Defining Terms

Before we look at examples, It’s always a good idea to define the terms we’ll be looking at in this article. The definition of causation is, “The action of causing something”. Correlation on the other hand is defined as, “a mutual relationship or connection between two or more things”.

Real World Application

The reason why the idea of causation vs. correlation can be such a dangerous thing in personal finance is because it causes your mind to validate your choices even when the fault of the negative outcome was your own self.

For example, you decide to apply for a few credit cards. A few months later, you build up astronomical balances and you are now in debt. Instead of realizing that you were the cause of this event, you tell yourself, “Credit cards are bad because it caused me to go into debt.” This is a classic case of correlation being mistaken for causation. The credit cards themselves did not cause you to go into debt. You decided to make too many purchases which ultimately led to you going into debt.

The dangerous thing about correlation is that it’s not only an issue within your mind. It can also be used as a tool to push individuals to make irrational decisions.

An area where this idea is commonly used as a tool is the health & wellness industry. Large health studies often use certain misleading data to imply causation when in reality it’s more of a correlation. There have been multiple companies that have tried to promote, for example, their vitamins. They would often cite studies claiming something along the lines of, “95% of people who took our vitamins were proven to have a lower blood sugar and heart rate.” To a viewer hearing this, it may seem like these vitamins have great benefits, but the viewer does not know the whole story.

Unlike what the company claimed, they purposefully left out the fact that everyone who participated in this study was already practicing a healthy lifestyle which consisted of eating a healthy diet, exercising regularly, and getting enough sleep. With this information, you can easily realize that the vitamins were a non-factor when it came to the results of the company’s study. The vitamins didn’t cause the healthy metrics, it was simply an irrelevant correlation in an attempt to get individuals to purchase their vitamins.

Best Practices In Personal Finance

After looking at some of these examples, I hope you can see how correlation and causation can play a huge role in your finances and your life. The only true way to combat this trap is to remain steady with your healthy financial habits. Whether you have 0 credit cards or 10 credit cards, you probably shouldn’t be overspending on dining out or a fancy vacation.

The reality is that personal finance follows a plethora of patterns. People with higher incomes tend to have more wealth. People who invest earlier tend to accumulate more money. People with stronger financial knowledge often make better financial decisions. But a pattern is not necessarily a cause.

The statements might contain a grain of truth, but without understanding the underlying causes, they can be dangerously incomplete. The lesson isn’t that statistics are unreliable, but actually quite the opposite.

Statistics are incredibly powerful but only when we ask the right questions. The next time you see a financial trend, don’t immediately ask, “How can I copy this?” Ask, “What is actually causing this?” That extra question could be the difference between following a financial pattern and actually understanding it.

In personal finance, understanding the difference can be worth far more than simply recognizing the pattern.

This concludes this week’s free publication! As always, we highly encourage anyone with questions or discussion points to join us on the Substack app where we can talk as a community. Engagement and understanding is our number one goal, and we strive to make this a place where financial minds can flourish!

With gratitude,

Isaiah Newsome

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I’m sure we’ve all been guilty of falling to hedonic adaptation at least once in our lives, but the question is, how do you avoid this psychological trap?

First, we’ll look at some statistics around this idea. A study performed by Empower showed that 74% of people in their survey claimed that more money would solve a large portion of their problems within their life. 71% of those same people stated that an unexpected $5,000 gift would only boost their happiness for around 3 months.

These statistics beg the question, “Will more money really solve more problems, or do humans have a false sense of what money can actually accomplish?” The answer to this question is yes…and no.

In some cases, a substantial amount of money like a lottery win will solve 99% of problems people have if utilized correctly. But hedonic adaptation usually pops up a lot more often when talking about ambitious, goal-setting individuals. For example, you get a $20,000 raise, and you’re extremely happy and excited about your accomplishment. You start to purchase more luxuries and your expenses slowly start to creep up once again. 3 months later, the “happy” effect wears off and you’re back to the same place you were before you got the raise. The only difference is now you have more income paired with more expenses.

The problem people run into with their personal finances usually isn’t reaching the goals they have. It’s more commonly the actions they take after hitting those same goals. That new car feels amazing when you get it, but a couple of months later, it will more than likely feel like your baseline. This leads to expenses constantly rising with your income, and the feeling of no progress being made starts to swoop in over time.

I myself have even run into similar problems over my short life, but I have found a few ways to counter the attacks of hedonic adaptation.

The most effective strategy I have seen work for others and myself is something called intermittent consumption. Intermittent consumption is very similar to intermittent fasting with food, but just applies to spending instead of food consumption. When you receive a lump sum amount of money, spending it all at once will lead to a boat load of instant gratification which is always temporary. This is why it’s best to practice spacing out your spending over a longer period of time. This will give you a feeling of “value” since a single paycheck or gift will have a longer useful life compared to it disappearing in one day.

I can also admit, this strategy does take a decent amount of emotional and psychological control just like most other personal finance best practices, but if done correctly, you will definitely feel a lot better about how you’re managing your money, and ultimately your life.

To sum up this article, we have to find a way to step off of the hedonic treadmill. Sometimes the life we keep running toward is the life we already have. Sometimes, we’re just moving too fast to realize it.

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This concludes this week’s free publication! As always, we highly encourage anyone with questions or discussion points to join us on the Substack app where we can talk as a community. Engagement and understanding is our number one goal, and we strive to make this a place where financial minds can flourish!

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Isaiah Newsome

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The reason why we’ll solely be looking at Spirit and Frontier airlines is because these are the 2 major players in the ULCC (Ultra Low Cost Carrier) sector. To add some context, the state of the airline industry on the day Spirit shutdown was very similar to what it looks like today. Extremely high fuel costs, repair costs, and a shortage of many vital aircraft components. This was widespread across every airline, but it especially affected the 2 ULCC airlines because their base margins were already so low due to the discounted price of their tickets.

This begs the question: “If prices of everything in the airline industry put so much of a strain on Spirit which ultimately led to their collapse, why didn’t Frontier fall with them?” This is a valid question for someone who is only looking at the surface-level strategy of these 2 companies because from afar, they look identical. The reason as to why only Spirit collapsed shows up when you look at the situation with a magnifying glass.

For both airlines, they operated with a very similar fleet of largely A320 and A321 aircrafts, making the companies very similar. The one major difference pops up when looking at the type of engines each company chose to use over a course of decades when purchasing new aircrafts. Frontier chose to use a combination of a few different engine types while purchasing new airplanes over the years, while Spirit assigned the infamous Pratt and Whitney Engines to their entire fleet of narrowbody commercial aircrafts. As an investor, this is the equivalent of putting all of your money into a single stock instead of diversifying into many different stocks/sectors. I’m sure you can see where the problem will arise based off of the previous statement alone.

Spirit had little to no issues with these engines until July of 2023 when Pratt & Whitney issued a major recall on their engines, causing Spirit to ground flights and lose millions of dollars due to not being able to service their regularly scheduled routes. Frontier on the other hand, only had to ground a small portion of their planes which did impact the company temporarily, but not nearly as bad as it affected Spirit. Frontier was able to bounce back rather quickly and is still a thriving ULCC airline while Spirit struggled to survive and ultimately shut down operations 3 years later.

The point of explaining this event has nothing to do with airlines. The point is that in finance, an identical strategy does not equal the same end result. In personal finance specifically, you can have the same job, same salary, same mortgage, and same family size as someone else, and still end up in a terrible financial position simply because the surface-level strategy is only one part of the equation.

Imagine two people who each earn $60,000, contribute 10% to their 401(k), own a home, and avoid credit card debt. On paper, their financial plans look almost identical. But one person may have a stable emergency fund and investments spread across different assets, while the other has high-interest debt and no cash reserves. The strategy looks the same from a distance, but the underlying risks are completely different.

This is why personal finance cannot simply be reduced to a list of rules that work for everyone. Saving 20% of your income is generally a good strategy, but if one person earns $40,000 and another earns $150,000, the impact of that 20% is dramatically different. As stated before, even two people with the same income can have completely different outcomes based on their housing costs, family responsibilities, debt, health, and career stability. The numbers may look similar but the financial systems underneath them are far from it.

The Spirit and Frontier situation is a reminder that risk is often hidden until the event that exposes it occurs. Spirit’s decision to rely heavily on one engine type may have seemed perfectly reasonable when those aircraft were operating normally, but the problem wasn’t necessarily the strategy itself, it was how vulnerable the entire system became when something unexpected happened and personal finance works the exact same way. A financial plan that looks perfect during normal times can fall apart quickly when a car breaks down or a job is lost. The goal isn’t to create a plan that works only when everything goes right. It’s to create a financial system that can survive when something goes wrong.

Ultimately, this is why copying someone else’s financial strategy can be dangerous in a variety of different ways. You can plagiarize someone’s investments or career path and still end up somewhere completely different. Mastering personal finance isn’t about finding the one strategy that guarantees success, but about understanding your own weaknesses and identifying where your plan could fail. These are the traits of someone who will succeed with their money.

This concludes this week’s free publication! As always, we highly encourage anyone with questions or discussion points to join us on the Substack app where we can talk as a community. Engagement and understanding is our number one goal, and we strive to make this a place where financial minds can flourish!

With gratitude,

Isaiah Newsome

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Most people assume the market will be “normal” during their retirement year because it usually is normal more often than not. As long as you have your money invested in a few solid index funds, you can reliably expect anywhere from 6%-9%/year returns over the long term which is great. The problem arises when the unexpected happens…

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This is a typical case of sunk-cost fallacy, and it affects more than just a simple movie theater visit. In this article, we’ll explore how the psychology behind sunk-cost fallacy contributes to how you manage your money.

If we went through every single area that sunk-cost fallacy plays a role in, we would be here all day. So instead, we will look at a few key scenarios where this fallacy plays a major and sometimes detrimental role.

The first area we will look at is investing. Investing is the backbone of wealth building, which is why this fallacy is so important to understand. It would be nice if investing was just about knowing the numbers and calculations, but after all, we are human and have human tendencies which a lot of the times play a big role in investing decisions.

Imagine that on January 1, 2020, you commit to investing $1,000 each month for 18 months into a company we’ll call XYZ. At the time, the stock was trading at $150/share. Your plan is as simple as stay disciplined and invest the same amount every month regardless of what the market does.

For the first year, you stick to your strategy exactly as planned. But by December 2020, XYZ has fallen to $75/share, cutting its value in half. At the same time, negative headlines begin to surface. Financial analysts question the company’s future, and reports suggest that XYZ may be forced to shut down operations within the next year.

The situation continues to deteriorate further and further as time goes on. Six months later, the stock has declined to $45/share as investors continue to sell their positions. At this stage, the company’s outlook has become increasingly bleak, and there is little evidence to suggest that a meaningful recovery is likely.

Eighteen months have now passed, and you have invested a total of $18,000. Before contributing another dollar, you pause to evaluate the situation. The facts point toward walking away, yet a different thought begins to take over: “I’ve already invested $18,000. I’m too far in to stop now. If I quit, all of that money invested would have been for nothing.”

That internal dialogue is the sunk-cost fallacy at work. Rather than making a decision based on the company’s current outlook and future prospects, your judgment becomes anchored to the amount you’ve already invested. The money spent in the past begins influencing a decision that should be based solely on what happens next. These important decisions could be the difference between you retaining thousands of dollars, or you continuing to lose thousands because you fail to recognize that you’re thinking with your heart and not your head.

I hope that example wasn’t too confusing, but just in case, I will give a real world example of a scenario outside of personal finance that I’m sure you’ve heard multiple times. Let’s say you’re talking to a friend who has been in a relationship for 10 years with their partner. Throughout the entire 10 years, it has been nothing but toxicity, arguments, and abusive behavior. You keep urging your friend to leave their partner, but the response you get every time is something along the lines of, “I’ve been with him/her for over 10 years and I don’t want to waste all the time and hard work we’ve put in.” Another classic case of sunk-cost fallacy.

The common theme with both of these examples is the fact that an individual makes an irrational future decision based not on facts and evidence, but off of what currency was put into the action, whether that’s time, money, or something else of value. It’s imperative to recognize the signs of this fallacy as it could save you a substantial amount of money (or 10 more years of a horrible relationship lol).

On a serious note, sunk cost fallacy scenarios can get pretty advanced, so I urge you to do some research on your own to get a better understanding of all the ways this fallacy can affect your finances and even your life as a whole.

This concludes this week’s free publication! As always, we highly encourage anyone with questions or discussion points to join us on the Substack app where we can talk as a community. Engagement and understanding is our number one goal, and we strive to make this a place where financial minds can flourish!

With gratitude,

Isaiah Newsome

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Personal finance is not only about throwing information out into a void and expecting it to reach the right people. It’s about helping others directly in any way possible. I’ll talk about what exactly I mean by that statement later in this article, but first I want to remind you of an important aspect of finance.

Every person who is born into this world has a very different upbringing, environment, and unique experience throughout childhood. Some people are never exposed to financial literacy until it smacks them in the face during adulthood. Others grow up watching parents budget, invest, and plan for the future. Neither person chose their starting point.

Because of this, it’s important that people who do have financial knowledge aren’t greedy when it comes to information that could genuinely improve someone’s life.

For example, I currently work in a place that has about 700–900 customers who make payments every month. There is a decent group of those customers who pay late every single month and struggle to stay organized with their finances. If I know this, I could either keep that knowledge to myself because “it isn’t my problem,” or I could take a few extra minutes to share a budgeting tip, explain how automatic payments work, or simply point someone toward a helpful resource like my own free newsletter. One conversation may not seem like much, but you never know what that information could lead to.

Think back to how you first became interested in personal finance. Maybe it was a YouTube video or maybe a parent gave you advice that stuck for years. Maybe you stumbled across a book, a podcast, or even a newsletter. Whatever sparked your interest probably didn’t feel like a life-changing moment at the time. Yet over the years, that single spark may have completely changed the trajectory of your financial future.

Now imagine being that same spark for someone else!

Financial literacy spreads differently than most forms of knowledge. It has a ripple effect. When one person learns how to budget, they often teach their spouse. When parents learn how to manage money, their children grow up seeing healthier financial habits. A coworker who finally understands investing may encourage a friend to open their first retirement account. One lesson can easily influence dozens of lives over the course of decades. Just like how investments compound, so can a single financial lesson.

The world doesn’t just need more financially literate people, but It needs more people who are willing to share what they know with patience and humility. That doesn’t mean lecturing people or pretending to have all the answers. In fact, the best teachers are usually the ones who simply share their own experiences and talk about the mistakes they made. Explaining the lessons you wish you had learned earlier could be the difference between someone who struggles and someone who excels.

One of my long-term goals for Everleaf Finance has never been to simply grow a large newsletter. My goal is to create a chain reaction. If one article helps one reader make a better financial decision, and that reader later helps someone else, the impact becomes much larger than any subscriber count could ever measure.

Financial literacy is one of the few forms of knowledge that becomes more valuable the more you give it away.So the next time you notice someone struggling with money, don’t assume they don’t care. They may have simply never been shown a better way. A five-minute conversation, a recommended resource, or even a little encouragement could become the moment that changes their financial future.

Knowledge can build wealth for you, but shared knowledge can build wealth for generations.

This concludes this week’s free publication! As always, we highly encourage anyone with questions or discussion points to join us on the Substack app where we can talk as a community. Engagement and understanding is our number one goal, and we strive to make this a place where financial minds can flourish!

With gratitude,

Isaiah Newsome

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For most people, the 2 main forms of payment are usually a debit card or a credit card. Many people simply opt to use a debit card if they have money in their account, and then fall back on a credit card if they don’t have the funds available immediately in their checking account. By approaching spending this way, you lose out on a substantial amount of money over time and that’s exactly what many individuals are doing today.

There is a certain group of people that have this idea that credit cards are inherently “bad” and will avoid using one at all costs. Research by the Federal Reserve shows that ~20% of all Americans don’t use a credit card at all. I’m sure you know a few of those people, or you may even be one yourself. If so, this article is for you.

When talking to individuals who avoid using credit cards, the reasoning behind it usually stems from some type of familial influence or a bad experience in the past, which is completely understandable. The problem though, is that the bad experience from the past, or the influence from friends or family to avoid using credit cards probably occurred due to the improper use of the card in the first place. So below, I will put my criteria of when and how a credit card should be used:

A credit card should only be used when you have the available cash in your checking account to pay off that balance. If this purchase isn’t in your monthly budget, you should not be making that purchase at all. A credit card is NOT a loan.

I can promise you, if you live by this rule, you won’t have any bad experiences with credit cards ever again.

Now that we’ve clarified the proper way of using credit cards, let’s look back at the title of this article which is, “The Most Expensive Swipe You’ll Ever Make.” The reason for this title is to show that by avoiding credit cards, you’re losing out on thousands of dollars in your lifetime. If you’re using the rule I gave you on how to use credit cards, there is really no benefit to using a debit card on everyday purchases.

To illustrate this, I will provide an example based on real world estimates. Based on research done by the Federal Reserve Bank of Atlanta, it shows that the average American spends roughly $500k-$650k on a debit card in their lifetime (Average adult life of 50 years). If we look at the smaller estimate of $500k, and instead assume that 500k was spent on a credit card that gives 2% cashback on all purchases, that total return comes to $10,000. Ten thousand dollars may not seem like a lot for an entire lifetime, but it’s all about perspective.

If someone walked up to you in a grocery store and said, “I will give you $10,000 for free, but all you have to do is make all of your purchases on a credit card first.” You would be ecstatic and probably think it’s some sort of scam. The reality is that there is “free” money in many areas of life that people miss out on due to a short-sighted view when it comes to personal finance. This example also excludes the use of credit cards with greater benefits and the use of specialized cards to maximize return, but that is an article for another day.

In conclusion, the proper use of a credit card will always yield a ~1.5%-4% return on every dollar you spend depending on the card and its benefits. Debit cards have no value in comparison to utilizing a credit card, so I urge you to stop losing out on money that could be yours with minimal effort. Start using your credit card.

This concludes this week’s free publication! As always, we highly encourage anyone with questions or discussion points to join us on the Substack app where we can talk as a community. Engagement and understanding is our number one goal, and we strive to make this a place where financial minds can flourish!

With gratitude,

Isaiah Newsome

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Although there is nothing inherently wrong with this path, it’s very limiting to your finances in your 20s and 30s. I’m not exactly sure when or where this “normal” path became the norm, but what I am sure of, is that thinking this is the only path to a normal life is a very dangerous idea to play with.

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Was there ever a time where you swiped your card multiple times over a period of a few days but purposefully didn’t check your bank account? The answer for many people will be yes, and this dilemma is exactly what this article revolves around.

A survey was done by U.S. News which surveyed 1200 Americans. Nearly 1 in 3 people admitted to purposefully avoiding checking bank accounts due to financial stress and fear.

For many people, the task of checking a bank account or a credit card balance is an overwhelming thing to think about. It’s almost as if you know the balance is probably higher than it should be, but if you just ignore seeing it with your own eyes, you might temporarily feel better, so you decide to ignore it. By doing this, individuals usually think they’re giving themselves more “time” to face the inevitable, but this is sadly not the case.

By staying in the dark, you push yourself further and further away from clarity. In personal finance, clarity is an essential part of properly managing your funds. The Oxford Language Dictionary portrays clarity as “The quality of being coherent and intelligible.” When you put clarity and personal finance together, the definition of the phrase is something along the lines of “knowing where you stand within your finances.” This means knowing how much you’ve spent today, yesterday, and the day before that. This also means that in order to know how much you’ve spent, you have to check your accounts every day!

It sounds simple, but many people have a subconscious fear of “seeing the damage”. Learning how to move past this fear will be an instrumental part of efficiently managing your finances.

On a separate note, I understand a select group of people may think checking bank or credit accounts every day is unnecessary and a waste of time. If you’re one of those people, let me try to convince you otherwise. A lot of times, using real world examples in other sectors of life help people understand certain concepts better, which is exactly what I will do.

Let’s say you’re a builder who is tasked with constructing a large 15-story hotel. On day 1 of the build, you’re able to put up 8 entire stories of the hotel. Now on day 2, you come to the building site, but you don’t remember exactly where you left off, so you just assume you left off on floor 6. Instead of building 7 more stories like you’re supposed to, you instead build 9 more stories making the build a 17 story hotel which wasn’t the original plan. If the builder simply looked back at what he already built, he could have easily built the rest of the hotel according to the original plan.

This same idea can be applied to your personal finances. If you refuse to check your account balances, you will never know where you stand within your finances, causing you to overspend which then leads to you being put in a poor financial position. With most things, clarity is key, but it’s especially important when talking about money. Don’t let uncertainty be the reason you struggle to manage your finances. Put clarity at the forefront of your mind every day and I am certain managing your finances will become a lot easier.

This concludes this week’s free publication! As always, we highly encourage anyone with questions or discussion points to join us on the Substack app where we can talk as a community. Engagement and understanding is our number one goal, and we strive to make this a place where financial minds can flourish!

With gratitude,

Isaiah Newsome

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*Opportunity score is based on a 1-10 scale with 10 being a “can’t miss opportunity” and 1 being a “forgettable opportunity”. Consider upgrading to a paid subscription to get access to all of our opportunity reports going forward!*

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