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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A sunk cost is just money that you’ve already spent that you can’t get back. How long ago it was is irrelevant. Your wife is wrong. Anything that has resale value is NOT a sunk cost. An example of a sunk cost would be a nonrefundable deposit on something. Once you pay the deposit, you can’t get that money back.
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