Net worth is defined as “Assets – Liabilities”. Where assets are everything that you own(house, cars, jewellery, rental properties, securities etc. and in case of companies it would be employees, machinery, factories , bank balance etc. ) whereas Liabilities are credit card and debit card bills, EMI bills, loans, mortgages and other loans and for companies salaries, long and short term debt payments, taxes etc.
Whereas Liquid Net worth is “Liquid assets – short term expenses”.
Liquid asset are cash you hold or something that can be easily converted to cash (A fixed deposit in Bank ) , to meet short term expenses such as meeting the family expenses, near future payments such as credit card bills, rent, monthly bills and in case of companies it would be salaries, taxes , administrative and other expenses.
Covid-19 pandemic has brought to the lime light this very important self-assessment of personal, professional, emotional and financial evaluation to the core . It exposed all our fallacies of planning, optimism, denial, underestimation of the problem and not staying mindful of what’s happening around us that is destroying financial , professional and personal wealth and health.
What else is happening is that Nature already started signalling that we have done enough damage to the planet by expressing itself with extreme weather, unintended severe storms , mild earthquakes(recently in Delhi) which I think may destroy livelihood more than this covid-19 Pandemic and may lead to more financial distress to families and companies and to countries GDP growth.
When we look at these extra ordinary negative events, Liquid net worth becomes so important to all of us and it is time that individuals and companies should start to seriously evaluate all possible scenarios of what can go wrong and come up with alternative plans to avoid pain and grief. Companies cannot afford to layoff valuable experienced employees for this nasty passing cloud called Carona. Companies should have hard cash excluding working capital requirements (Cash is what is more important in present situations that can make or break a company) , that can allow them survive without any issue for at least a year with business as usual possibility, individuals should start asking if they are eligible to spend on any given day. We should avoid waste by not buying that we will not use/eat or can be postponed for a while. There are many more such ways we can assess to increase our Liquid Net Worth and reduce Liabilities to have a peaceful, healthy living or a nice evening walk with your near and dear. Ponder on this and increase your liquid Net worth and stay hale and healthy.
Note: Never ever go for EMI on Credit card or for Moratorium. Without your attention those bills become so huge that it can destroy all your present or future financial plannings and also net worth will be gone.