Outsmart your own brain and spend less money

Sarah and I have a clothes dryer that — no joke — hates us. It destroys our stuff. It doesn’t do what we ask it to. And when it does actually do what we want, it complains, loudly. Seriously: It’s like a giant metal toddler.

The thing is, we should have replaced this thing months ago. Dryers aren’t cheap, but if we’d made a plan, we could have bitten the bullet long ago and replaced it. But we still have this awful, hulking, beast of an appliance throwing tantrums in the laundry closet. And we’ve invested money into it that we could have put towards its replacement.

Why? Because of a trap in our thinking we’ve fallen into, repeatedly. There’s a good chance you’ve fallen into this trap, too, and you’re spending more money than you should. It’s called “the sunk cost fallacy.” Today we’re going to see how we can outsmart ourselves in order to beat the trap and to save money.

It Had Such Potential

When we moved into our house, some friends gave us an old (but working) dryer they had just replaced. Since we’d just bought a house, money was tight, so we gratefully accepted their hand-me-down.

It worked decently for a while, but before long, clothes took longer and longer to dry. And it started screeching whenever it ran. And then the axle that spun the dryer shattered.

Time to pack it in, right? Good hustle, dryer? Nope.

I am a man, and dumb. “I can fix it!” So, armed with a wrench and a Google, I took the dryer apart. Hours later, Iʼd found the broken piece and ordered a replacement part online.

The part came a few days later and I fixed the dryer! And it required a wrench!

Comic from Wondermark

Well, in fixing it, I broke something else. A wire, I think. So I had to take the whole thing back apart and fix it again. The free dryer had now cost us a chunk of money, a week of laundry piling up, many hours of my time tinkering with it, and a few fights with Sarah.

But it was working again, so that’s it, right? It’s all fixed and we have a good-as-new dryer? Nope. Fast-forward to now. It’s a year later, and the dryer isn’t working at all. For the last six months, with each use, one article of clothing has gotten chewed up. And a week ago, it stopped getting our clothes dry at all, even with hours of tumbling.

Why I Haven’t Replaced It Yet

It seems obvious that we should replace the dryer, right? Every time we thought about replacing it, though, Iʼve wrestled with the fact that Iʼve spent so much time (and money) working on it. Shouldnʼt I “honor” that investment by making it work?

That line of thinking is a trap. Itʼs something economists call “the sunk cost fallacy.” Basically, humans are really good at saying “I’ve already spent money on This Thing, so I should keep spending money to fix it, rather than pay money to replace it.” We figure, “well … we already made that investment, so we should make good on that and invest some more in this thing.

Here’s another example. Let’s say that, on a whim a few weeks back, you bought a coupon to a local restaurant, and the expiration date is coming up this weekend. You’ve since looked at your budget and can see that you really don’t have the $40 you’d need for a babysitter or the evening (and for the sake of argument, hiring a babysitter’s the only option). As sad as it feels to not take advantage of the money you’d spent on the coupons, spending money you don’t have on the babysitter is an example of falling into the sunk-cost trap.

Or let’s say you’ve taken your old car in for a check-up, and the mechanic calls you up and says it’ll cost more to fix the car than it would to replace it with another vehicle. You protest: “But we just put new tires on it last month, and that was $300!” Again, as sad as it is to have spent that money before, it’s already spent.

In the case of our dryer, even though I’d already spent money on replacement parts, and though I’d spent time working on fixing it, and even though my pride as a tinkering fix-it-up kind of guy was on the line, the most rational thing for us to do would be to start looking for a replacement dryer.

How to Escape the Trap

Itʼs a real temptation to “honor” the money and time youʼve already poured into something. It can be hard to disregard it.

What you should do is say “what’s our long-term plan, and from where we are, right now, regardless of what weʼve spent so far, what will it take to get to where we want to be?

Hereʼs how to focus on your money’s future, and not on your money’s past.

Forget about what you’ve already spent (or haven’t spent)

Whether it’s for a broken dryer, or a minivan with new tires, or a coupon for a local restaurant, remind yourself that “what we’ve already spent, we’ve already spent.”

Photo by Alan Cleaver

Value things for what they can do for you in the future, and not for what they’ve done for you in the past.

One more example. You see a pitcher with a built-in water filter on sale, and you buy it. Then, it turns out that the replacement filters are really expensive. And the only way to get cheaper filters that work is to start over with a brand new pitcher. It might make sense to buy the new pitcher, even though you already spent money on the earlier one.

Again, the point is to say: from where weʼre standing right now, whatʼs the best way forward? And sometimes that might mean buying something you already own. (Maybe you can sell the other pitcher at a yard sale or online to recoup some of the cost.)

Sometimes, but not always, fixing your stuff is better than buying replacements. Find the line.

You might think I’m suggesting that anytime something breaks, you should throw it away and get a new one. Not at all. Usually, fixing something that’s broken is far better than replacing it. But thatʼs not always the case. The trick is simply recognizing that your investment so far shouldn’t direct your investment from here on out.

Logical fallacies are tricky things, mainly because they seem — on their surface — to make sense. Often, we think weʼre making a rational decision about money, but weʼre actually making an emotional decision about money. Sometimes we need to take a step back, to look at the whole picture, and to then decide what makes the most sense.

And sometimes, even if we’ve spent money, time, and energy “fixing” the problem, we’re better off in the long run by replacing the dryer completely.

Have you ever fallen for the sunk cost fallacy? What are things that you keep plowing money (or time) into, even when it might be better to move on?

top photo source
Charlie Park

Charlie lives with his wife and three daughters outside of San Francisco. He runs PearBudget, enjoys being outdoors, and really loves a good library.

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  1. Great advice. I have some thinking to do on a few projects around here and this gives me ideas. On how to look at them. Thank you!!

  2. Yes!! My husband saved me from the sunk cost fallacy last week. We’d had an after market reversing camera fitted to our car years ago. It was a necessity – the rear vision with just the mirrors and windows was terrible, and we have small kids and dogs.

    The camera broke. And we fixed it. And it broke again. And we fixed it – always taking it back to the same original installer, because they know it best, right? Wrong. Turns out they were super shonky. When they went out of business (happens to the worst of them) we finally bit the bullet and bought a whole new camera system from another shop. When they ripped out the original they were shocked by how poorly it had been installed – pinched wires, bad connections, poor quality workmanship. Had I followed my line of thinking, I’d still be trying to get it fixed! Thank goodness for smart husbands 🙂

  3. I generally fix things a few times and then decide that it’s not economically feasible to continue. That’s why after about 3 repairs our original dishwasher was replaced, twice (the first replacement was rubbish), same for the washing machine. The new dishwasher has just had a lot spent on it, but a new one would cost more than twice as much and wouldn’t be as good. Just spent a fair bit on the car too, but not so much that replacing it would be better. It’s a fine line, but one that I’m getting fairly good at dancing on.

  4. You made me laugh and think. This is exactly why I stopped using Groupon. I bought a coupon for a family portrait. I was within a few weeks of the expiration when I remembered it. I had to coordinate schedules, outfits, beauty shop appointments, plan the cash for the prints (my coupon did not include the actual printing of the photos). It all became too much. It was painful to let my coupon expire, but I had to let it go for my wallet and sanity.

    Great advice.

  5. Wow. “What we’ve already spent, we’ve already spent”. Ugh.. We are struggling with the fact that our current family vehicle will not hold a 3rd child, (literally the seats don’t fit, I have tried). Our current vehicle is now 6 years old, but we bought it new, and it has less than 60K miles. We paid it off the first two years we had it. But, we HAVE to have something to fit our soon to be family of five, no other options. So hard to let go, isn’t it?

    • Have you looked at the Sunshine Radian carseats? My friend is a mother of multiples and was able to get three of them in their small backseat. May not work with your car but worth looking into.

  6. I have the most trouble with letting a gift card or something expire. But for the most part I’m all about looking at the bottom line. So if it’ll cost us more to repair something, we’re off to get a new one (or live without).

  7. hah, our dryer starts eating things every 12-18 months or so. It is 10 yrs old and was a floor model when we bought it. The problem being we know what it needs and how much it costs and how much time it takes to replace it (about $60 and an hour). So when do we quit fixing and replace? My husband and I discuss this every time. With two more repairs it will have equaled the cost of the dryer originally.

  8. We have made this mistake so many times it’s not even funny. I love the suggestion of looking to an item’s (or even idea’s?) future to figure out what should be done with it now.

    Another thing we find ourselves doing is not factoring in the emotional and relational toil of certain items or ideas. I wish I remembered more often to value the peace in my home enough to be willing to spend a little more money to maintain it.
    Thanks for the insight!

  9. The coupon thing was the best example. How often don’t we get sucked into spending more money than we want to, just because a coupon is about to expire?

    It’s such a shame, though, that replacing things is often cheaper than getting them repaired. What kind of a world do we live in, where replacing a few parts is cheaper than making a whole new one? This frustrates me to no end.

    • I totally agree, Kathleen. The fact that buying a whole new Thing is easier, faster, and cheaper than fixing the old one is maddening. And maybe it’s selective perception on my part (another logical fallacy at work!), but it seems like it’s happening more and more.

      • Libby H says:

        Pretty sure that is part of the marketing/production strategy these days. Things simply aren’t made as well as they used to be, enabling companies to sell more of them. And replacement parts are usually super expensive.

        The computerization of things is what gets me. Who knows how to actually fix a car these days? Even the mechanics plug it into a computer to run the diagnostic when you got to get it fixed.

        • There’s a really good book on the whole computerization topic. Actually, it’s more about how, in general, the working parts of the things we use are abstracted away (physically, in terms of what changes we can make to them, and socially, in terms of who in our neighborhood / community has the specialized knowledge to tackle them). It’s called Shop Class As Soul Craft (link goes to a find-it-in-a-library website). The author is a philosophy professor at UVA and also runs a motorcycle repair shop. It’s a good book.

  10. Loved this post – we have hit this many a times. It culminated when we had to junk two cars in one year thanks to the incredible cost it would take to replace the parts needed. We just had to bite the bullet.
    But what I really struggle with – as an inveterate DYI-er – is valuing my time. I like to do things for myself and I like learning. But I’ve learned to think twice about taking on I’ll-Do-It-Myself projects when I could be working on other things I’m masterful at or enjoying family time where no one else can replace me.

  11. I’m glad I followed the link from Mom off Meth to this blog! We just bought a house, and are getting hand-me-down washer and dryer. It’s good to pay attention to things like this, and be able to “let go” when the time comes to replace items.

  12. I love knowing about the sunk cost fallacy because it’s so easy to get trapped in it. I’m pretty good about throwing in the towel when I know it’ll cost more or be more of a hassle to keep it, but one thing I don’t do too well on are clothes. I’m a terrible shopper, and I’ll regret having spent serious bucks on something and found out that it doesn’t really fit me all that well. But instead of altering it or donating it, I keep it hanging on my closet, just in case.

    Otherwise though I’m pretty good about it. I once bought an electric bass on a whim, thinking I would love playing it all the time. Turns out I don’t practice nearly enough, and rather than mull over the costs of having purchased it, I sold it, granted at a lower price, but at least I earned *some* of that money back.

    I’m reading a great book right now called “Mistakes Were Made But Not By Me” which sounds very similar to sunk cost fallacy. The authors talk about cognitive dissonance, where we’re in dissonance (instead of consonance) with something, either a mistake or something bad we did, then we justify it to make ourselves feel better.

    I would imagine plenty of people who fall prey to the sunk cost fallacy do a bit of justifying to calm their dissonance!

  13. I have actually known about the sunk cost fallacy, and used it to my advantage recently — big time. My husband’s ten year old car had some major repairs — totaling about $1800 done in May. It seemed like a decent investment, since we were planning to keep the car for another year or so, and the car is worth probably $4000. However, in June he took a trip to New York – but never made it (in his car). He broke down in Pennsylvania, and found out the transmission was shot — cost to fix it was $3500. Despite already having spend the $1800 in May, we DIDN’T have the car fixed. It wasn’t worth it. In fact, since he was broken down in PA, we ended up DONATING the car to charity (they towed the car away), and he rented a car home (it was too difficult to sell a broken down car two states away). Instead, we spent the money on a down payment on a new car.

  14. I read your post and I thought, that’s what yesterday was all about, so I wrote my post on hiring a carpet cleaner (instead of renting the machine and spending our day doing it maybe not as well) and on buying a new faucet instead of paying the plumber (and husband did spend the entire day, but it’s love(ly)).
    Thanks for inspiration.

  15. Oh my goodness, if only I had learned something like this 2 years ago! I invested about $18,000 (over a year’s income for us at the time) in starting a business. It wasn’t starting off too well, and my husband and I had discussed pulling the plug. If we kept going, we could lose a lot more. However, we had invested so much, we just ‘had’ to keep trying. Well, long story short, we ended up over $100k in the whole and filing bankruptcy. $18,000 seems so minuscule now!

  16. Where we live you can get a low cost repair plan through the local gas/electric company. For about $ 17 a month that cover all repairs and replacement pieces and the cost of the service call for our hot water heater, Stove, dryer and furance. you also have the option of add other appliances for a few $s more.
    We usally have then out once a year for something. We have never had to pay a repair bill. Last time they were out our Dryer was not heating. It was only a blown out fuse. The cost of the replacement peice and the labor was more then we pay for the plan a year. So this years repair plan has paid for it self.

  17. I can’t think of any personal examples right now, but I enjoyed reading your post, and especially enjoyed the comic!! Oh, a relative gave us a voucher for a restaurant earlier this year. She paid $20 for it and we’d still have to pay about $50 out of pocket to cover the cost of the rest of the meal. Plus, get a sitter for our daughter. It expires in a few weeks and we are opting not to use it. I hate that our relative is out the $20, but does that mean we should waste even more money to complete her purchase? Nah!

    • In cases like this, you might see if there’s someone in your neighborhood / church / work / community who is in a place where they could use it, and to give it to them.

      It’s always frustrating to feel like money’s going down the drain, but good for you for not dropping money that you don’t have on the evening!

  18. This helps SO much with an issue we’re currently having! I think we may just sell our house and quit looking at what all we’ve put into it. It’s become too small for our family and we need to look forward!

  19. My husband calls those moments where we’ve spent money on something only for it to not be useful to us a costly lesson. There are always lessons in life and some cost us money and others cost us time, and still others cost us both. But you learn your lesson and hopefully you won’t make the same mistake again. I love it b/c it gives me freedom to make mistakes and not feel guilty about it or make emotional decisions about the future only to spend more money or time on something. Thanks for your post!

  20. It’s hard isn’t it because initial outlay comes into it (can you afford the upfront), + eco considerations (it might take my time to fix it, but it means less in landfill). But then, like your dryer, there’s some things that are beyond fixing and best passed on for parts (someone’s door maybe needs replacing) or gut the lot and plant something in it.

    By far the cheapest option short and long term for both wallet and environment would be send the current broken dryer to the recycling area of your tip, and replace it with an indoor clothes airer 🙂

    Good luck!

    • Hi Kristy! I have grown to love air-drying clothes. All of my clothing that I care about (i.e. not my sweatpants, but nicer t-shirts and blouses, skirts, etc) now goes automatically on hangers or clothespins inside.

      I wish I could forgo machine-drying altogether, but the main problem I keep coming back to are TOWELS… whenever I’ve put terry-cloth towels on the line, I’ve thought, “Gee, I need to write a blog post on how to make your own loofah sponge!” Also, here in Virginia, the humidity is intense… it’s hard to get a thick towel to dry all the way, and if they don’t dry all the way, they start smelling moldy pretty quickly!

      Anyway, maybe someday I can invest in those waffle-weave towels they have in Europe, that dry so quickly in the air. I did take our old broken dryer to a recycling facility, which was an experience!

      Thanks for your great ideas!

  21. I’ve been guilty of this kind of thinking (over even stupid things, like Gymbucks that I simply MUST use even though our clothing budget for the month is used up!), and I never knew it had a name. Thanks for bringing it to light, Charlie!

  22. I was so proud of myself for FINALLY deciding to stop fixing my car. We have spent thousands repairing it, and one thing after another keeps breaking. It is hard to know when to say “enough is enough,” but it kind of felt good when I did!

  23. Yes. Ours was the car, too. Should have gotten rid of it the FIRST year we bought it and ended up in the shop 4 different times… all MAJOR costly repairs. But we kept it long enough to be on a first name basis with the mechanic. (Note: not a good sign when you call and they respond, “Oh no. Not again.”) Needless to say, buying a different “new to us” car last summer was a fantastic choice… just wish we had done it 3 years sooner!

  24. Jennifer Erickson says:

    I read this tonight after shopping for a dishwasher. Thank you for confirming my decision to finally purchase a new one. The cash we paid for it was a bit set aside for the orthodontist bill coming up soon, but we had invested enough time and money into this hand me down dishwasher. The dishes were coming out dirtier than I’d put them in, it was making a lot of extra noise and my hubby had already replaced and unclogged every part that could come out. He used a wrench. Tuesday we will have a new GE dishwasher, the first one I’ve ever chosen for myself, and our old one will go somewhere to meet it’s kindred spirit – your dryer.

  25. True that fixing things can sometimes be more expensive than repairing. But repairs that cost more can still be what an economist would call “rational,” if you care about avoiding use of the resources needed to make a new one. The gain in satisfaction from avoiding resource overuse may more than offset the extra cost of repair for some consumers. Then there are people who actually enjoy fixing things as a hobby…but I’m not sure they can be called “rational”! 😉

  26. Never been in this particular situation but the husband and I always had crappy dishwashers and finally we bought ourself a new one… it took 9 years of marriage for us to finally have a decent dishwasher lol.

  27. This is great! I Bookmarked this post so I can refer back when I’m feeling like I might get trapped. Currently, this idea is helping me lose the clutter I hold onto so tightly because it is prohibiting me from doing what I actually want to spend my time on. Sure, I can take hours selling my stuff and I’m deathly afraid of yard sales, or I can dump it at goodwill or give it away and be at peace with a new space that I can work with however I want. Lesson: don’t waste time getting rid of stuff you will never use when you can dump it and have all that time to start something new.

  28. There might be another perspective here too — We had almost the same exact story happen to us as this one with the dryer. In our case, it inspired us to invest in a couple of clothes drying racks and a clothes line, and we’ve never missed the dryer since. Rather than either sinking in more money or starting over with a repeat of the same, there may be other paths to think about (often ones we’d never even considered before).

  29. Generally I have seen this type of action when people have a computer or printer with a problem. From experience, I have spend good money trying to maintain an old PC or printer I’ve have had for a few years purely because I have spent money on minor upgrades or cartridges, when the cost of a new unit in reality would ultimately be cheaper as technology costs are always dropping in price. Sometime you need to step out of your thought process to allow options to filter in.

  30. We actually had almost the exact car scenario happen to us when we were first married. I was driving a 94 station wagon that wasn’t a long-term car, but we expected to get a few more years out of it. Well, we spent something like $800 fixing something in it (the radiator, maybe? I don’t even remember now). A week later, I started having engine trouble.

    The mechanic thought $1200 would be the very best case scenario, and that it would probably cost a lot more than that. So we bought a new (to us) car, the car I’m still driving now. It was really hard to see all that money go down the drain, but we just couldn’t justify sinking another penny into that piece of junk. Which is what it was – we sold it for scrap metal and got about $100.

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