Sunk cost fallacy

Be mindful of loss aversion and the sunk cost fallacy.

Loss aversion – losses are more painful than gains are pleasurable – people will disproportionately prefer to avoid losses.

Sunk cost fallacy – when people continue to invest time or money because of their previous sunk costs, regardless of whether future winnings look probable – chasing losses.

The sunk cost fallacy can lead people to persist in areas they have invested much time and money (I studied finance for four years, so I have to continue to pursue a career in finance).

Sometimes it is best to cut your losses and let the sunk costs go (I do not enjoy working in finance and would rather work in healthcare).

Just do the next right thing for you regardless of what you have spent time on in the past.