How It Affects Your Decisions

Key Takeaways

• Sunk cost fallacy makes you keep investing in something because you’ve already spent time or money on it.
• You should think of sunk costs as money already spent that can’t be recovered to make smarter decisions.
• Sunk cost fallacy can affect decisions in many areas like relationships, careers, and hobbies.

The sunk cost fallacy is a cognitive bias that makes you feel as if you should continue pouring money, time, or effort into a situation since you’ve already “sunk” so much into it already. This perceived sunk cost makes it difficult to walk away from the situation since you don’t want to see your resources wasted.

For example, have you ever stuck with something because you’ve already put in *so* much effort? Like reading a terrible book because you’re already halfway through, so you might as well find out what happens.

When falling prey to the sunk cost fallacy, “the impact of loss feels worse than the prospect of gain, so we keep making decisions based on past costs instead of future costs and benefits,” explains Yalda Safai, MD, MPH, a psychiatrist in New York City.

According to the National Institutes of Health (NIH), this leads to irrational, emotion-based decision-making, causing you to spend additional resources on a dead end instead of walking away from the situation that’s no longer serving you.

Keep reading to learn more about the dangers of falling into this cognitive bias and explore some common scenarios where sunk cost fallacy can show up in your life.

How the Sunk Cost Fallacy Works

It can be really challenging to walk away from a situation where you’ve already spent any amount of time, money, or energy. What often happens is that you try to rationalize the situation by saying that since the spent cost can’t be recovered, you might as well stay the course and/or allocate additional resources to try to make things better.

What ends up happening is that you may stay in a unfulfilling stagnant situation and lose additional valuable resources, such as emotional energy, your time (which is finite), or money. The sunk cost fallacy can also sneak up on you by inflating your confidence in a situation.

While closing the chapter on the situation—despite how much you’ve spent—may conjure feelings of fear or nervousness, doing so actually opens you up to new situations that will serve you better. 

It’s important to re-frame these sunk costs as just that: money already spent that cannot be recuperated. For clear and rational decision-making, the amount you already spent must be viewed as irrelevant to what comes next.

How Sunk Cost Fallacy Shows Up in Our Lives

While the definition of sunk cost fallacy is often associated with actual financial costs—like putting hundreds or thousands of dollars into a car that still won’t run, for example—it can happen in any area of your life. You might see this cognitive bias crop up in your career, personal relationships, education, financial investments, and elsewhere.

Some specific examples might include: 

• Finishing a book or movie you dislike just because you’ve started it
• Gambling more money to try to make up for lost bets
• Investing additional energy and time into a friendship that’s one-sided and proven unlikely to change course
• Remaining in a chosen education track even though you know it’s not what you want to do anymore
• Staying in a romantic relationship where values are misaligned and needs aren’t being met because you’ve been together for so long already
• Sticking to a hobby you dislike because you’ve already spent the money on supplies
• Remaining at a job or on a career track that’s no longer serving you or your future
• Throwing additional money at an investment/product/item in hopes for a better return when you’ve already lost money and things aren’t likely to improve

Even large entities—such as governments, companies, and sports teams—are susceptible to the sunk cost fallacy. For example, they may continue to allocate more resources into projects, products, strategies, or programs that aren’t profitable or successful.

Studies have shown that the larger the loss, the higher the sunk-cost bias is. In other words, the more you have already “invested,” the less likely you are to shift gears and walk away.

How to Know When To Walk Away

There’s a fine line between knowing when to stay the course and when to walk away.

For example, you might go through a totally normal rough patch in a relationship, but this isn’t necessarily grounds for immediately leaving. Or you might try a hobby that you’re not 100% gung-ho about, but could end up loving it once you get past that awkward “I’m not very good at this” hurdle.

In these moments, it’s important to prioritize rational thought. If past results haven’t paid off, then it’s like it won’t in the future either.

Also, consider the following: 

• Poor outcomes: If you’re repeatedly met with an unfulfilling outcome despite best efforts, re-evaluate.
• Opportunity cost: Where will your dollar/energy/time get the most value? Can you get more “return” on your resources by venturing elsewhere or staying the course?
• Mental health: If a situation takes a negative toll on your mental well-being and the future doesn’t look bright, closing the door is best.
• Compromised confidence: If you’re feeling less and less sure about the situation, this is an indicator that you may need to close the door.

Yalda Safai, MD, MPH

The best predictor of the future or future behavior is the past. If until this point the relationships, hobby, friendship, job, etc. has not served you in any positive regard, it likely won’t in the future.

— Yalda Safai, MD, MPH

How to Reduce the Sunk-Cost Fallacy

The sunk-cost fallacy can lead to poor decisions and significant losses. Unfortunately, like other types of cognitive biases, it isn’t always easy to avoid. Some strategies that might help limit it’s damaging effects include:

• Considering how staying the course might affect others: Researchers have found that the risk of harm to others reduces the sunk cost effect. If sticking with the status quo might negatively affect others, you’re more likely to abandon the decision and move on to something else.
• Assess your thoughts and feelings: One study found that people who focused on how they felt and thought about the situation were more likely to give up on failing plans, while those who focused on ways to improve the situation were more likely to stick with it. 

Most importantly, ask yourself, “Would I continue on this course if I hadn’t already invested the resources?” If the answer is no, it’s a sign you should adjust your plans. Set clear goals and focus on the future instead of dwelling on past choices.

Verywell Mind uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. National Institutes of Health. Sunk cost fallacy – How it affects career decision-making.

2. Tait V, Miller HL Jr. Loss aversion as a potential factor in the sunk-cost fallacy. Int J Psychol Res (Medellin). 2019;12(2):8-16. doi:10.21500/20112084.3951

3. Haita-Falah C. Sunk-cost fallacy and cognitive ability in individual decision-making. Journal of Economic Psychology. 2017;58:44-59. doi:10.1016/j.joep.2016.12.001

4. Hamzagic ZI, Derksen DG, Matsuba MK, Aßfalg A, Bernstein DM. Harm to others reduces the sunk-cost effect. Mem Cogn. 2021;49(3):544-556. doi:10.3758/s13421-020-01112-7

5. Strough J, Bruine de Bruin W, Parker AM, et al. What were they thinking? Reducing sunk-cost bias in a life-span sample. Psychol Aging. 2016;31(7):724-736. doi:10.1037/pag0000130

By Wendy Rose Gould

Wendy Rose Gould is a lifestyle reporter with over a decade of experience covering health and wellness topics.

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