CHICAGO — As the old saying goes, “knowledge is power.” Arguably nowhere is this truer than in how you handle your money. Knowing your true net worth is an essential part of building and maintaining a sensible approach to your financial affairs.
A precise knowledge of where you stand will help you make appropriate investment decisions, demonstrate how to handle debt, plan your estate, and other important financial matters. Equally important is the psychological comfort that comes with knowing where you really stand on the financial landscape.
At first glance, calculating your net worth may look like a quick and easy task; just add up all of your assets, subtract your liabilities, and you have it. But calculating true net worth is a bit more complicated than that. Among the easiest things to overlook when calculating liabilities are the costs associated with such things as real estate brokerage commissions and taxes resulting from liquidating certain assets such as 401(k) plans.