Two things that no one likes are admitting when we’ve made a mistake and losing money. Unfortunately, these are the two ingredients needed to fall prey to the sunk cost fallacy. Sometimes this can be something small. For example, ordering too much food and then eating more than you’re comfortable with just to get your money’s worth. While this is a silly thing to do, I have absolutly done it. However, I’m not talking about the little things. I’m talking about big, life changing decisions that you hesitate on because you’ve already put time and money into them.

High Impact Decisions


Even if you’re still in college, the decision to change your major from one to another can be a hard choice. You may have put several years of studying and thousands of dollars into that major only to put that aside and start new. This is even more challenging when there are years behind a career. Are you really willing to start over, even if it might make you happier? What about if your current career has a high salary? How do you take that into account?

These are all very personal questions that we each must answer for ourselves. The one thing that I can warn against is that just because you’ve put a lot of time and money into something isn’t a good reason to stick with it. That’s the sunk cost fallacy. This is especially true if your current path impacts your happiness from day to day.

Now, all jobs have tasks that we don’t like about them. It’s unrealistic to expect your job to make you happy 100% of the time, but it should be good for the majority of the time. You should be stimulated and interested in what you’re doing with work. If that’s not the case, then it might be a good idea to look elsewhere. Just be sure that you’re planning out your finances in a way that will suit your life while you are training for your future role and for any differences in salary they may bring.

Where You Live

Where you live is important and if it’s not suiting your needs or that of your family that’s an issue. You may worry about having to sell a home and being uprooted from what you know, even if it’s not working out for you currently. It’s the “devil you know” and change can be intidimating. However, just because you’ve been somewhere a long time, doesn’t mean that it fits with the life you want to build for yourself and your loved ones.

While it can be a pain to move, it can be an absolute game changer. Depending on what you want out of your home, it can really make all the difference. Do you want to live closer to work so that you can have more time with your kids before bedtime? Do you want to be in a better school district or near a downtown area?

There are tradeoffs when looking for a new place. For example, you may have to sacrifice square footage to be downtown, but maybe there’s a big park nearby where you can spend some time outdoors. If you’re thinking about making a big move, say to an unfamiliar area for that new career, then I recommend renting. This will let you experience the area and better understand the specific tradeoffs of your situation without having to pay the penalties of closing costs and agent fees if you decide you’re unhappy where you are later.


Doubling down on a bad investment can be a dangerous route just to try and prove that you made the right decision. With investments (and most other financial decisions), folks can get a bit touchy when questioned as to why they have invested in a particular company, fund, property, etc. To be confident enough to put your money in an investment, you should be able to answer that question. What becomes a bit complex is if that decision doesn’t work out. Many are experiencing this unease in their decision with the current downturn in cryptocurrency values.

Regardless of what an investment’s value is today, the key is to look at how your decision to invest in it fits into your long term plans. If your long term plans for your life changes, then your investment strategy should be reevaluated. This includes all of your accounts and investments. Just because an investment did fit with your life plans, doesn’t mean they do now.

Another example would be a real estate investment decision. If you’ve picked the wrong property or there were some unexpected expense that makes it no longer a good investement, it’s time to reevaluate that investment. Be sure that you’re not throwing good money after bad just because you have the property already in your possession. Another way this may happen is if you realize that you just do not want to be a landlord. If this is the case, then get out of this situation immediately and move that money into an investment you really want. Maybe use it to fund the education needed for your new career if you are lucky enough to have something like this to leverage.

The Decision Making Process

One of my favorite ideas Paula Pant from Afford Anything is the frequency with which she discusses decision making. Specifically, the way in which you approach a decision point. One of my favorite resources on this is the Afford Anything podcast episode with Annie Duke, a professional poker player, on the Art of Decision Making.

The key is that even if you have an amazing decision process, the result may not go the way you want. In this case, it may be time to change course, even if you already have sunk costs. Start your decision making process over from where you are now.

To do this, lay out all of your options and see what fits the way that you want to build your life and influence the lives of your loved ones. Sometimes, knowing all of your options is the hardest part. That’s where someone like a financial coach can step in to help you see things in a different way. From there, look at what sacrifices you will have to make to pursue that option. Specifically you want to know if they would be:

  1. Easy to reverse if the decision ended up with an unfavorable result. OR
  2. Okay to live with in the event that changing your mind is not quick. This is even more important if the decision is not reversible.

Its Okay to Be Wrong

There’s no playbook for life. Everyone is wrong at some point or another, even about their own life choices. I have definitely been wrong, even with my own finances early on in my career. Research shows that we don’t know what will really make us happy. The biggest key with any of these decisions is not to put so much of a strain on your finances to remove flexibility from your life. Flexibility is the real key to being able to continue to search for what makes you happy.

Not to mention that having financial security gives you the freedom to be wrong and eat those sunk costs. This makes you less likely to fall prey to the sunk cost fallacy.

What major life decisions have you made that went poorly? Did you change course? If so, how? Let me know in the comments below!