Free Real Estate Articles by Damian Lanfranchi and Done-For-You Deals

(Continuing from Part 1 of Family Finances – Sunk Costs & Bad Movies)

Of course not! It’s like finishing a meal that’s making you sick because you already paid the bill!

The movie ticket is a sunk cost and sitting thru the rest of a horrible movie because you paid for it just doesn’t make sense. When you’re halfway through a terrible movie you should ask yourself, “At this point in time, would I’d rather be here watching this terrible movie or go home?” You know what, you might still stay there – maybe you enjoy the air conditioning. But punishing yourself by staying there because “you paid for it” is crazy!

The same goes for a bad meal. Ask yourself, “At this point if someone gave me the rest of this meal for free, would I eat it?” I’d bet you’d say, “Heck, no!” That’s nutty, right?

So what’s this all have to do with family finances?

Well, whether you’re thinking about buying or selling a house, don’t let the “sunk costs” stand in the way of making a clear decision.

If you’re paying rent, however much you’ve spent on rent over the years is a “sunk cost”. You can’t get it back. So whether you decide to keep renting or finally become a homeowner, you’re decision should be based solely upon what is happening today – not with how much you’ve already spent.

If you’re thinking about selling your house, “sunk costs” are even more menacing!

With the crazy real estate market, you may have purchased your house for more than it’s worth today. Well, that’s hard to hear, but how much you paid for your house is also a “sunk cost”. While you still have your property, which is valuable, you don’t have and can’t get back the purchase price.

So the real, and only, question to ask is, “In this point in time if I had a choice between paying X$ (whatever your house is valued at today) or having the cash in hand, what would I do?”

You might find it hard to let go of those “sunk costs”. It’s only natural. There’s a lot of emotion attached to “sunk costs”. It’s easy to lose sleep imagining “what IF”.

What if you could go back and make a better decision. Hey – we could all be millionaires if we all invested $1,000 in Microsoft just a decade ago! But that’s the past. Your success and happiness is based on what you do moving forward – not looking back. And that means leaves those sunk costs behind.

Whatever home situation you are in and the sunk costs you are struggling with – if you have not done so already – be sure to make a Creative Homeowner Solution Request today. Discover what all your options really are. Just click on the Creative Homeowner Solution Request link on this page.

You’re about to get an Economics lesson that will change the way you manage your family finances (don’t worry, this isn’t boring college stuff).

You see in economics there’s a concept known as “sunk costs”. Real simply this just means any amount of money or time you’ve already invested that you can’t get back.

The point is when you make financial decisions, or any decisions for that matter, you can avoid poor decisions by treating “sunk costs” as exactly that – a lost expense you can never get back. Never weigh sunk costs in making a decision. After all, they’re already sunk!!

Okay – enough economics – let’s go to the movies!

What was the last bad movie you saw in the theater?

I’m talking really bad – just thoroughly un-enjoyable???

So halfway through – you know, the point where you realized, “This movie is just getting worse”, did you get up and walk out OR just sit there?

If you’re like most folks, you probably sat there.

Why?

Even though the movie was giving them a migraine, most folks will say, “Well, I already paid $8 so I stayed.”

That’s sunk costs in action!!

Stop and think about it. Does wasting more of your time watching another hour of an irritating movie make sense just because you already paid for it?

(Stay tuned for Part 2 of Family Finances – Sunk Costs & Bad Movies)