Net Worth vs Liquid Net Worth Explained – PillarWM
Wealthy investors spend much of their time building wealth in an attempt to achieve certain financial goals. One can describe this wealth in terms of net worth or liquid net worth. Investors should have a firm understanding of net worth vs liquid net worth before charting out their financial goals. If you are a wealthy investor who plans to invest between $5 million and $500 million in the near future, you can learn from our 30+ years of investment expertise by requesting a free copy of our book 7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning For Families With Liquid Investable Portfolios Between $5 Million and $500 Million.
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.
Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
Table of Contents
Net Worth vs Liquid Net Worth
As a wealthy investor, your primary focus should be on wealth building and wealth protection. However, you might not yet understand the differences between net worth and liquid net worth or how to calculate net worth vs liquid net worth. Both these terms indicate how much wealth you possess. However, they differ in some key areas. Please speak with our wealth managers to better understand your net worth and liquid net worth.
So what is a liquid net worth vs net worth? Let’s start by defining what net worth is.
You could already be familiar with the term “net worth”. However, you might not be aware of the exact definition and how it is calculated. Your net worth is simply the value of all your assets minus your liabilities. This is similar to how one calculates the “net worth” of a business.
Your assets include the various possessions you own. This could be your house, your car, the money in your bank accounts, and even your insurance policies. You should note that your personal belongings such as your clothes or the furniture in your home may not be classified as assets, as they would not be seized in the event of bankruptcy.
Your liabilities include the various financial obligations you must repay. This could be outstanding rent, loans, mortgages, and bills. To calculate your liabilities, you should add up the total value of what you owe in the present. This means you shouldn’t include future liabilities in this calculation.
With this in mind, let’s say your assets have a combined value of $25 million and that you owe $5 million in debt. Your net worth will be $25 million minus $5 million in this scenario, which comes up to $20 million.
Liquid Net Worth
The term “total net worth” sounds so similar to “liquid net worth” that you may have inadvertently used the terms interchangeably. However, your liquid net worth can be quite different from your actual net worth.
You can calculate your liquid net worth by subtracting your liabilities from your liquid assets. However, we should define what liquid assets actually are.
Liquid assets refer to cash or assets that can be converted to cash quickly. Some examples of liquid assets are cash, checking accounts, stocks, bonds, mutual funds, and other securities.
Some examples of non-liquid assets include real estate investments, machinery, or equipment. These are referred to as “non-liquid” because they require time to convert into cash. In addition to this, you may need to spend money to convert them into cash in the first place.
So if your cash, checking account, stocks and bond amount to a total value of $15 million, and your liabilities amount to $5 million, your liquid net worth will be $10 million.
What’s More Important: Net Worth or Liquid Net Worth?
Now that we understand the primary difference between net worth and liquid net worth, you may be wondering which one is more important. You can learn about total net worth vs liquid net worth by speaking with our managers.
Both types of net worth can be important depending on the situation. If you encounter some sort of a medical emergency and need to pay for expensive treatment, you can draw cash via your liquid net worth. However, if you are simply focusing on building wealth in the long run, your total net worth can be more important.
Wealthy investors should ideally focus on building up both types of net worth if they wish to achieve their future financial goals. You may be able to boost your net worth significantly over time with a wealth manager’s assistance.
How a Wealth Manager Can Help You Build And Protect Your Net Worth
Investors can build up and protect their net worth with the help of a wealth manager. Some of the ways they can do this include:
Putting Your Money Into Reliable Investments
As a wealthy investor, you may already be aware that you can grow your net worth by investing in reliable assets. However, this strategy may also help you protect your wealth.
Placing your money in stable assets that offer steady returns helps you grow your wealth without worrying about market volatility or unexpected fluctuations. You can learn about some types of assets to invest in by reading our portfolio expansion guide.
A wealth manager can guide you in choosing the right investments in line with your portfolio goals. These professionals are familiar with the ins and outs of investment and can offer their expertise where it is needed.
Wealth managers are also skilled at identifying various portfolio risks. Such risks could jeopardize your portfolio, and by connection, your wealth. You might be able to overcome certain portfolio risks by diversifying your assets. However, introducing new assets to your portfolio may also introduce new risks.
A wealth manager can help you mitigate such risks and possibly improve your portfolio performance using their expertise. They may be able to help you maximize your portfolio returns using a combination of strategies. You can learn how to improve your portfolio performance by reading our special guide.
Planning For Retirement
Investors can also grow and protect their wealth with the aid of retirement planning. Planning for a comfortable retirement requires an in-depth assessment of your finances and following budgeting practices. This financial analysis helps you break down your net worth and understand which assets it is tied up in.
The budgeting aspect of retirement planning helps you rethink your spending habits and build up your savings for a comfortable retirement. It is wise to consult with a wealth manager and determine what your net worth should be by the time you hit retirement age. You can learn about the importance of financial planning for the future by ordering a copy of our book 7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning For Families With Liquid Investable Portfolios Between $5 Million and $500 Million.
How to Identify a Good Wealth Manager?
Wealth managers offer a wide range of services to help you boost your net worth and protect your wealth. However, some of these professionals are far better than others. You should assess any wealth manager based on the following criteria before using their services.
A key aspect that separates a good wealth manager from a great one is experience. Plenty of wealth managers have financial degrees from prestigious universities. However, their expertise primarily develops through helping their clients over the years.
An experienced wealth manager will have followed their client’s financial journey and offered their assistance along the way. They get to see which strategies work and which ones should be used in the event of a financial emergency.
Wealth managers offer services in various areas, including asset management, portfolio analysis, retirement planning, and estate planning. This means they should possess knowledge in each of these areas. Wealth management is a multifaceted service, so you should ensure your wealth manager can deliver as promised. You can test your wealth manager’s knowledge by asking them some of the questions we discuss in our guide to choosing a financial advisor.
A wealth manager can be both experienced and knowledgeable. However, these alone do not have them great. The best wealth managers are also easy to reach out to. Such wealth managers should offer multiple ways to get in touch with them. This could be over the phone and email.
A wealth manager who doesn’t make time for their clients or is difficult to reach should be avoided. You won’t be able to reach out to such wealth managers when making time-critical decisions. For this reason, you should always opt for a wealth manager that prioritizes your needs.
Good wealth managers should also offer personalized services. This includes tailoring their services to meet your specific needs. For example, you may require assistance with your investments as well as retirement planning. Therefore, your wealth manager should prioritize these before offering you their other ones, such as estate planning and tax planning.
In addition to this, a good wealth manager should create financial plans that match your own financial background. They should take the time to understand your unique needs and goals and tailor their plans so that you can follow along with them easily. Please speak with our wealth managers to learn about our personalized services.
The right wealth manager should offer transparency in their services. This means explaining their list of services and fees to you before you hire them. Wealth managers typically charge their clients a fixed fee annual fee based on a percentage of their asset value.
This fee structure keeps you from paying extra each time you want to use the wealth manager’s services. However, you should ensure there are no hidden charges before signing on with the health manager.
Why Choose Pillar Wealth Management?
If you plan on investing between $5 million and $500 in the near future, you should reach out to Pillar Wealth Management for assistance. Our wealth managers can offer their premier expertise developed through their six decades of industry experience. We have assisted numerous clients with boosting their net worth as well as protecting their wealth.
Our wealth managers strive to provide each client with personalized services and are upfront about their fees. We fine-tune each of our plans and advice according to your unique needs. This is because we believe a customized approach is better than a one-size-fits-all approach when it comes to wealth management.
So start building your net worth and protecting your wealth with the assistance of professionals.Please reach out to us for a free appointment and get started with premier wealth management services.
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