Mark Cuban Says Liquid Net Worth Is Especially Important for Business Owners
Entrepreneur and investor Mark Cuban emphasizes the importance of understanding your liquid net worth, particularly if you own a business. Unlike total net worth, which includes all your assets — both liquid and illiquid — liquid net worth focuses solely on assets that can quickly be converted into cash.
For business owners, having a clear picture of liquid net worth is crucial. It helps in making informed financial decisions, managing cash flow, and preparing for unexpected expenses without jeopardizing long-term investments.
How to Determine Your Liquid Net Worth
Calculating your liquid net worth involves a few straightforward steps:
- List Your Liquid Assets: These include cash, checking and savings account balances, stocks, bonds, mutual funds, and other investments that can be quickly sold or accessed.
- Exclude Illiquid Assets: Do not include real estate, retirement accounts with withdrawal penalties, business equity that can’t be easily sold, or collectibles.
- Subtract Your Liabilities: Deduct any debts, such as credit card balances, personal loans, or other short-term obligations.
The formula looks like this:
Liquid Net Worth = (Total Liquid Assets) – (Total Liabilities)
By regularly assessing your liquid net worth, you can ensure that you have enough accessible funds to handle emergencies, invest in new opportunities, or sustain your business during challenging times.
https://www.inc.com/chris-morris/what-is-liquid-net-worth-and-how-do-you-calculate-it/91254959
