Trying to Simplify?  Beware of Sunk Costs

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If you look around your house, you see things.  Lots of things.  Things you may no longer need, or things that no longer bring you any joy.  If you aspire to be a minimalist, or just want a simpler life, you decide to declutter those unneeded things.  You’re certain if you just had less stuff, you’d feel more relaxed and happy.

As you retrieve a box for those past treasures, however, a strange phenomenon occurs that stops you dead in your tracks.  An evil thought pops into your mind: “But I paid good money for that!”  Thinking about how much money you shelled out for these no longer loved, no longer needed items causes immediate regret, followed by a nauseous wave or possibly depression.

You put the box down.  And then you do something else to distract you from your misery.

This, my friends, is the battle of sunk cost.  The good news is, once you understand the enemy of sunk cost, you can conquer it.  Let’s break it down.  According to Investopedia, here is the definition of a sunk cost:

“A sunk cost is a cost that has already been incurred and cannot be recovered … Sunk costs (past costs) are excluded from future business decisions because the cost will be the same regardless of the outcome of a decision.”

A sunk cost is past tense.  While this applies to businesses, it also applies to all our spending.  You spent the money.  You can’t un-spend it.  Whether you keep the item or donate it, you already spent the money.

Zero in on the second part of that definition: “Sunk costs are excluded from future [buying] decisions because the cost will be the same regardless of the outcome of a decision.”  Here’s where we can learn a life lesson.

You can look at your unneeded items, tell yourself it is a sunk cost, get over your internal conflict, donate the item, and move on.  A healthier approach is to pause for a minute and recognize the cost of that item.  Consider the amount of work you invested to earn the money to purchase whatever it is, and THEN proceed moving it out of your life.

Acknowledging sunk cost isn’t a license to be cavalier with your spending and subsequent decluttering.  Instead, acknowledging sunk cost is how you overcome the inability to part with something based purely on the guilt you feel thinking about how much you spent on the item.

Acknowledge the cost.  Reflect on it and vow to do better.  Then purge the item. The truth is whether it sits on your shelf or someone else’s, that money you spent is long gone.

What are your sunk cost stories?  Share them below.  Or if you want some like-minded friends, join the free SimpleMoney Community on Facebook to share your sunk cost wins or woes.


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2 responses to “Trying to Simplify?  Beware of Sunk Costs

  1. So true. I have recently moved and have unneeded items in storage that are being donated rather than paying someone to deliver them to our new address. Thanks for helping me understand why that is the best decision.

    1. It’s a tough situation. I still find myself thinking “but I spent good money!” from time to time and even have to remind myself. Thanks for chiming in. I think moving is an excellent example – people pay to move stuff just because they paid good money for the stuff. 🙂

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