According to Wikipedia, sunk costs are “past costs that have already been incurred and cannot be recovered.”
Usually an economic term, it also applies to other areas of our lives.
Recognizing Sunk Costs
Video games. So you got yourself sucked into Farmville; a friend’s request for a pig lured you in. But hours and hours have been expended on this game, and even as you realize it was a waste of time, you keep playing. Why? Because you’ve already put in so many hours.
Lottery. Many people play the lottery, myself occasionally included. Yet I have hard people say as they buy tickets for next week, “My odds are better because I didn’t win last week.”
Food. You’ve been served too much food, and you eat, even though you are not hungry. Why? It would be a shame to let it go to waste.
Clothing. You were lured in by clothing that in retrospect just isn’t you, or worse, doesn’t fit right. Yet you keep wearing it because you spent the money on it — even though you don’t feel good wearing it.
Any of these sound familiar?
The reality is that once the money is spent, the time and effort expended or the item prepared, it becomes a sunk cost. You cannot get the initial investment of money, effort or raw materials back.
Avoiding Continuing the Damage
The issue with sunk costs is that the initial investment is not recoverable, and if you recognize it as a bad investment, it is simply a giant sink. As my grandfather used to say, this is “throwing good money after bad.” You have to recognize a sunk cost and stop perpetuating it.
Video games. Stop playing. The world won’t end if you don’t upgrade your barn.
Lottery. Don’t play with the mistaken impression that a loss one week in any way increases your chances of winning on any other week. Math doesn’t work that way. Lottery draws are independent of each other. The numbers that were just drawn have as much chance of reappearing on the next draw as do yours.
Food. Don’t eat if you’re not hungry.
Clothing. Get rid of things that don’t make you feel great.
It’s easy to get sucked into sunk cost thinking. But be aware that you should never proceed simply because you have already put in time and money. Always consider the outcome to determine if continuing the path is worth it.
