Sunk Costs – Cutting Our Losses For a Better Future

Good bye budding blueberries.

Economists have a term for time and money wasted on loosing endeavors – they’re called “sunk costs.”  Sunk costs are any money, time, effort, reputation, or pride that have been spent and cannot be recovered.  The rule of sunk costs is to ignore them.  Don’t even think about them.  As a matter of fact, you are irrational if you do.  Rationality demands that only the future costs and benefits be considered in deciding future investments.

The rule of sunk costs is easy to recite and simple to understand, but actually doing it – that’s where it gets harder.  We tend to want to hold on, to ride it out, to see it through to the bitter, bitter end.  But, as hard as it may be, often times the best decision is to cut your losses and quit.

It’s hard, but we’re cutting our losses and selling our house.  We’ve decided to move forward down a different path now, and that means staring our sunk costs right in the sticky face.

Some of our costs (roughly estimated):

  • $90,000 in mortgage payment ($2200 for 41 months)
  • $20,000 and 1000 hours to remodel and improve our house (bathrooms, water filtration, Pergo flooring, water heater, window fixtures, lighting fixtures, painting…)
  • $18,000 to install solar panels 3 months ago
  • $7,000 to fence in the yard
  • $3,000 and 500 hours to install irrigation, plant fruit trees, and plant a garden
  • $750 and 200 hours to keep the grass cut
  • $200, 200 hours, and 7000 headaches hunting gophers and repairing gopher-wreaked havoc
  • $300 and 50 hours building the fort
  • $500 and 50 hours (seriously!) for the garden shed
  • For a total of ~$140,000; 2000 hours; 7000 headaches.
It’s a sad list to start staring into, but stare we must.  Sure, it makes us a little ill to honestly assess our current situation, but we certainly wouldn’t be doing ourselves any favors by ignoring, and thus growing, this unhappy list.  The line-item-additions to this list stop now.  Sorry broken kitchen sink faucet.  Sorry leaking sprinkler valve manifold.  Sorry future owners :).

Sunk Costs Photo Gallery – Selling Stuff

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