Final answer:
The correct answer is option B. Allows better budgeting.
Step-by-step explanation:
Knowing one's net worth is crucial for making informed financial decisions. It provides a clear picture of where you stand financially by subtracting your liabilities from your assets. Understanding your net worth enables better budgeting, as it helps you to prioritize expenses, set realistic financial goals, and track progress. A positive net worth indicates that you have more assets than debts, which can provide financial security and freedom to make choices that can increase your wealth over time.
Contrary to the options provided in the question, knowing one's net worth does not help in avoiding taxes, but it is an essential component of personal financial literacy, which is important for individuals at all income levels, not just for wealthy individuals. It has a significant impact on financial decisions and is directly related to financial savings for the future, planning for retirement, and managing expenditures effectively, including payments for insurance, credit costs, and benefits.