Episode Transcript
[00:00:00] Speaker A: It's Take Control Tuesday and I'm on the phone with Mansa Musa. Mansa, I had this car one time that I was trying to hold on for dear life to this car and I sunk a lot of money into it and only to have to have it junked pretty much because it was worth nothing.
So this is sort of what we're talking about today.
[00:00:22] Speaker B: Yeah, we're talking about the sunk cost fallacy that sometimes turns into a trap for people. Once again, that's the sunk cost fallacy. Here's what it is in plain terms.
You keep putting money into something just because you already spent money on it, even when it no longer makes sense.
So your example is perfect, Randy. And that happens to a lot of people. You have a car, you repair it and then you keep on fixing it. And here's the thing, you do that not because it's a good decision, but because you don't want to, quote, waste, unquote, what you already spent.
[00:01:05] Speaker A: Right.
[00:01:06] Speaker B: That's the trap.
[00:01:08] Speaker A: Yeah, yeah.
[00:01:09] Speaker B: Because the money you already spent is gone.
It's not coming back.
Right now this is a principle in behavioral economics, which is how people actually handle money and what they think when they make decisions. So here's how people think. If I stop now, I lose what I already put in. But the reality is if you keep going, you may lose even more. Yeah, this shows up everywhere. Subscriptions, you don't use, things you bought but don't need, financial strategies that aren't working anymore, and even decisions about debt, you keep going not because it makes sense today, but because of what you already did yesterday.
So when you're making a financial decision to make sure you don't fall into this trap, here's what you have to stop asking. Stop asking, how much have I already put in? And start asking, if I were starting today, would I do this again?
That question changes everything because you're now deciding based on today's reality, not yesterday's cost.
And here's the hard truth. Holding on doesn't recover the loss.
[00:02:35] Speaker A: Sure doesn't.
[00:02:36] Speaker B: In fact, it usually increases it. So what do you do? You can make the next decision better. That's it.
You don't fix the past, you improve the future. You can't get yesterday's money back, but you can still control what happens next.
[00:02:55] Speaker A: Yeah, for sure. It's like some of these people who got those gym memberships at the beginning of the year and haven't been there but once. I appreciate you so much, Mansa. Thank you for that. And if you want to hear it again, go to our website attakecontroltuesday.com.
you can also find the archives right there as well. And Manza, as always, thank you so much.
[00:03:18] Speaker B: Thank you.
