Exploring diffusion, compound interest, and financial awareness

Welcome to the Intentional Dollar weekly newsletter — great work taking this small step to move your money forward. I’m Logan, a Certified Financial Planner™, and I’m excited you’re here!

What’s inside?

• One tool to experiment with

• Two quotes from others

• Three questions to dig deeper

• Four lines of poetry for the point

_{One tool to experiment with:}

Diffusion

A diffuser on a sprinkler system is a dial you turn to alter the depth and breadth of water coverage. When you turn the dial in, it diffuses the stream of water casting a wider, but shorter spray. When dialed out, the sprinkler shoots a longer, unencumbered stream into a concentrated area.

Diffusion works very well for watering grass, but is less effective for reaching financial goals.

I like the analogy of reading books: if you read one page of 1,000 books, you’ve read 1,000 pages — but made virtually no progress. Compare this to reading four books with 250 pages. You’ve read 1,000 pages and completed four books. Which 1,000 pages was more effective? Diffusion is a subtle thief of progress. Two readers cover the same page count, but only one has results, knowledge, and progression.

There are boundless financial goals to optimize: pay off student loans, save for a house, build an emergency fund, save for retirement, take a family vacation, and plenty more. Try to fund all of these goals, and the progress is invisible; this is the negative aspect of diffusion.

To employ this tool, list out the current financial goals you are funding. How many do you have? The experiment this week is to reduce these numerous buckets and concentrate on one financial goal — perhaps it’s finally building a financial safety net. By dialing back the diffuser, you will see better results. You might have to defer the family vacation, or slow the speed at which you pay off the student loans, but you will see progress on your main goal.

_{Two quotes on compound interest:}

Compound interest occurs when you start to earn interest on previously earned interest. Over time, this produces unimaginable results. This is straight forward in finance, less so in other areas. Patience and a long time-horizon are the only pre-requisites.

_{Three questions on financial awareness:}

1. What would an outside observer commentate on what your money says about you? (Generous, impulsive, frugal, healthy, diligent — why?)

2. What money thoughts or habits do you hold that don’t serve you?

3. Which external circumstances/environments cause you to make suboptimal financial decisions?

Which question stuck with you? Questions like these are spotlights for the mind. Reply to this email and let us know which one shined light on a previously dark cave.

_{Four lines of poetry for the point:}