades of compound growth.

If your employer offers a 401(k) match, I'd almost always recommend contributing enough to receive the full match. It's one of the highest-return financial decisions you can make.

The key is recognizing that retirement accounts and liquid net worth serve different purposes.

Retirement accounts are designed to take care of your future self.

Your liquid net worth is designed to give your current self flexibility.

Early in your financial journey, you'll likely be building both at the same time. An emergency fund, retirement contributions, and accessible savings all play important roles.

As your retirement investments grow and your future becomes more secure, you may decide to direct more of your additional investing toward taxable brokerage accounts to increase your financial flexibility today.

There's no perfect formula.

The right balance depends on your goals, your family, and the life you're trying to build.

For me, I want to know that both versions of Andy are taken care of.

Future Andy has the retirement savings he'll need decades from now.

Current Andy has the Freedom Fund that allows our family to make confident decisions today.

How to Track Your Net Worth and Liquid Net Worth

Tracking your net worth is one of the best habits you can build because it allows you to see your progress over time.

But after writing this article, I'd encourage you to go one step further.

Track your liquid net worth, too.

Watching both numbers grow gives you a more complete picture of your financial life. Your net worth reflects the wealth you're building for the future, while your liquid net worth reflects the flexibility you have today.

Personally, I use Monarch Money to track our family's finances. It automatically connects to our bank accounts, investment accounts, credit cards, loans, and mortgage to calculate our overall net worth in one place.

To track your liquid net worth, I recommend creating a custom view that includes only your liquid assets, such as your checking account, savings account, taxable brokerage account, CDs, Treasury bills, and cryptocurrency, while excluding retirement accounts, home equity, vehicles, and other illiquid assets. Then subtract any applicable short-term liabilities, such as credit card balances, auto loans, or personal loans.

By tracking both numbers side by side, you'll be able to celebrate two different kinds of progress.

One number shows how much wealth you're building.

The other shows how much freedom you're creating.

If you're looking for a tool to simplify the process, you can learn more in my Monarch Money Review, where I walk through how our family uses it to organize our finances and track our progress toward our goals.

Final Thoughts

For years, I focused almost exclusively on growing my net worth.

And I'm glad I did.

Building wealth has given my family opportunities we never imagined when we were paying off debt and trying to get ahead.

But over time, I realized there was another number that mattered just as much.

My liquid net worth.

Today, I still track my net worth because it reminds me how far we've come.

But I also track my liquid net worth because it reminds me how much flexibility we've created.

One measures the wealth we're building.

The other measures the freedom we've earned.

My hope is that you'll start tracking both.

Build your net worth so your future self is secure.

Build your Freedom Fund so your current self has more choices.

Because at the end of the day, the goal isn't simply to become wealthy.

It's to create a life with the freedom to spend more time with the people and priorities that matter most.