A person’s net worth may often paint an impressive picture, but it can also be misleading if most of that wealth is locked away in immovable assets like property or in long-term investments that cannot be accessed easily. Financial experts highlight that true financial stability lies not just in the size of one’s net worth, but in the liquidity of assets — meaning how quickly money can be accessed in times of need. For instance, an individual may appear wealthy on paper, yet if their cash reserves are low, they may still find themselves struggling to meet routine expenses. This is a reality many people face when they rely heavily on their salary slips, property documents, or investment portfolios as indicators of security, only to realize midway through the month that their finances are stretched thin. Chartered Accountant Apoorva Gavai points out that this is not a rare situation but rather a common pattern, even among people with high-paying jobs, valuable homes, and multiple investments.
In one of her LinkedIn posts, Gavai emphasized this paradox by asking whether people have ever looked at their salary slip or property papers and felt confident about their financial condition, only to feel broke by the twentieth day of the month. According to her, this is something she has consistently observed in her work with individuals and families across income brackets. The combination of a good job, decent assets, and significant net worth often still comes with a constant sense of financial stress. The reason for this contradiction lies in the distinction between net worth and actual cash flow, a difference that many fail to recognize.
Net worth refers to the overall value of what a person owns after subtracting what they owe. Cash flow, on the other hand, is the money left in hand after covering all monthly obligations and expenses. For example, someone may own an apartment worth Rs 1.5 crore with an outstanding home loan of Rs 50 lakh. Their net worth would technically stand at Rs 1 crore, but this does not automatically mean financial comfort. As Gavai explains, one can be a crorepati on paper yet still face a cash crunch by the end of the month. This highlights that financial health is not only about the assets you hold but also about how much disposable cash is available to meet immediate needs. If most of the wealth is tied up in illiquid forms like property or investments that mature only in the long run, it cannot help in emergencies or sudden financial requirements.
The root of this issue often lies in the financial decisions people make as their income grows. Many choose to take on hefty home loans, heavily invest in real estate, or spend more to maintain a lifestyle that matches their earnings. While these choices might increase their overall net worth, they simultaneously shrink their available monthly cash flow. This leaves little flexibility for handling unplanned events. When faced with sudden crises such as medical emergencies, unexpected job loss, or pressing family issues, such individuals may be forced to borrow or sell long-term investments at unfavorable terms, worsening their financial strain.
To overcome this challenge, Gavai suggests adopting practical financial strategies that focus on liquidity. She advises conducting regular “liquidity audits” to assess how easily assets can be accessed in times of need. A good practice is to maintain a reserve of at least six months’ worth of household expenses in liquid instruments like savings accounts or sweep fixed deposits, which provide both safety and accessibility. She stresses the importance of understanding that financial comfort is not just about what one owns, but about how quickly those resources can be turned into usable funds. Additionally, she urges individuals to assess the efficiency of their capital investments. For instance, owning a second property worth Rs 50 lakh that generates a monthly rental income of only Rs 10,000 reflects a very low yield of 0.2 percent, which is hardly an efficient use of resources.
In conclusion, Gavai’s perspective emphasizes that genuine financial freedom extends beyond building assets and accumulating wealth on paper. It is about striking a balance between asset creation and liquidity management. Having sufficient liquid reserves ensures not only the ability to face emergencies without distress but also the peace of mind that comes with financial flexibility. True financial security, therefore, is not measured by how much wealth a person has but by how easily they can access money when it matters the most.
