Sunk Cost Fallacy & How to Make the Best Decisions in Your Life + Business

Have you ever bought a giant plate of food, finished half of it, felt full, and finished the other half anyway, just because you didn't want to waste money? I certainly have done that before. Today, we're talking about the sunk cost fallacy - if you learn about this fallacy and how to avoid it, it can save you a lot of heartache in your life and business.

The awareness of sunk cost fallacy can shift the way you're making decisions in your life and business.

A sunk cost in economics is basically a cost that has already been incurred, something you've already spent money on and cannot be recovered. Maybe you bought a movie ticket. Maybe you bought an online course. Usually, this is referring to purchases made with physical money, but we can think about this mentally or emotionally, too.A lot of times, when we think about whether or not to move forward, we let the fact that we spent money on a purchase weigh too heavily into our choices. For example, let's say there's a scenario where we buy a ticket to a movie. We're sitting in the cinema, and halfway through, we think, "I don't really like this movie.” As we sit there, we have a choice. Do you want to waste another hour of your life, sitting through the movie, just to make the money spent worth it? Or do you want to get up and leave? We have that informed choice. Sometimes, we don't give ourselves that informed choice.I will give you another practical example from my life: I had begun to crochet this beanie, and I had it half-finished, sitting in my closet for probably a year. I didn't finish it because I didn't really like the thread color, but I felt like because I already did the work to finish half of this beanie, I might as well finish it up. But I didn't finish it, and it sat there. Mentally, it nagged at me and distracted me and eventually, I got rid of the beanie! I told myself, "Okay, all I have now is this present moment. I can't rewind history. I cannot go back in time. All I have is this present moment and this half-finished beanie, and I know that I don't want to spend two hours working on this beanie that I don't like the color of. I just don't."

When we're half finished with something, what we need to do in that moment is instead of looking backward, look forward - weigh the pros and cons of completing this project. Be honest with yourself, not just with the physical energy it's going to take us moving forward, but the mental and emotional energy as well.

I hear this from women all the time who purchase online courses, saying,"It's not really valuable for me, but I feel like I need to just finish it." Then, they're spending another 20 hours of their lives on something they feel isn't an asset to them.

I'm not advocating haphazardly quitting everything, but sometimes in our lives, we do the opposite: we haphazardly finish everything. We just automatically feel like we need to finish things just to finish them, or just to feel good about ourselves, or just to financially ‘make it worth it’.

Maybe there's something that has been nagging you, sitting in the back of your mind: maybe there’s a book on the shelf next to you that you think you really should finish, but you're not enjoying it. Hey, don't finish the book! Start a new one that you enjoy and that is going to bring life to you. Have you ever finished something just to finish it?