Ignoring sunk cost

As I’m going through everything in my house and determining what’s worth keeping, I’m building a pile of stuff to get rid of that gets higher by the day.  Most of it was at one point in my life a planned purchase that I thought about for a while and really wanted, and some of it was expensive.  I’ll be honest, that stuff is the hardest to let go.

Take my anime collection (nerd alert!).  Most of my dvds were $20-30 each, and I’ve got a few dozen.   They date back to the days when it was a lot harder to get, too.

There’s also a lot of kitchen tools that I’m not going to have room for.  One of the reasons I wanted to buy our current house was because it had a huge kitchen.  I’d say that 50% of my cookware has to go.

Then, of course, there are the piles of books everywhere that don’t fit on my bookshelves.  I swore to weed out the ones I’m least likely to reread, so that’s more on the list of stuff to get rid of.

But how: that’s the question.  At first, for simplicity’s sake, I was going to drop it all off at various donation centres: between the library, and Goodwill, almost everything could be easily disposed of.  However, my mercenary side kicked in and I thought I’d see what I could get by selling them used.

This is where the idea of sunk cost comes in.  Even though I am well aware of the concept, it’s still really hard to ignore the original purchase or retail price of something when you’re selling it.  I received an offer of $30 for a couple kitchenaid mixer attachments that cost between $50-80 each.  Even though at one point I was willing to give them away, it was harder to sell them at such a reduced rate when in my mind they were worth more.  Same with the dvds: I just got an email from someone offering $50 for everything. My first instinct was to laugh.

Sunk cost fallacy is the concept that people keep factoring in the time and money they have already spent on something when determining it’s value.  The more you have spent, the harder it is to let something go, even when keeping it means a loss of more money and time.

You see this all the time with vehicle purchases.  Some idiot buys a fancy car for $50k, on financing. They have a down payment of $5k, and get a loan for the rest.  Monthly payments are $650.  Two years later, they realize they can’t afford it and look into selling it, but the value is now $35000 even though they still owe $46000.  They could sell it and just owe $11,000, and even buy a used clunker for $5k, and end up owing $16k, but most of the time they can’t accept the idea that the money they’very already paid is useless and will instead keep paying off the full amount of the loan.

To a lesser degree, I’m facing that.  I have to acknowledge that the amount I paid has no bearing on the value today.  If getting $50 for a stack of old dvds is the best offer I’m going to get without going through the hassle of trying to sell them individually on ebay or something like that, I should take it.  In the end, I’ll be ahead $50 and will have one less box to pack and cart around.

Look at the math, and ignore everything else.  Depreciation is a bitch,  but you can’t get around it.  Don’t let the past prevent you from making the best deal today.

One thought on “Ignoring sunk cost

  1. Good point about sunk costs, and you are probably right about taking what you can get on the DVDs! I’ve found that most old DVDs, CDs, books, and video games are essentially worthless. We have enough space that I haven’t just dumped them all yet, but the odds of me watching, listening to, reading or playing most of them ever again are low. Maybe when I finally reach early retirement – at least that’s what I keep telling myself!

    Liked by 1 person

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