Whether on the stock market, in relationships, in private projects or at work: it would often be better to draw a line in the sand. But often we do just the opposite and invest even more resources. How do you get away from this ring?
It seems counterintuitive, but it’s not unusual for people to stick with the wrong decisions, even if they make the situation even worse. Someone fixes their car and realizes that the costs have gotten out of hand a long time ago. Buying a new one would still be cheaper than keeping the repair, but so much money has already gone into it!
Someone in the stock market bets on a security whose price is going down. Despite all the predictions, he holds on to the losing paper and even continues to invest to “make up for” the loss. Perhaps it would be much more worthwhile to take advantage of the growth opportunities of other stocks.
Someone has invested a lot of resources in training, only to realize at some point that they are extremely dissatisfied with their course of study or their job. But instead of starting over, those affected often stay where they are. It is considered that what has been achieved so far would be “lost”. The time for closure is long overdue.
Unconscious factors encourage irrational behavior
But from the point of view of psychologists, this is usually a mistake. Appropriately, in these contexts they speak of the “sunk cost fallacy”. It makes us feel obligated to “save” previous efforts, even if a fresh start would be objectively more rewarding. A phenomenon that has deep roots in the human psyche. And that shows how strongly emotional aspects influence our behavior.
A number of factors seem to be responsible for why the sunk cost mentality is so common. One reason has to do with the fact that it is difficult for us to tolerate mental dissonance. Admitting that investments do not lead to success creates such dissonance. To reduce it and not feel “waste”, it seems that it tends to stick to the current path – against all reason. The difference between wish and reality is then less obvious.
Another aspect is our “loss prevention”. Experts use this to describe that losses are more important than gains. It will be harder to finish a hopeless project the more resources we have already invested, no matter how unusual this is.
There is also a phenomenon known as “status quo bias”. Behind this is the all-too-human need to adapt to the current situation, to an unknown future. Therefore, people often choose the path that seems safer and rely on their previous decisions, even if a drastic cut would make more sense.
You can escape from the thought trap by using psychological tricks
In addition, it is only a matter of knowing the right time to end a project or invest rationally instead of wasting more resources. However, some valuable suggestions can be derived from the research findings to avoid the sunk cost fallacy:
An objective assessment of future prospects: A good starting point is a sophisticated cost-benefit analysis. It helps to avoid the investments already made (ie the “sunk costs”) and ask yourself: Would I now, in this situation, start over and invest more? Are there real opportunities for positive development?
Ending criteria clearly defined: Right from the start of a project or investment, it can be useful to define certain situations that would end the project if they occur. For example, you could say: I quit when I used more than 30 percent of the original budget without any clear progress. Such criteria are objective standards and help avoid emotional attachment.
Change of view with third parties: Sometimes we are too emotionally involved to see clearly. Feedback from others can be valuable as outsiders often look at a personal problem more objectively. You can ask questions like: From my point of view, would it make sense to continue?
Focus on future benefits rather than past costs: A helpful mental trick is to view a previous investment as a whole and ask yourself if the remaining effort is justified compared to the potential future benefit . If not, it might be time to let go.
Being honest with yourself can be liberating
If you follow this advice, you at least have a good chance of not sticking stupidly and blindly to what has obviously been harboring the seeds of failure for a long time in difficult situations. Another finding of psychological research encourages us to pull the emergency brake more often: after an honest analysis, people often feel much better than they feared. After all, ending a hopeless endeavor isn’t just about saving money and time. But also to regain inner freedom.
2024-11-05 16:51:00
#avoid #mistake #thinking #save #time #money
