ABSTRACTRecent work puts forth “net worth optimization” as an extension of asset‐only mean–variance optimization and liability‐relative optimization in which all of the components of an individual's holistic economic balance sheet are included in the optimization. This type of holistic, total portfolio optimization is constrained to include an untradable allocation to two entries in an individual economic balance sheet: the person's human capital and the person's nondiscretionary consumption liability, in which both are modeled as separate personalized combinations of asset classes (and perhaps individual stocks or bonds) based on the expected nature of their cash flow characteristics. In a series of controlled optimizations in which various parameters are varied, we study how changes in human capital modeling (riskiness) and balance sheet strength (funding status) influence the recommended asset allocation for an investor's financial capital asset allocation. Net worth optimization separates an investor's risk tolerance (attitude toward risk) from the investor's ability to take on risk (risk capacity), allowing risk tolerance to serve its original purpose.