I Hur man beräknar ditt verkliga nettovärde täckte jag grunderna om nettoförmögenhet och hur man beräknar det. Men det finns faktiskt mer än en typ av nettoförmögenhet.
I den artikeln täckte vi vad som bäst kan beskrivas som totalt nettovärde, vilket verkligen är något av en överdrift. En mycket mer exakt definition är flytande nettovärde.
Den följer samma allmänna beräkningsmetod för total nettoförmögenhet, men tar hänsyn till transaktionskostnader och andra faktorer som är involverade i att konvertera icke-likvida tillgångar till faktiska kontanter.
Av den anledningen är den likvida nettoförmögenheten lägre än den totala nettoförmögenheten.
Låt oss titta på varför det är så.
Det kan kännas bra att citera totalt nettovärde, eftersom det verkligen är ett optimerat antal. Du tar bruttovärdet av dina tillgångar och subtraherar sedan dina skulder, vilket ger dig ett maximalt nettovärde.
Likvida nettoförmögenhet spelar roll eftersom det bättre speglar hur mycket pengar du har tillgängligt om du behövde likvidera dina tillgångar på kort sikt.
Som jag påpekade i Hur du beräknar ditt verkliga nettovärde , totalt nettovärde använder följande beräkning:
Tillgångar – Skulder =Nettovärde
Men om inte dina tillgångar hålls i mycket likvid form, är ditt likvida nettovärde verkligen ditt verkliga nettovärde. Det beror på att det tar allt likvidationskostnader beaktas.
Om du var tvungen att likvidera hela din egendom för att betala för en akut utgift, är ditt likvida nettoförmögenhet allt som verkligen spelar roll.
Beräkningen för likvid nettoförmögenhet ser ut så här:
(Tillgångar – Skulder) – Kostnad för att likvidera dina tillgångar =Nettovärde
Kostnaden för att likvidera dina tillgångar är den grundläggande skillnaden mellan totalt nettovärde och likvidt nettovärde.
Om bruttovärdet av dina tillgångar är 500 000 USD och du har 300 000 USD i skulder av alla slag, blir ditt totala nettovärde 200 000 USD. Men ditt likvida nettovärde blir något mindre.
Låt oss till exempel säga att du behövde likvidera alla dina tillgångar för att betala för ett större medicinskt ingrepp, för att hjälpa en familjemedlem i nöd eller för att starta ett nytt företag. Eftersom likvidationen skulle behöva ske ganska snabbt, kanske du inte heller får fullt marknadsvärde för de tillgångar du likviderar.
I den situationen kan du sälja ditt hus för 10 % mindre än marknadsvärdet för att generera en snabb försäljning. Du kanske gör samma sak med försäljningen av en andra bil eller ett fritidshus.
Vid försäljning av fastigheter måste du också dra av transaktionskostnader. Detsamma skulle vara sant om du säljer finansiella tillgångar, som aktier eller obligationer.
Annonser efter pengar. Vi kan få kompensation om du klickar på den här annonsen.Annons
Livet är oförutsägbart. Din pensionsplan borde inte vara det. Ta kontakt med en oberoende finansiell expert för att se om du är på väg att nå dina pensionsmål. Klicka på ditt tillstånd för att komma igång. Get Started Transaction costs will always figure into the liquidation of any non-cash assets. And the degree to which you may have to discount an asset for a fast sale will depend on how quickly it needs to be sold.
If in liquidating your $500,000 in total assets, you have to discount them by $50,000, then incur $30,000 in liquidation costs, your total assets would be reduced to $420,000. After subtracting $300,000 in liabilities, your liquid net worth will be $120,000.
That’s $80,000 less than your total net worth, but it represents your actual net worth.
For what it’s worth, if you’re applying for a loan with a bank, they’ll likely accept your total net worth as the actual number. But in a situation where you actually need to liquidate your assets to raise cash, liquid net worth will be the real number.
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These factors will be different for everyone, based on the composition of their holdings.
For example, if most of your assets are in real estate or retirement savings, your liquid net worth will be a lot lower than someone who has the majority of their assets in cash and cash equivalents.
There are liquidation factors unique to each asset class.
These include cash and cash equivalents. Examples are:
Since there are generally no fees or market value considerations with any of these assets, they won’t be reduced upon liquidation.
Although in the case of CDs, you’ll normally pay a small prepayment penalty if you liquidate the certificate before the stated term is over.
The contribution retirement plans make to liquid net worth might be the most misunderstood of all personal assets.
Most people assume if they have $200,000 in a 401(k) plan, that makes a full $200,000 contribution to their net worth.
That’s never true, at least not in the case of liquid net worth.
The reason is income taxes. Retirement plans are tax-deferred, but not tax-free. If you have to liquidate your 401(k) plan today, you’ll have to pay ordinary income tax on the amount withdrawn. And if you’re under 59 ½, you’ll also have to pay a 10% early withdrawal penalty in most cases.
If your combined state and federal income tax marginal tax rates are 20%, you’ll pay 30% of the amount of the plan upon liquidation (including the 10% penalty). That tax bite will reduce a $200,000 plan down to $140,000.
There may also be liquidation charges, payable to the plan administrator, as well as commissions on the sale of assets held in the plan. That could potentially shave a few thousand dollars more off the value of your plan.
The only limited exception is a Roth IRA, and then only if you are at least 59 ½ and have participated in the plan for at least five years. If you meet those qualifications, and you liquidate the entire plan, no tax or penalty will be required. You would get the full $200,000 in the plan.
Of course, if you’re under 59 ½, you’d have to pay ordinary income tax and the 10% early withdrawal penalty on the investment earnings portion of your Roth IRA.
When it comes to going liquid, real estate is probably the most complicated asset of all. Even in a strong housing market, it can take weeks to sell a house. But in a slow market, it can take months.
Exactly how much it can be sold for will depend upon how quickly you want to sell. If you need to sell right away, you’ll have to cut the price it below the prevailing market value. If the house has a fair market value of $300,000, but you need to sell quickly, you might have to drop the price down to 280,000, or even $270,000.
Of course, if you’re prepared to wait as long as it takes to sell, you’ll likely get the full market value.
But apart from market factors, there are also transaction costs. Those can be steep.
A traditional real estate agent will charge a 6% commission to sell a home. You can easily get a service that will sell it for substantially less, but the services they provide may be greatly reduced. If you need a quick sale, that may not help your cause.
But even apart from a real estate sales commission, there are other costs. You can generally figure you’ll need to pay between 1% and 2% in closing costs. Those may involve an attorney fee, any transaction taxes in your state, or other fees charged to sellers in your market.
Depending on the real estate market in your area, you may also need to pay seller paid closing costs for the buyer. Paying the buyer’s closing costs is a valuable inducement to get prospective buyers to make an offer on your home. That’s the good part.
The downside is that you’ll actually have to pay those closing costs. That could be another 2% or 3% of the sale price of your home.
Altogether, transaction costs to sell your home may approach 10%. If you’re looking to calculate liquid net worth, you should deduct that from the fair market value of your home – even if you don’t plan to sell in the near future.
Including business equity in your net worth is tricky. Under the best of circumstances, valuing a business is an inexact science, and no better than an estimate. Under the worst of circumstances, it may be impossible to come up with a reasonable number.
Apart from the difficulty in valuing a business, you also have to make a reasonable guess on the salability of the business. Simply put, some businesses are easier to sell than others. And if a business is too closely associated with you personally, like if I were trying to sell “Jeff Rose, Inc.”, the business may not have much market value at all. In that case, I am the business so it may not have much value without me.
Most people just guess at the value of their businesses. But if you want a more accurate number, you’ll need to periodically have the business appraised by an industry expert. And even that is likely to produce nothing more than a ballpark.
Converting a business to cash is also problematic. If it’s your primary source of income, selling it may not even be practical. And even if you do sell it, it can be anyone’s guess how long that will take. You’ll also need to subtract any business debts from the value of the business.
For most people who are self-employed, it’s best to completely exclude business equity from liquid net worth.
Most people overvalue their personal possessions, because they assign valuations based on retail cost. But if you had to convert them the cash, the retail value would be completely irrelevant. All that matters is what they could be sold for. That will depend on finding a willing buyer.
As a general rule, your personal possessions are probably not worth more than 10% to 20% of their retail value. Exceptions would be certain jewelry items or artwork, for which there are established markets.
You also have to consider the impact selling personal possessions will have on your lifestyle. It may be that you can’t sell any more than half your personal possessions and only those that are least essential to your daily life.
On balance, $50,000 in furnishings and trinkets may have a cash sale value of no more than $5,000 to $10,000. And that will be even lower since you probably can’t sell them all.
Let’s do a quick example to demonstrate the difference between total net worth and liquid net worth.
The total value of your assets is $600,000, and your liabilities are $300,000. That gives you a total net worth of $300,000.
But to determine liquid net worth, let’s look at each asset individually:
Based on all the factors above, your liquid net worth looks like this:
As you can see from the example above, there’s a big difference between total net worth and liquid net worth.
In the example, we started out with a total net worth of $300,000. But after deducting for marketing factors, taxes and transaction costs, we ended up at $171,000.
That’s a difference of $129,000, which is a long way from pocket change and rounding errors.
Your total net worth isn’t completely irrelevant, it’s just not as accurate as you may want to believe. In either case, it helps to know both your total and liquid net worth.
The moral of the story is that liquid net worth is closer to your true net worth. And that makes a strong case for saving and investing even more money than you think you should. After melting down everything you have, and paying off all liabilities, you’re probably worth less than you think. And a lot less at that.
