I believe that each of us possesses a money blueprint, a mental map that defines our behaviors and attitudes toward money. Our basic blueprints come from our parents. They're altered through our interactions with friends and co-workers. And, of course, our own experiences lead us to modify and add to our money blueprints.

A couple of months ago, I had lunch with my friend Michael. We talked a bit about my money blueprint, then we talked a bit about his. Because our backgrounds are similar, our money blueprints are similar.

"You know what would be interesting," Michael suggested. "You should write your financial autobiography."

Last week, I drove out to the box factory to see my brother Jeff and my cousin Nick. Ostensibly, I made the trip to check up on Mom's financial situation. Really, though, it was an excuse to spend three hours chatting about nothing and everything all at once.

As I was looking through Mom's Social Security info, I decided to check my own account online.

"Look," I said. "I'll get $1125 per month if I start Social Security in thirteen years. If I wait eighteen years, I'll get $1598 per month. That's as if I had another half-million dollars saved for retirement." [I based this very rough estimate on the math for the four-percent rule.]

If you've been reading my stuff in recent years, you know that I'm a vocal advocate for finding your purpose in life.

I believe purpose is the foundation on which all plans — financial and otherwise — ought to be built. Purpose is a compass. It helps you set big goals, sure, but it also acts as a guide when times get tough. Your mother died? Your wife left? Your husband lost his job? If you know what your primary purpose is in life, these stressful events are much easier to deal with.

To that end, I encourage readers to take the time to craft a personal mission statement. Anecdata from the folks who have actually followed through on this exercise confirms my suspicion: Doing this can be life-changing. I'm not joking.

There's a consensus among money writers that one of the most important first steps on the road to financial freedom is establishing an emergency fund. Your emergency fund is like self-insurance to protect you from all the small, surprise disasters we each encounter in daily life.

But not every unexpected event is unwelcome. Sometimes life brings us lucky breaks — but these opportunities can still cost money. That's why I believe it makes sense to also keep a chunk of cash in an "opportunity fund".

The Opportunity Fund

I first learned about opportunity funds from reading about billionaires and business owners. These savvy savers often set aside money specifically to take advantage of unexpected opportunities. Continue reading...

In the spirit of getting back to basics this month at Get Rich Slowly, I'm planning to publish a series of articles about the most important numbers in personal finance. Let's start by looking at how to calculate your net worth.

To measure the value of a business, companies talk about equity or "book value". Jargon, right? In personal finance, equity is known as net worth. It's exactly the same thing but on a personal level. Your net worth is an important number because it reveals how much the business of you is worth at the moment.

Still clear as mud? Maybe this definition of net worth from Wait But Why will make more sense:

During my two-week break, I've been working to migrate some of my old Money Boss articles to Get Rich Slowly. I thought this long piece on how to set good goals might be useful to those of you about to set goals and resolutions for 2018, so I'm publishing it today. Enjoy!

We've reached one of my favorite parts of the year: the transition from the old to the new. I like that so many of us pause during the winter to reflect on how are lives are going -- and the direction we'd like them to head.

As part of this, many folks set goals and resolutions for the coming year. Unfortunately, most of these goals and resolutions are destined to remain nothing more than dreams. Why? Because most people don't know how to set good goals.

I want to change that.

Let's take some time today to explore what science says about how to set smart goals and resolutions. My hope is that by arming yourself with this knowledge, you'll still be pursuing your aims in April -- instead of having relegated them to the realm of dreams.

How to Set Good Goals

If you ask most people how to set good goals, they'll tell you that goals should be SMART: specific, measurable, achievable, relevant, and timed. While this sounds great -- and it's a methodology I've pushed in the past myself -- there's no actual evidence that it works. (Maybe your research skills are better than mine; if you can find studies that show SMART goals are effective, please let me know.)

So what kind of goals are effective? In The How of Happiness, Sonja Lyubomirsky shares her summary of the studies into productive (and happy) goalsetting. "There is persuasive evidence that following your dreams is a critical ingredient of happiness," she writes. And it matters which goals you pursue while following those dreams:

The pursuit of goals that are intrinsic, authentic, approach-oriented [which I'm describing as "positive" in this article], harmonious, activity-based, and flexible will deliver more happiness than the pursuit of goals that are extrinsic, inauthentic, avoidance-oriented [or negative], conflicting, circumstance-based, or rigid. This mouthful of words is based on decades of research.

Let's look at each of these qualities a little more closely. According to science, Lyubomirsky says, the best goals will be:

• Intrinsic. Good goals come from inside you, not from an outside source. You'll be much more motivated to get things done if you're acting because you want to and not because you have to. Your goals should be things you'd do even if you weren’t required. (A bad goal is one you pursue simply to please others. Think "want" over "ought".)
• Authentic. Lyubomirsky says that people are happier, healthier, and work harder when they choose goals aligned with their values. "The more a goal fits your personality, the more likely that its pursuit will be rewarding and pleasureful," she writes. If you're an introvert, it might not make sense to make a resolution that involves joining a group. But if you have a dominant personality, a goal of getting involved in local government could be perfect.
• Positive. A good goal helps you pursue a desirable outcome instead of avoiding an undesirable one. What do I mean? Well, a resolution can usually be framed as an approach goal (e.g., to be fit) or an avoidance goal (e.g., not to be fat). Studies show that people who pursue avoidance goals are less happy and achieve worse results than those who pursue approach goals. So, find a way to state your aim in a positive way -- as a target you're moving toward rather than something you're trying to escape.
• Harmonious. All of your goals should be aligned, complementing each other to create unified action. In this way, they can work together to make each one easier to achieve. Conflicting goals cause frustration and stress. (During my RV trip across the U.S., I had two goals that didn't work well together: I wanted to stay fit and I wanted to drink beer in every city I visited. You can guess how that turned out...)
• Flexible. Your goals will evolve over time. As your priorities change, your goals should too. Don't abandon difficult goals, but be willing to alter direction as your circumstances and priorities change.
• Activity-based. Goals that involve doing rather than getting tend to make people happier and more motivated. For one thing, you're likely to adapt quickly to whatever it is you achieve -- whether it's moving to Miami or buying a new computer -- so that the anticipated pleasure fades rapidly. Plus, you have more control over whether you do something than if you obtain something. For example, it's better to create a goal in which you aim to take 100 photographs per day (an action you can control) rather than one in which you aim to sell a photo to a national magazine (an outcome that may be beyond your reach).

That last bullet point is important and deserves additional clarification.

Remember how I've written in the past about developing an internal locus of control?

The first tenet of the Get Rich Slowly philosophy is: You are the boss of you. This means that you should spend time and money on the things that you can actually influence while ignoring those that you can't. When pursuing goals, I can't determine the results; I can only determine my effort. Thus, it makes sense to set goals based on my actions (write two hours per day, go to the gym five times a week, max out my Roth IRA) instead of desired outcomes (get 100,000 email subscribers, bench-press my bodyweight, earn a 10% return on my investments).

I think of it like this: It's better to prioritize habits over targets. You have more control over your input than you do over the outcomes.

Why go to all this trouble when setting goals? Because if you're careful to create good goals, you'll get better results -- with your life and your finances. And the better your results, the more likely you'll be to continue working toward your goals...and your larger purpose.

As you all know, I'm fond of financial scorecards. While admitting their limitations, I like numbers and tools that allow you to compare your financial progress with other people.

I like credit scores, for instance, because they put a number on how you handle money -- a number you can compare to Americans at large. And I like apps like Credit Sesame, which let you to monitor your credit score -- much like a bathroom scale lets you monitor your weight.

Perhaps my favorite number is net worth, the total value of everything you own. Calculating net worth is easy. It's what you own minus what you owe. That's it. Simple, right? Simple but powerful.

Our financial decisions are based on our expectations for the future.

We save for retirement because we expect we'll live a long time in old age, a period where we expect to be relatively unproductive. We invest in stocks because we expect the market to provide outsized returns when compared to other asset classes. We set aside emergency savings because we expect that bad things will happen -- if not tomorrow, then next week (or next year).

We base our expectations on past experience -- both our own experience and the experiences of others.

We expect to live a long time in old age because statistically most of our contemporaries live a long time in old age. We expect the stock market to provide excellent returns because for the past 100 years, that's what the stock market has done.We expect bad things to happen because bad things always happen.

Generally speaking, there's nothing wrong with this method of planning. It works.

When we base our expectations for the future based on what's happened in the past, we tend to get good results. We accumulate money for when we're no longer able (or willing) to work. Our investments grow. We have a cash cushion for when the car breaks down or little Jimmy breaks his leg.

Beyond All Expectations

But what happens when the old patterns break? What happens when past data becomes meaningless? That's the subject of an intersting article from Nick Maggiulli at Of Dollars and Data.

He tells the story of how the dodo went extinct. Evolving in an ecosystem without predators, these birds had no fear of humans. They had no expectation that another creature might hunt them down and eat them and end the species.

Maggiulli writes:

From the perspective of the dodo, the arrival of humans (or any other large predator) was outside the realm of its evolutionary grasp. Anything the dodo had approached previously had not tried to eat it. However, the arrival of humans broke the old pattern. It was beyond all expectations.

This idea is directly relevant to how investors use historical financial data to make decisions about the future. We assume that history is a great guide for what is to come, which is only sometimes true. We rely heavily on previous patterns...until they break. This is the classic black swan problem explained by Nassim Taleb, and highlights the difficulty with relying on financial history to make predictions.

"Just like the dodo," Maggiuilli says, "investors are on their own island of financial history with no clue what will wash ashore from the seas of tomorrow."

While browsing money blogs yesterday, I came upon an old article from my pal Joe at Retire by 40. The post is from 2015, but it contains a cool concept that I think might be useful for readers of Get Rich Slowly.

Joe -- who was inspired in turn by J. Money at Budgets Are Sexy -- asks, "What's your lifestime wealth ratio?" According to Joe and J. Money, your lifetime wealth ratio is result of a simple equation:

Lifetime Wealth Ratio = Your Net Worth / Your Lifetime Income

In pain English, your lifetime wealth ratio (or LWR) compares how much you have today with how much you've earned during your time in the workforce. It's a way to look at the wealth you've created and gauge how well you've done at keeping that wealth.

Let's take a closer look at the lifetime wealth ratio and how it's calculated.

If you give (or receive) a gift that misses the mark, returning the item is the natural thing to do. After all, return policies are pretty awesome these days.

However, if you decide to make a bigger impact with your gift -- an item that you've probably survived without just fine for the last year anyway -- why not donate it?

Why You Should Think About Donating an Unwanted Christmas Gift

• If you donate your unwanted gifts, you'll decrease clutter. Cutting clutter has emotional benefits that I don't understand, but I feel better when my life and environment are clear.
• Your item might be useful to someone else. Many times, I have kept items I didn't really need because I might need them sometime. But I find it easier to donate or sell items if I imagine those items making someone else's life easier or better ... you know, instead of taking up space in my spare closet.
• Improve your community. Along with being useful to someone else or an organization, your donation may improve your community. How? By giving your fellow community members something they really need or letting a community organization raise money with your gift that could help them operate other community-boosting programs.
• You may be able to deduct donations on your taxes. According to the IRS, you may deduct certain donations if you've given to qualified organizations. You must maintain documentation of this donation, however.
• You're giving something. If you weren't able to donate as much as you wanted to in 2015, this is an opportunity to give a little something without, shall I say, much of an investment from you. If the gift had been given to you, you didn't invest anything at all. But, I still think it counts as giving because you could have returned the item for cash or returned it for another item.