My wife and I are having a disagreement as to what it means. She says that it means the cost of something you purchased some time ago, and had you not purchased it the money would be gone anyway.
Basically, 3 years ago we decided to purchase something to hold onto and sell later on when the value goes up. She says that the purchase price can be considered as profit since it was so long ago. I disagreed. Anyway, she calls it “sunk cost”.
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If you spend money on something and that money is not recoverable, that money is called “sunk cost” and should not be factored into future decisions.
For example, you buy a shirt that is not returnable and doesn’t fit so you can’t wear it. You’re considering buying a new shirt… the money you spent on the first one should not influence that decision, the only factors influencing the decision should be based on whether or not you need/want a shirt since what you paid for the first shirt is now sunk.
In your scenario with your wife, the phenomenon you are discussing is closer to “buyer’s remorse”
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