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”.
In: 59
Your wife is wrong. A sunk cost is a cost that you already had, so it shouldn’t be weighed into current and future decision making.
For example: ”I don’t really enjoy golfing anymore, but I’ve spent thousands of dollars on clubs, equipment and club memberships so I have to keep playing golf.”
No, the money spent on golf are sunk costs – you wont get that money back by continuing to play golf. If you don’t enjoy playing golf you should quit, and the only economic factors you should consider are future ones. Such as the money you would save by ending your club membership, of the money you could get by selling your clubs and equipment.
Latest Answers