Minimalism and Sunk Costs

Minimalism and Sunk Costs

Thinking about sunk costs today. It is a business term that can be applied to stuff. Many people have anxiety about getting rid of stuff because of what they spent on it, even if they are going to sell their stuff on Criaigslist. The thought is, “I can’t sell that I spent too much money on it and I’ll lose too much!” That is not the “business” way of thinking about these costs, which are sunk costs. When you buy something, you pay, and those costs are “sunk” meaning that the money is spent, gone. You have already taken the monetary loss at the time of purchase. At that point you own it and if it just sits in a garage or a closet, you are not getting any return on your sunk costs. In fact, you might be paying to own the stuff because if you have something you have to insure it, store it, clean it, upgrade it, repair it etc.

The only question in a case like this is do you want to recoup some of the sunk costs because that cost is done, finished, complete. Because the monetary cost is done and you are not getting any value from the thing, and in fact it may be costing you value, it makes complete business sense to try to recoup some value from it. That means either getting back some monetary value by selling it, or gaining some social value, or karma, or good will by donating it (and no longer have to pay the cost of owning it).

For some, me included, getting rid of an item, especially if it was expensive, forces you to confront the fact that you made a mistake in buying it in the first place. It is hard to confront a wasteful decision, and that keeps many, me included, from getting rid of some stuff. Just fess up and do it. This gets easier over time. Once you get rid of the stuff, you will forget about it and the sense of relief at putting that mistake behind you is a nice reward.

4 responses to “Minimalism and Sunk Costs”

  1. Ben Edwards says:

    Mike, this post was definitely an “a ha!” moment for me. I am going to get rid of more past purchases without beating myself up too much over the monetary loss. You are right, some of the things I have told my wife I won’t get rid of – “because I won’t get anywhere near what I paid for them” – are actually just taking up space in my garage that could be better spent by actually having one of our vehicles parked in there.

    -Ben Edwards

  2. mikeprevost says:

    Right on Ben. You are on your way.

  3. Rich Kahle says:

    I just had a lesson in this as I closed my gym and sold off all the equipment. I sold much to longtime members and friends without any real thought as to price having over my 14 years of business long since recouped the monetary cost.

    Along with this, I let go of a lot of personal items I was hanging on to because “I might need it” or “I spent so much on that”. The pain of letting it go was nothing compared to the freedom gained in it’s absence.

    Very good article. Thank you.

  4. mikeprevost says:

    Exactly! Most people do not realize that “stuff” can compromise your freedom. Nowadays I strive to have just a few high quality items. But each item is replaceable, so I don’t worry about them too much. It is a nice place to be. Congrats on clearing out your stuff.

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