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How to use your liquid net worth to generate income

Updated: Jun 20, 2023



Liquid net worth represents an individual’s immediately accessible assets that are easily convertible to cash. This is also known as liquid net worth.


Most people waste their liquid net worth purchasing stuff they don’t need.


What most people do:


❌ Trade their time for money

❌ Trade money for new shiny objects

❌ Show off their new shiny objects to family and friends

❌ Repeat until broke


Top 1% of People:


✅ Trade their time for money

✅ Use that money to buy assets

✅ Use those assets to make money

✅ Use that money to buy their time back

✅ Rinse and repeat


Being in the top 1% is simple, but not easy.


It requires discipline, and some liquid net worth (of course).


Having liquidity enables us to react to financial needs including emergencies, investment opportunities, and other financial needs.


Here, we’ll look at the earning possibilities of liquid net worth and discuss how it may be used to create new revenue streams and enhance your entire financial situation.


Understanding Liquid Net Worth


Liquid net worth of an individual is calculated by:

Liquid assets less total liabilities.

Some examples of liquid assets:

  • Cash

  • Checking and savings accounts

  • Money market accounts

  • Easily tradable investments such as stocks, bonds, and mutual funds.

Illiquid assets are assets which cannot be easily converted into cash.

Some examples of illiquid assets:

  • Real estate

  • Antiques

Income Potential of Liquid Net Worth — 4 types


1. High-interest saving accounts


By far one of the simplest (and safest) ways to generate income from liquid net worth.


These accounts offer a relatively low-risk option for earning passive income, with interest rates typically higher than traditional savings accounts.


Even a person with half a brain can do this.


2. Dividend stocks


A great and simple approach to generate income is to invest in dividend-paying equities.


Companies pay their shareholders dividends, often once every three months.


We may create a consistent flow of passive income while also profiting from possible capital growth by investing in a diverse portfolio of dividend-paying equities.


A good starting point to look for dividend stocks is the Singapore Exchange (SGX).


Do keep in mind, though, that not all dividend stocks are made equal.


3. Bonds


Bonds are debt securities issued by governments or corporations, which pay periodic interest to bondholders.

We get a regular income stream (with principal protected) by investing in a wide variety of bonds.

Bondholders receive payments before shareholders. It’s why bonds are typically viewed as less risky than stocks.


4. Real estate investment trusts (REITs)



Companies that own, manage, or finance real estate assets that generate income are known as REITs.


Property ownership requires a sizeable initial investment and can take months or even years to sell.


Owning REITs is a cheaper alternative owning real estate.


REITs are required to distribute at least 90% of their taxable income to shareholders, making them a popular proxy to property.


Investing in publicly traded REITs gives us exposure to the real estate market, without actually owning physical property.


Conclusion


As the saying goes:

“It’s not about how much money you have, it’s what you do with it.


You may think that people who own big houses and flashy cars are rich.


But they may be poor, and riddled with debt (debt used to fund those purchases).


Start using your liquid cash to generate income for you today. Start small, but just start.


Join Our BOS Community


In the Buffett Online School, we believe in learning the right investing mindset and system, so we can start cultivating emotional detachment and grow our wealth safely and substantially in the long run.


By joining the Buffett Online School community, you and your friends will have access to a wealth of educational resources, expert insights, and a vibrant network of learners. This will help you and your loved ones further enhance your investment skills and emotional stability, thereby improving your portfolio returns.


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- Gone Fishing With Buffett ebook to understand Buffett’s investing insights (worth $17)

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Remember, you have the choice to cultivate the right investing mindset and unlock your potential to build wealth through intelligent investing. Together, we can create a network of educated investors who make informed decisions and contribute to their financial well-being! Join the BOS Community Today!


In the meantime, feel free to check out some of our blog posts to continue your learning. You can also join our BOS Telegram channel for more investing insights.

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