The sunk-cost fallacy: Throwing good money after bad

My mother spent three weeks in the hospital in August. Her extended stay affected me in lots of little ways I couldn't anticipate. To escape my daily worries, I went searching for a little solace — I re-activated my World of Warcraft account.

World of Warcraft is a subscription-based online computer game. As a player, you become immersed in a virtual fantasy world, interacting with thousands of other players from around the globe. It's great fun. Enjoyed in moderation, World of Warcraft (or any other computer game) can be a fantastic pastime.

 

Unfortunately, I'm not so good with enjoying things in moderation. I had quit the game cold turkey several years ago because it was consuming my life. This time, I made an effort to keep my play under control. For the first week, I limited myself to an hour a day. By last week, however, I was playing at least four hours every day, and other areas of my life — my fitness, my mental health, my relationships — were beginning to suffer.

“But I can't quit,” I thought. “I paid $77.94 for a six-month subscription. Plus I've already invested 80 hours into the game. I should keep going.” This line of thinking was dumb, and I knew it. The money had already been spent, as had the time. It was gone. Chasing it with additional money and additional time wouldn't make things better. I was engaging in the sunk-cost fallacy.

The Sunk-Cost Fallacy

The sunk-cost fallacy describes our tendency to throw good money after bad. Just because you've already spent money on something doesn't mean you should continue spending money on it. Sometimes the opposite is true. Psychologically, the more you spend on something, the less you're willing to let it go. In Why Smart People Make Big Money Mistakes (and How to Correct Them), the authors write:

Once your money is spent, it's gone. It has no relevance. To the extent you can incorporate that notion into your financial decisions, you'll be that much better off for trying. If you're debating the sale of an investment (or a home), for example, remember that your goal is to maximize your wealth and your enjoyment. The goal is not to justify your decision to buy the investment at whatever price you originally paid for it. Who cares? What counts, in terms of getting where you want to be tomorrow, is what that investment is worth today.

It's important not to consider past costs when making financial decisions, but to make decisions based on future costs and benefits.

Often we succumb to the sunk-cost fallacy because we don't want to feel wasteful or to admit we made a mistake. All that Stuff I'm trying to get out of my life is nothing more than a manifestation of this: I know how much money I've spent for the things I own, and so am reluctant to let them go. What I need to realize is that it's not what these things were worth to me in the past that's important, but how much they're worth to me now. If I do not value them, and they're just taking up space, then they're better off out of the house.

Learning to Walk Away

We all make financial mistakes. When you realize you've done something wrong, try not to think about the money (and time and emotion) you've already spent. Instead, decide what to do based on the future. From Why Smart People Make Big Money Mistakes:

Imagine that you've got a ten-year-old minivan that needs a new transmission. The sunk cost fallacy tells us that you're more likely to plunk down the money for the new transmission if you've recently sunk hundreds or thousands on repairs into your clunker before that. So ask yourself: If someone gave you that minivan as a gift yesterday, would you spend the money today to get it running? If the answer is “no” — because that large an investment is not worth it on its merit — then it's probably time to think about buying a new car.

Similarly, it is relevant only to your ego that your Amalgamated Thingamabobs stock, for which you paid $100 a share, is now selling for $25 a share. If you believe that lower price is a bargain, hold on and maybe even buy more shares. But if it is not — if, given the chance, you would pass on the opportunity to buy the same shares at any price today — then it is time to sell.

When Kris and I were young and stupid, we paid $1200 to join a “consumers club”, through which we could purchase furniture and housewares for reduced prices. Though the sales pitch had been convincing, it quickly became clear that this was a bad deal for us. We had to drive half an hour to reach the club, and when we got there, they never really had what we wanted. Yet we remained members for many years, dutifully paying the $75 annual fee. “We've already spent so much,” we'd say. “It doesn't make sense to quit.”

Eventually we wised up. Just because we'd already spent a ton of money, that didn't justify continuing to do so.

Similarly, I've come to my senses about World of Warcraft. I've decided to say good-bye to Jahdu, my level 42 Orcish hunter. It hurts to think of the $77.94 I paid for a six-month subscription “going to waste” — not to mention all the time I spent over the past few weeks — but I know that it's better not to pine after sunk costs, and will instead look to the future.

I'll get better value from my time if I spend it reading and writing about personal finance!

Another Real-Life Example of Sunk-Costs

Last March, I decided to tackle my physical fitness by setting some big goals for myself. One of those was to go from couch-potato to marathon runner in about six months. To goad myself into action, I paid about $100 (non-refundable, non-transferable) to sign up for the Portland Marathon (which is being run at this very moment).

For a while, this seemed like a brilliant idea. Having paid for the marathon in advance, I was motivated to train so that my money didn't go to waste. I began to run with a group. I lost weight. I felt great.

At the end of May, however, I hurt myself. I took some time off. I didn't worry too much, because there were still four months left before the marathon. But when I tried to return to running, the pain persisted. I went to see a physical therapist. June turned to July turned to August. Eventually I decided that maybe I could walk the marathon. I'd paid $100 for it, dammit, and I wasn't going to let that money go to waste!

Over the last couple months, however, I've come to realize that I'm engaging in the sunk-cost fallacy again. The fact that I've already spent $100 for the marathon is meaningless. It's a sunk cost. It's not recoverable. What matters is the future cost in time and money. And, as it turns out, health.

I could have continued to push myself to prepare for the marathon, but the most likely result would have been additional doctor bills and physical therapy visits. I would be spending future money attempting to make past money “good” again.

Instead, I've changed my focus.

I've begun to prepare for the 2009 Portland Marathon. I'm running short distances (three miles) a couple times a week. I'm lifting weights to build my leg strength. Meanwhile, I've learned a lesson. In the future, I won't sign up for the marathon until later in the summer, when I'm sure that I'm physically ready to go.

One More…

In late June, I laid out plans for a five-week trip to England (and beyond). I was going to hike Hadrian's Wall, take in an Everton football match (or two), visit Bath and Wells, and — best of all — spend time with GRS readers all across Great Britain. (And possibly in France and/or The Netherlands, as well.) On July 4th, I bought a one-way ticket to London, and was looking forward to having a series of small adventures.

That's my dream world.

In the Real World, things didn't go as planned:

  • Mom got sick. My family is still wrestling with her situation. It looks like she'll move from the “memory care unit” to a regular apartment in the assisted-living facility, but she's not happy about being there. Plus, her finances are a mess. Of the family members, I'm the most logical person (and the only one with time) to untangle things.
  • Meanwhile, my own house has problems. The roof is leaking. In most places, this isn't an issue during the summer, but I live in Oregon. We've had some heavy rainstorms, and these have revealed a leak coming into the guest room upstairs. So, we're trying to hire a roofer to begin work soon. Trying is the key word here. All of the roofers are flooded with work because it took so long for the rain to let up this year.
  • I've received a jury summons for early September, right when I'd hoped to be in France and/or The Netherlands.
  • Kris, who had thought she was okay with me being gone, isn't quite ready for me travel on my own for an extended period. This may sound unimportant, but it isn't. She needs to be comfortable with this too before I take off on my grand adventures. By delaying a couple of months, it gives her time to get adjusted to the idea.

There are other smaller problems, too. Taken together, these factors have forced me to admit that now is not a good time to make a solo trip to England. My adventures will have to wait.

Sunk Costs

What does this all have to do with money? Well, I'm about to present an object lesson in sunk costs.

Kris and I talked long and hard about the decision. She was actually more in favor of me going than I was. “You've already bought the ticket,” she told me. “You shouldn't let that go to waste.”

“I don't want to waste it,” I said. “But it's a sunk cost. It's not a factor in the decision. That money has already been spent whether I go or not.”

I've tried to write about sunk costs twice before but without much success. (Here's the first time and the second.) And whenever I mention sunk costs in passing, people misinterpret my meaning. For some reason, the popular (and incorrect) definition of “sunk cost” equates to something like “dumb spending” or “spending you shouldn't have done”. But that's not what the term means.Sunk costs are simply costs that have already been incurred and cannot be recovered.

Sunk costs are neither good nor bad. They just are. There's no value associated with them at all. (In fact, it's when we assign values to sunk costs that we make poor decisions.) Thus, sunk costs shouldn't be considered when making a decision.

In my case, I tried to recover my costs. I contacted my friend Chris Guillebeau for his help. He explained how plane tickets work. “It's all about the terms and conditions,” he told me. “If your ticket is refundable, you're good. Even if it's not, you can usually reschedule or get some sort of flight credit.”

So, I called around to see if I could get a refund or somehow reschedule my flight. For once, though, my frugal habits worked against me. I bought my one-way ticket to London for $900, a full $500 less than any other ticket I could find for the same itinerary. But one of the reasons my ticket was so cheap was that it was fixed — I couldn't change anything about it. (I've never had to change a ticket before in my life, and I didn't expect I'd have to change this one.)

Bottom line: I spent $900 on a plane ticket that had to be used or lost.

Last week, when it came time to decide whether I was actually going to London, I didn't even consider the cost of the ticket. If I flew to England, I was out the $900. But if I stayed home, I was out the $900 too. This is the purest example of a sunk cost I can imagine! As a result, I was able to make my decision based solely on the pros and cons of each option.

Staying Home

Leaving aside the money I spent to buy the ticket, it makes more sense for me to stay home. I hate doing it — I want to travel! — but it's the best choice for my mother, my wife, and my house.

I don't feel bad, though. I know there's lots of travel in my future. It took days for me to decide to skip my trip to England, and during that time, Kris and I had some long talks. During these discussions, we agreed that in exchange for staying home now, my trip to Latin America in October is a sure thing. Nothing will stop that. I'm plotting other trips too, including a possible trip to Antarctica with Chris Guillebeau where I hope to make Your Money: The Missing Manual the second-best selling book on the continent.

Plus, by waiting eight weeks, I'll have more time to tackle some other projects. I'll be able to get my diet and fitness back on track. (They've taken a hit over the past month!) I'll have an extra eight weeks to learn Spanish. (I've been taking classes for a couple of months now. Me gusta es mucho.) And, perhaps best of all, I'll have extra time to purge the Stuff that's been causing me so much consternation around here.

And you know what? Now, I'll have more time to write here at Get Rich Slowly! Even though it feels like I'm wasting $900 by skipping my trip to London, I know it's the smart decision.

More about...Psychology

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Tina from Frugal Sisters
Tina from Frugal Sisters
11 years ago

My expercience is a lot more dramatic. On the day of my first wedding I had a fleeting moment of becoming a run-away bride. The only reason I didn’t leave my x-husband at the alter was the money that I had already put into the wedding. Well, I should have left him at the alter. It cost me a lot of money and stress to be married to a man that didn’t know what it meant to save a penny. He spent every penny we both made and more. I didn’t know that he had borrowed money from my family… Read more »

Jonathan from Master Your Card
Jonathan from Master Your Card
11 years ago

WoW is a perfect example of the sunk-cost fallacy, and one that hits particularly close to home. There’s something disturbingly addictive about MMORPG’s (to me, anyway), and I’ve always stayed away from them as much as I can because I’m not sure if I have the willpower to get out once I truly get in.

J.D, don’t know if you have ever seen http://www.wowdetox.com/. If not, it is well worth a quick browse every now and again. It will put you off of going back to the dark side in no time at all 🙂

J.D.
J.D.
11 years ago

Nice, Jonathan. I’d never seen that site before. The second comment on the front page right now has a perfect example of the sunk-cost fallacy: #33371 I hate WoW. It turned my friend into a mindless freak. He was so obsessed with the game, when he called once, I told him I was at my grandmother’s funeral. And the only thing he could say was “What? You can’t play later?” And he’s lost his social life and has become a total loser because “I need to finish up my one month WoW card.” And Tina, your example is perfect, too.… Read more »

Simon
Simon
11 years ago

I have had quite the similar experience. I played Diablo 2, another product by Blizzard, which totally took over my life. I wasted a lot of time playing instead of studying. Even though the online play was free, it does mess up many aspects of our lives.

Adam
Adam
11 years ago

I know there are a number of secondary market websites where you can sell your characters/whatever else you get in that game.

You should check it out…maybe you can get some of your investment back!

kick_push
kick_push
11 years ago

i’ve had a world of warcraft account for almost 2 years now.. i don’t know how to feel about it.. it has it’s positives and negatives.. one positive is you save money because you spend most of your time indoors.. it is a great time killer you already mentioned the negatives (takes over your life, mental and physical health, etc..).. i’ve even heard stories of this game ruining relationships i rarely play anymore.. but i keep my account on because my brother plays a lot more than i do.. i have a 70 dwarf warrior (alliance).. and another orc warrior… Read more »

Steven Fisher
Steven Fisher
11 years ago

I have a completely different experience with World of Warcraft. I downloaded the demo, played it, and liked it… and realized I’d love it as a casual game for a couple hours every other weekend.

I realized I’d never really advance at that rate. Honestly, that doesn’t bother me much, though it would make it hard to group.

I realized I’d be paying the same amount as someone who played 20 or more hours a week.

And I decided to just let the trial expire. Why pay for extra frustration in my life?

kick_push
kick_push
11 years ago

that’s the thing w/ warcraft.. that game never stops.. there’s always something you want to improve on.. and it takes time to get there

i know i’m screwed.. because when the expansion comes out.. i’m sure i’ll be playing again lol

Jennifer
Jennifer
11 years ago

WoW is what you make it to be. For awhile when I was between jobs I played a lot. So much that my husband informed me that it was kind of taking over my life more than it should. I listened to him and I stopped playing as much. Now I organize my WoW time around my calendar, instead of the other way around. However, I must say that I have met some really amazing and fun people on WoW. I’m not a very social person, and this game has made it really fun to talk to people in kind… Read more »

Strabo
Strabo
11 years ago

I love WoW as casual game. 11 € a month for unlimited time has saved me a lot of money by not buying other entertainment just to pass some idle time. Learning to take it in moderation is the important thing.

WiseMoneyMatters
WiseMoneyMatters
11 years ago

I was addicted to WoW for quite some time. The first few days I owned it, I played it 14 hours per day. It was ridiculous. I had to learn the hard way to just walk away, even though I was really attached to my character and all the time and energy I put into the game.

Great article.

Adam
Adam
11 years ago

“remember that your goal is to maximize your wealth and your enjoyment.” I think that this is a great way to look at things. Playing it out in the WoW example, if you’ve spent $80, and played 80 hours, and enjoyed them, then you’ve spent about a dollar an hour for something you enjoyed. If that enjoyment was worth a dollar an hour, then you’re already ahead. Looking at the other way, you’re now noticing that other facets of your life are starting to suffer, so in this case, to maximize your enjoyment (of your overall life), then stopping is… Read more »

Shanel Yang
Shanel Yang
11 years ago

This is a common problem with new Hold ‘Em players. They hate the idea of folding if they’ve already put any money into the pot. The more they put in, the more they hate to fold. Even if their hand gets progressively worse and it becomes increasingly obvious the other side bluffed you into staying in the game in the first place. They just keep hanging onto that slim chance of getting their money back rather than kiss all those chips goodbye for good. For the same reason, even if they have a good hand, they’ll fold if another player… Read more »

mbrogz3000
mbrogz3000
11 years ago

Thats exactly where I saw myself going with WoW after only 2 weeks of playing it. It was going to be expensive AND consume mountains of my free time. I ended up selling my game and remaining trial on ebay, only losing like $10 or so. Distractions like this are a terrible thing though, and probably costing even more than the monetary cost to play. I wasted a good bit of that solid-GPA-building freshman year of college playing Starcraft. I actually ‘infected’ my dorm by introducing it to everyone, and instead of studying we’d play Starcraft. Studying became something that… Read more »

keith twombley
keith twombley
11 years ago

World of Warcraft has been a great tool *for* my financial well-being.

WOW is the only game I play now.

Instead of looking at it as a $15 recurring cost, I look at what it’s saving me.

I don’t buy other video games. That’s a savings of $50-$150 per month right there. I only go out to see movies that I really really want to see (saving me $20 a week at least). Same with going out to restaurants.

Sure, there’s something to be said against a life of WOW-inspired hermitage, but financially, it makes a lot of sense 🙂

jtimberman
jtimberman
11 years ago

The same sunk-cost fallacy is what kept me from throwing out the miniatures I commented about in another post here recently. I had spent so much money, even though it was almost 15 years ago, that I couldn’t justify dumping everything. I think people do this more than they realize. Right now I’ve got a sunk-cost fallacy issue sitting by the curb in front of my house. We have a paid-for car that we bought early this year for $2000. We just put $800 into repairing it, and now it needs another $400 to get running again. I have a… Read more »

Brian Arnold
Brian Arnold
11 years ago

Back some months ago, I saw WoW Detox linked, and it led to me writing up my thoughts on WoW, and the time and money spent on it. http://www.randomthink.net/blog/2007/11/12/why-i-wont-be-leaving-wow-anytime-soon Wow, that was longer ago than I thought it was, but anyhow: I generally agree with the concept of the sunk-cost fallacy, and I can see where it’d go with WoW, but for me and my wife, it’s probably some of the best $30 we spend each month. In terms of dollars-per-hour, it’s fairly cheap, and the more you play, the more you get out of your money. Like all things,… Read more »

Wesley
Wesley
11 years ago

I’m with you on this one…I had a similar experience with Diablo 2. It was a huge time-sink, and when I was online with friends, I felt obligated to keep playing…I didn’t want to let them down. It ended up leading to a serious discussion with my wife (not the pleasent kind). We worked it out and I walked away.

I think any sort of reality escape can get out of hand, WoW is just really good at it.

Great article!

Mkg
Mkg
11 years ago

Thanks for sharing your experience I have never played but there are certain things in my life I can compare this with its nice to realize when you fall you can always get back on track!

partgypsy
partgypsy
11 years ago

We have a similar situation, but with a dog. He is a rescue dog, and have been working with him for 5 months. So far we have purchased licence, crate, dog bed, toys, new fence, dog training classes, vet bills, and lots of time and aggravation, but he is still not meshed with our family. The whole idea is that eventually he will be a good companion animal that we will have for many years, but the payoff right now has only been stress on our marriage. But at the least he is a living creature, not a video game.

J.D.
J.D.
11 years ago

I agree that World of Warcraft (and all Blizzard games, to be honest) is a great value financially in terms of getting pleasure for what you spend on it. It’s some of the best cheap fun I’ve ever had in my life. HOWEVER, it’s not a good value for ME in terms of time, self-esteem, and money I forego by playing. Because it takes a huge amount of my time (because I’m not personally able to exercise restraint), I get less writing done, and less writing means less income. I wish I were one of those people who could play… Read more »

J.D.
J.D.
11 years ago

Also, I think some of you are missing the point. I’m not arguing that World of Warcraft is a bad thing. I’m using it as an example of me succumbing to the sunk-cost fallacy. If I were to justify my continued playing because (a) I’d already spent money on the next five months and (b) I’d already devoted 80 hours to the game, I’d basically be falling into this trap. What I’m saying is that it’s important for me to cast aside this thinking and make my decision based on the future benefit it would bring me… This post was… Read more »

Jordan
Jordan
11 years ago

I’ve heard of a guy going to his lay minister for dating advice (I heard the story through the minister). The guy had been dating a girl for quite some time, so he figured he kind of had to marry her after investing all that in the relationship.

The minister was an economics professor in his day job. He told this guy, straight up, “It’s a sunk cost. Forget it. Move on.”

But it seems like there might be times when we should take sunk costs into account. I can’t think of any examples, though–can anyone else?

Daniel Gibbons
Daniel Gibbons
11 years ago

I absolutely love this post. It reminds me of working at a dot-com company in the first bubble and as all dot-com stocks started to fall before the collapse everyone would talk about “averaging down”. That is, buying more shares while the price fell to reduce their average price paid per share. But whichever way you cut it, you’re still committing more money to a losing investment, and most of those people ended up “averaging down” in an entirely different way than they’d hoped…

ekrabs
ekrabs
11 years ago

I wish I saw this sooner, but then, I was preoccupied with the Freddie and Fannie takeover….

I had a WOW account. I think I played in moderation (although I use that term loosely), but ultimately canceled it because I didn’t want to pay the monthly fee.

I use to play Diablo 2, Warcraft 3, and Starcraft all the time too. They were more time-sink than money-sinks I think….

I’m now on Team Fortress 2, but again, more of a time-sink. Again, I don’t think I over-do it. Just started playing again last weekend, but only because a friend asked.

Rondondo
Rondondo
11 years ago

I almost fell into the sunk cost fallacy when I bought a sportscar last year. It’s a gorgeous car (Audi TT Special Edition) and I was really in love with it for a number of months. I think I wanted it because I’ve never had a car like that in my life and figured I was successful and deserved it. I can totally afford the car, or even a much more expensive car for that matter. The truth is that it’s just an impractical third car for me and mostly sits in the garage looking pretty. I rarely have a… Read more »

Jennifer
Jennifer
11 years ago

Boy I blew it this year, and I mean that. I set us up on a savings plan this year and had it planned out that we would have 10k by the end of the year (I am the only income earner). Excited my hubby and I worked on the plan and saved over 5k. Then summer hit, bam. We blew it… we now have 2k on our CC and have dwindled our savings down to 2.5k. I suppose I should have paid off all of our debt first instead of building up this large savings account. Sunk cost fallacy… Read more »

Charlotte
Charlotte
11 years ago

#20 partgypsy We had the same experience with our dog Mulder. Week by week we wanted to take him back to the shelter. On the 4th week or so, I looked at him and felt sorry…then I looked at my husband. He said “ok, let’s do everything we can to make him part of the family”. We never looked back, he is our pride and joy, now almost a year old. It takes work but it is totally worth it. Watch the Dog Whisperer shows on NatGeo and read Cesar Millan’s books. Before you know it he will be an… Read more »

ThatGuy
ThatGuy
11 years ago

The irony of all of this is that by quitting and writing about WOW (a very popular and polarizing topic), you may have driven more traffic to your site and thus more income. Chances are if enough people start reading your blog because of this entry, that $80 dollars might be some of the best money you have ever spent.

-ThatGuy

Michelle
Michelle
11 years ago

I do not feel this to be a Sunk-cost. Both my fiance and I play WoW and we play together. We think it’s a good social outlet, and nice way to spend some time together. Look at it this way, spend $15.00 a month (30.00 in our case) to be able to enjoy something together on our free time, which would otherwise be spent (and then some)on going out say…for the weekend. Drinks for two? You would spend about that same amount in just one weekend, let alone a whole month. For us, WoW is helping us stay in and… Read more »

AB
AB
11 years ago

You could probably sell your WoW account, you know. Especially if you have a 6 month sub on it. It would help recoup those costs…

mwarden
mwarden
11 years ago

Ok, I guess in a way you can view this as a form of sunk-cost fallacy, but the other way to view it is perfectly logical. The first hour you play costs you $x. After you’ve paid that $x, the hours you play between then and six months from then are free. *IF* the marginal benefit of each of those hours is greater than zero, then you should play. I think what you are saying is that the benefit was not > 0 because it was affecting other areas of your life. You are not losing additional money if you… Read more »

Cairsten
Cairsten
11 years ago

I have to admit, I would have tackled your problem from the other end: by scheduling your playtime, and using the parental controls to enforce them, with your wife to back it up. I’ve found that just the fact of being accountable to someone else for the way I spend my time has a great effect in limiting wasted time, and once you fall into the habit of only playing during your allotted hours, you probably would not have found it that hard to live with the restriction.

J.D.
J.D.
11 years ago

I feel like today I failed as a writer! 🙂 I don’t think I made it clear what the sunk-cost fallacy is. People seem to be equating “sunk cost” with “waste of money”, and while there’s an element of that here, they’re not the same thing. Even something good can have a sunk cost. A sunk cost is just anything you’ve already spent. It’s not necessarily good or bad — it just is. The sunk-cost fallacy is believing you should spend more because you’ve already spent some. That’s what I was trying to write about. Alas, I may have to… Read more »

shevy
shevy
11 years ago

I did the same sort of thing (obsessive play) with Dune and then Dune 2000 several years ago but at least it never cost me more money than purchasing the game itself.

Honestly, I’d still play it if the the disk hadn’t gotten so badly scratched that a third of it won’t work (the Atreides levels beyond the first one).

Adrienne
Adrienne
11 years ago

My own personal sunk-cost fallacy is with all you can eat buffets. It’s a great place to bring the kids because there is no wait for the food and it keeps them entertained but I find myself eating way too much trying to get “my money’s worth”.

J.D.
J.D.
11 years ago

Yes, Adrienne, that’s a great example! Trying to get your money’s worth at a buffet is engaging in the sunk-cost fallacy… 🙂

Jennifer
Jennifer
11 years ago

J.D. I dont think it was you who are a bad writer, you quoted someone else “The sunk-cost fallacy describes our tendency to throw good money after bad.”

I think that is where we were misinformed…

JACK
JACK
11 years ago

J.D., a good post, but a bit of nuance is needed. As someone trained in economics, I’ve long known of the sunk-cost fallacy. It’s a real problem and people screw up on it all the time. But I wouldn’t say one should ignore completely what was paid for something, and just focus on future costs. The difference is between fungible goods and investments. If you paid 10 bucks for a movie ticket, and you go in and find the movie horribly disgusting and revolting. It’s definitely a mistake, and sunk-cost fallacy, to sit there and say, “but I spent 10… Read more »

Tiffany
Tiffany
11 years ago

Here’s an example of sunk cost (from 2 years ago): Paying for a three-month subscription (instead of a one-month subscription) to a personals website, and one week into it meeting the man who I’ll be marrying in a couple months. There was a little more benefit to walking away from the paid subscription in that case, though.

M****
M****
11 years ago

I have pretty mixed feelings about WoW. I’m one of only 3 women who play in my guild; my husband got me into the game because it was causing a lot of trouble in our marriage. Essentially, he brought me down with him so I would stop arguing with him about the time he spent playing. I now have a fully epic, level 70 hunter. I go on raids that take 3-5 hours at a time. We never go out. We trade time with each other so one can raid and the other watch the kids. We’ve invested so much… Read more »

Mike
Mike
11 years ago

I started playing in Sept 2005, 3 years ago. I made alot of friends in that game while we raided MC/BWL, some of them actually live within a few hours of my house. I’ve quit the game a few times since then, recently picking it up again. I found the best way to subscribe is to either get a 60 day game card, or just pay for one month with your CC, then after that you immediately go back in and cancel the recurring subscription. You’ll save a few bucks (per month) if you buy the 6 month deal, but… Read more »

Early Retirement Extreme
Early Retirement Extreme
11 years ago

You guys make me feel old. The last Warcraft I played was II. There’s a free turn based game as wesnoth.org — can be somewhat addictive.

jerichohill
jerichohill
11 years ago

How do we go 40 posts without one mention of a nightelf mohawk?

EscapeVelocity
EscapeVelocity
11 years ago

Got me through graduate school, and continues to make it hard to just walk away, although I wasn’t able to get a job in my field and am now in a completely different line of work. Let my professional organization memberships lapse, but I still have a pile of books and old notes. Not about the money, but about the time.

Matt at Steadfast Finances
Matt at Steadfast Finances
11 years ago

Good thing I saw this post before checking eBay for the new PC game SPORE.

Adam
Adam
11 years ago

I think many of the comments here speak volumes about why personal finance is so hard for some people.

There’s no reason to avoid World of Warcraft, Diablo, Spore or any other video game. Just use a shred of moderation. Completely removing something from your life is the easy way out of a problem, without actually addressing the cause.

deepali
deepali
11 years ago

I think relationships can be a good example of a sunk-cost fallacy – how many people continue to stick out a bad situation only because it’s “been so long”?

I am also wondering when you reach that point with investments whose value is dropping. For example, my 401K is going down the drain, but I’m still putting money into it… Do I rebalance? Hold? Fold?

Greg
Greg
11 years ago

J.D., you’ve put a tag on the pain I’ve been feeling lately. Five years ago, my wife and I built our “dream home” (I have come to hate that expression) in the country. We were able to do this in large part because we have always lived a frugal life as a married couple. For 10 years we worked to eliminate all school debt and the mortgage on our modest townhouse as we planned an ecological country home in which to raise our family. To make a long story short, the building process blew us out of the water. From… Read more »

Ryan @ Smarter Wealth
Ryan @ Smarter Wealth
11 years ago

This game sounds really really cool. I might get involved in it if I ever have some spare time.
Thanks for the post

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