In the Wall Street Journal Buy Side article “What Is Liquid Net Worth?” journalist Erin Gobler explains how liquid net worth differs from total net worth and why both figures matter. While total net worth includes assets such as real estate and retirement accounts, liquid net worth focuses on cash and other assets that can be accessed relatively quickly, minus outstanding liabilities. The article also outlines how to calculate liquid net worth, which assets should be included and how much an individual or family may need for financial emergencies.
Our Chief Investment Officer and CEO, Steven Rogé, helped clarify what truly makes an asset liquid. He explained that although stocks, bonds and ETFs can generally be sold quickly, their value may fluctuate, and selling can create tax consequences or force an investor to accept a loss. For that reason, these investments should not be treated the same as cash when determining whether an emergency fund is sufficient.
Steven also emphasized that the appropriate emergency fund depends on the stability and predictability of a household’s income. Business owners, commission-based professionals and others with variable earnings may benefit from keeping closer to six months of expenses readily available, while some two-income households may be comfortable with a smaller reserve.
Most importantly, Steven cautioned against viewing the lower return on emergency savings as a missed investment opportunity. The purpose of an emergency fund is to provide stability and prevent an unexpected expense or loss of income from disrupting a long-term investment strategy.
Click here to view the full article.
For tailored, fee-only guidance on managing your wealth or questions about investment strategies, please contact our team of CERTIFIED FINANCIAL PLANNERTM (CFP®) professionals for a complimentary discovery call at 631.218.0077, or click here. We would be happy to show you how our financial planning process can help you stay on track and achieve your financial goals. You can also send us a message directly.
R.W. Rogé & Company, Inc. is an independent, fee-only financial planning and investment management firm serving clients locally and virtually across the country, with Long Island, New York, and Beverly, Massachusetts office locations. R.W. Rogé & Company, Inc. was founded on a “client first” culture and proudly commits to acting in your best interest as a fiduciary. We have helped clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, as well as our process, explore our detailed overview of services and approach.
