Master Your Card

Sounds very official and economic, doesn’t it? Yeah, it’s not mine. That’s a phrase I picked up over at Get Rich Slowly. J.D. had a post that talked about how we tend to throw good money down the drain after bad money.

I realized two things after reading J.D.’s post: I do this, and I learned it from my father.

I’ve put a hold on buying television series on DVD, not so much because of the cost, but more because I have no idea what the term ‘moderation’ means when it comes to my time watching these series. What I find to be the case is that I will try to watch all 22 episodes in one night, which means I’m up until 6:30 am the next morning and trying to catch an hour of sleep before I have to get up for work.

I own the DVDs, yet for some reason I feel the need to watch them all at once. This was especially true when I was using my credit card to pay for them. While money was never so much the issue, I felt by using my credit card I was somehow more obligated to watch them all and really get my money’s worth. It sounds like twisted logic, and it is, but when I was using my credit card to buy DVDs I was carrying balances. This was before I wised up, so I was paying interest on those purchases.

Somehow I felt that I had a responsibility to watch all of the shows immediately because I’d sunk so much money and time into them already, it only made sense to continue as I was. This is exactly the point that J.D. makes. Some of us inherently look at the money we’ve spent and project that onto future spending, or we simply have a hard time letting go of something we no longer need because we understand all too well just how much money we’ve spent on it.

Enter my dad.

He’s actually pretty good with not spending money poorly. But, he is bad about letting go of things that he knows he’s spent a good deal of money on, which invariably costs him more money in the long run.

He and my mom just recently moved to Kuwait for his job. He’s a civilian contractor but works with the military so that’s why his job sent him there. At any rate, they were moving after spending almost 20 years in one house…20 years and no garage sales, so you can imagine the amount of stuff they’ve accumulated over the years.

In an effort to get rid of some stuff, my dad tried to sell it. Unfortunately, they live in a small town and most people believe that when you’re selling secondhand stuff, regardless of it’s condition, they should get a damn good deal on the item. My dad, on the other hand, believes that he should get a fair price in relation to what he paid. So, needless to say, he didn’t really sell anything.

Some of this stuff they could have thrown away, they don’t use it. In fact, my mom tried and when my dad found out, he threw a fit. The whole ordeal was needlessly stressful for them because my dad couldn’t seem to let go of material things. And it wasn’t like he needed them, these things just represented the money he’d spent over the years, the hard work he’d put into earning them. While I can certainly understand that feeling, he spent more money to store them than he would have if he’d just gotten rid of the things he didn‘t need or want. Sunk-cost fallacy.

When it comes to our money and time, most of us will find reasons to justify our bad money decisions - like “I’ve already invested X amount of dollars and X amount of time into this, it would be silly to stop now.” This is often easier than admitting we’ve made a poor decision or even just an emotional decision. But, in order to correct the behaviors that lead to debt, we have to acknowledge them, so I thought this sunk-cost fallacy was an interesting concept to explore.

What are your sunk-cost fallacies and how have you overcome them? Were they learned behaviors from others, similar to mine, or did you just discover them on your own?