One of the hardest concepts for me to wrap my head around now that I’m in business school is known as sunk costs: the idea that when money has been spent on research or supplies with the goal of doing a project, it should not be taken into account when deciding whether or not to do a project.
“What do you mean it doesn’t matter if I’ve already invested money into this project?” my untrained brain wants to shout out. “Why can’t I let that influence my decision?”
And it turns out that business school really isn’t that far removed from reality. I’ve been letting sunk costs influence my life for far too long. Take for example some various crafting projects that I’ve had lying around my house. A few months before my best friend gave birth to her first baby, I decided to learn silk ribbon embroidery and make the baby a blanket- two projects for the price of one. I started a bit, and then put it aside, promising myself I’d pick it up and finish it later. My best friend’s daughter turned nine last month- I never did get much further than when I had started nine years ago!
Why am I telling you this story? To illustrate the difficulty I had in getting rid of certain things (which I never use) just because I felt like I paid good money for them. I never finished that silk ribbon embroidery kit, nor the fairy doll craft for which I bought the organic felt, nor the quilting, nor, nor nor…
The fact that I had spent money on each object prevented me from being objective as to the likelihood of ever finishing the project. And that is a really important step, in my opinion! There are many times that we should just let go, and sacrifice the money already spent, if doing so will help us acheive our future goals. This particular example involved sacrificing the purchase cost for the goal of being more organized and less cluttered, but another goal might be stopping your gym membership, even though you’ve been paying on it for months.
Are you good at sacrificing sunk costs in order to meet your goals? Maybe you hate to take them out of the equation! Have you ever had a hard time getting rid of something just because you already paid for it?