438 | Dollars and Sense | Clint Murphy & Ginger
ChooseFI
Choose Wisely: Let Go of Sunk Costs
The decision-making process can be heavily influenced by sunk costs, which refer to money already spent and unrecoverable. In scenarios where substantial investments have already been made, individuals often feel compelled to continue pouring resources into a failing project, fearing the loss of previous expenditures. This tendency clouds judgment, leading to suboptimal decisions. Conversely, when facing a similar scenario without any prior investment, the logical choice becomes clearer, emphasizing that past investments should not dictate future actions. The key insight is to recognize the separation between sunk costs and future potential, thereby enabling more rational decision-making regarding investments.
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