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The Sunk Cost Fallacy In Finance

on October 27 | in All, Economy | by | with Comments Off on The Sunk Cost Fallacy In Finance

There are different fallacies that govern the way that we live our lives. This is despite the fact that we know them or not. For most of them you find that we do not even know much about them but we still do them all the same. The same true for the sunk cost fallacy. We are sure it’s something that a lot of people do but don’t mow its name. Today we look at what it is and how it affects the way that we make our financial choices.

What Is The Sunk Cost Fallacy?

The sunk cost fallacy is a past cost that has been paid that is irrecoverable this is regardless of any actions that we might take. To put it simpler it’s like picking up the split milk and hoping that you can still use it. In online australian casinos is like claiming a bonus only to find out that you don’t have enough money for the play through requirements.

The sunk cost fallacy
The sunk cost fallacy

What Is It On Finance?

In finance, the sunk cost fallacy is your trying to recover funds that you know that you know have no control over. This can be investments or any set cost that you have already paid only to realize you can’t get it back. Basically, the sunk cost fallacy needs you to be able to accept irreversible financial actions as they are. They reason why you need to do so is because without accepting them, you can make foolish decisions that will hinder your progress later on.

How To Beat The Sunk Cost Fallacy In Finance

  1. Try to make sure that you are always ware of the choices that you make. This therefore means that you have to be knowledgeable in everything that you do. Don’t make any financial decisions before knowing what they have in store for you like playing online casino games and other unnecessary things .
  2. Know the loses and the gains that you will make before you make any financial choices as this will led to regret later on.
  3. Try and always have a next action regardless of the outcomes of your financial investment.

Sources: time.com

Sunk cost illustration
Sunk cost illustration

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