Saying you have wealth of 100,000 euros may seem equivalent to saying you have 100,000 euros available. In reality, the two statements describe very different situations. Someone may own a home, a car, financial investments and other assets with a high combined value, but have only a few thousand euros immediately usable. Conversely, another person may have less total wealth but much greater financial resources available in the short term. The difference depends on the composition of wealth, the level of debt and how easily different assets can be converted into money.
This is why knowing net worth alone is not enough when assessing your financial position. You need to understand its composition and distinguish at least three concepts: net wealth, financial assets and available liquidity.
What net worth really means
The Bank of Italy defines household net wealth as the difference between the total value of assets owned and liabilities. Assets include both real assets, such as property, businesses and valuables, and financial assets, such as deposits, government securities, bonds, funds, shares and other instruments. Debts must be subtracted, including mortgages, loans and other liabilities.
Suppose someone owns a home worth 180,000 euros, has 20,000 euros in a current account and investments, and still has 100,000 euros of mortgage debt to repay. Their net wealth would be:
That person can therefore correctly claim to have net worth of 100,000 euros. However, this does not mean they can use 100,000 euros tomorrow to meet an expense. A substantial part of their wealth is embedded in the home, while part of the home's value is financed through the mortgage.
This is precisely where one of the most common confusions in personal finance arises: asset value and available financial resources are not the same thing.
A home can make you wealthier without making you more liquid
Property has historically been very important in Italian household wealth. According to the joint Bank of Italy and ISTAT publication on the wealth of institutional sectors, at the end of 2022 housing accounted for a very substantial share of Italian households' gross wealth: its weight had reached 46.3%.
This means a significant portion of household wealth is held in property. It is therefore perfectly possible to have high net wealth but relatively little immediately usable money.
Imagine someone who bought a home many years ago, now valued at 250,000 euros, and has no remaining mortgage. They also have 5,000 euros in a current account and no other investments. Their net wealth could exceed 250,000 euros, but if they suddenly needed 30,000 euros, they could not simply withdraw it from the house.
To obtain that liquidity, they would have to sell the property, borrow against it as possible collateral, or find another financial solution. Each transaction takes time, entails costs and may be incompatible with continuing to use the home.
The property is therefore wealth, but not cash.
Even investments are not necessarily available money
The same distinction applies, although to a different degree, to financial investments.
Suppose someone has 100,000 euros allocated as follows:
- 10,000 euros in a current account;
- 20,000 euros in bonds;
- 70,000 euros in equity ETFs.
Total financial wealth is indeed 100,000 euros, but only the 10,000 euros in the account is immediately usable without liquidating other instruments. Bonds and ETFs can normally be sold, but their value can change over time and there is no guarantee that the moment money is needed will coincide with a favourable time to sell.
If the 70,000 euros invested in equities suffered a decline of 25%, for example, their value would temporarily fall to around 52,500 euros. Being forced to sell at precisely that point would mean crystallising the loss.
An investment can therefore be saleable without being equivalent to cash. The technical ability to sell an asset quickly does not mean it is economically immaterial when you do so.
Cash availability, asset liquidity and wealth are three different things
These concepts can be distinguished more precisely.
Cash availability means money immediately available and usable, such as a current account balance or substantially equivalent holdings. Asset liquidity instead indicates how easily an asset or instrument can be converted into money without significant losses or excessive waiting. Wealth, finally, comprises all assets owned, net of debts.
A home normally carries substantial wealth value but has low liquidity compared with a bank deposit. An ETF listed on a highly liquid market can instead be sold quickly, but the sale price depends on the market. Finally, money in a current account has high liquidity and no risk of nominal fluctuation, although inflation can reduce its purchasing power.
Understanding these differences is essential because it allows wealth to be viewed not just as an aggregate number but as a structure.
Two people with 100,000 euros each can be in opposite situations
Imagine two individuals with the same net wealth.
The first owns a home worth 200,000 euros, has 105,000 euros remaining on the mortgage and holds 5,000 euros in a current account. Their net worth is:
The second owns no property, has no debts and holds 30,000 euros in a current account and 70,000 euros in investments. The second person also has net worth of 100,000 euros.
Purely in wealth terms, the two values coincide. In terms of financial flexibility, however, the situations differ greatly. The second person has far more financial assets that can readily be used or sold. The first instead holds most of their wealth in their home while continuing to service the outstanding mortgage debt.
This does not mean one situation is necessarily better than the other. It simply means that net worth alone does not adequately describe short-term financial resilience.
The role of debt is often forgotten
Another frequent mistake is to consider only what you own without subtracting what you owe.
Someone may claim to have a 300,000-euro home, a 30,000-euro car and investments of 20,000 euros, apparently reaching wealth of 350,000 euros. But if they still owe 220,000 euros on the mortgage and 15,000 euros on car financing, the situation changes radically.
This is precisely the principle used by the Bank of Italy: liabilities are subtracted from the sum of financial and non-financial assets.
Debt is not necessarily negative. A mortgage can enable a home purchase and financing can support productive investments. But when measuring wealth actually owned, it cannot be ignored.
Having wealth does not mean being able to pay expenses
This distinction becomes particularly important when a liquidity problem arises. An individual may have a strong asset position but lack the money needed for immediate payments.
This phenomenon does not concern households alone. Businesses also face a fundamental distinction between net assets, profitability and cash availability. A company can own property, machinery and receivables worth very large amounts while struggling to pay suppliers and wages if cash flow is insufficient.
The same principle applies to personal finance. If someone owns a 400,000-euro home but has only 500 euros available in their account and suddenly loses their income, the home's value does not automatically pay next month's bills.
Financial resilience should therefore be examined across several dimensions.
A more useful snapshot of your wealth
Calculating net worth alone is a first step, but dividing assets into categories can help you truly understand your position. Imagine this situation:
| Component | Value |
|---|---|
| Current account | 12,000 € |
| Readily accessible deposits | 8,000 € |
| Financial investments | 50,000 € |
| Car | 20,000 € |
| Home | 250,000 € |
| Total assets | 340,000 € |
| Outstanding mortgage | −130,000 € |
| Other loans | −10,000 € |
| Net worth | 200,000 € |
The person therefore has net wealth of 200,000 euros. However, immediately available liquidity is only 20,000 euros, counting the current account and readily accessible deposits. The other net 180,000 euros is distributed among investments, the car and property wealth.
Simply saying “I have 200,000 euros” therefore hides a great deal of information. A more useful description would be: net worth 200,000 euros; readily available liquidity 20,000 euros; investments 50,000 euros; real assets 270,000 euros; debts 140,000 euros.
Italian wealth clearly illustrates this difference
Bank of Italy and ISTAT data show the phenomenon in aggregate. At the end of 2022, total net wealth of Italian households was around 10,421 billion euros, equivalent to approximately 177,000 euros per capita. But this wealth included non-financial assets, mainly property, financial assets and liabilities.
It would therefore be incorrect to conclude that each Italian had an average of 177,000 euros available. First, this is an aggregate average and wealth is very unequally distributed; second, a substantial portion consists of homes and other assets that cannot be spent immediately.
The Survey on Household Income and Wealth also shows that financial assets include very different categories: bank and postal deposits, mutual funds and ETFs, bonds, government securities, assets held abroad and other financial instruments. Even speaking generally of “financial assets” is therefore not equivalent to talking about money in an account.
High wealth and a small emergency fund can coexist
Returning to personal financial management, imagine someone with net worth of 150,000 euros consisting almost entirely of their home. If they have only 2,000 euros in cash and essential expenses of 2,000 euros a month, their emergency fund amounts to just one month's expenses.
A second person might have net worth of only 70,000 euros, but available liquidity of 15,000 euros and no significant debt.
The first is wealthier in asset terms. The second, however, may be better prepared for a temporary loss of income. This is one reason why indicators such as net worth, available liquidity and months of financial self-sufficiency should be analysed together rather than confused.
How much of your wealth should be liquid?
There is no universal percentage.
Saying that 10%, 20% or 30% of wealth should always be held in cash would make little sense. Someone with wealth of 50,000 euros might need an emergency fund of 10,000 euros, or 20%. Someone worth two million euros would hardly need to keep 400,000 euros in cash simply because it represents the same percentage.
It is much more rational to start with needs: current expenses, an emergency fund, expected financial commitments and short-term goals. Liquidity should be sized against these factors, rather than as an automatic percentage of total wealth.
Once those needs are covered, the remaining wealth can be organised according to objectives, time horizon and the risk you are willing to bear.
Investment availability must also be interpreted correctly
A very large financial portfolio can offer greater flexibility than property wealth, but oversimplification must also be avoided here. A bond maturing in the future, an equity ETF, a pension fund and a bank deposit do not provide the same economic access.
Some assets can be sold immediately but at an uncertain price. Others may involve restrictions, exit costs or special conditions. Others still, such as certain pension arrangements, have purposes and rules that make their capital difficult to use for everyday needs.
It is therefore useful to ask not only “what is it worth?”, but also “how quickly can I turn it into money, at what cost and with what risk?”.
These three questions provide a much better understanding of wealth's financial quality.
Balanced wealth is not simply large wealth
Owning many assets does not automatically guarantee financial security. Wealth may be substantial but extremely concentrated in a single property, burdened by debt and accompanied by very little cash. It may be numerically impressive but offer little flexibility.
Likewise, keeping all wealth liquid to avoid any restrictions can be inefficient over the long term because of inflation and forgone returns.
The challenge is therefore to balance availability, security, returns and diversification.
Well-organised wealth should meet immediate needs without requiring the sale of long-term assets, maintain adequate reserves for unexpected events and simultaneously direct capital not needed in the short term towards future goals.
Conclusion
Having wealth of 100,000 euros does not mean having 100,000 euros available. That figure could be embedded in a home, invested in financial markets, reduced by debt or spread across assets with very different levels of liquidity.
Net worth remains a fundamental indicator because it shows how much you actually own after subtracting what you owe. But it is insufficient to measure the ability to handle an unexpected expense or temporary loss of income.
To obtain a genuinely useful snapshot of your situation, it is therefore better to ask at least three questions:
- What is the total value of what I own, net of debts?
- How much money can I use immediately?
- How much of my wealth can be converted quickly into cash without significant losses?
Only by combining this information can you understand how financially resilient you really are.
Wealth measures how much you own. Liquidity measures how much room you have today.
Both matter, but they are not the same thing.