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Do you understand the concept of sunk cost? It refers to anything you\\u2019ve invested time or money in and afterward discover that the thing is not going to play out the way you thought. It could be an investment, a hobby, a project of some kind, a purchase, even a political candidate. The tendency we have when this happens is to stick with the unproductive thing simply because we\\u2019ve sunk so much into it already (the sunk cost). In the long run, it may be better to cut those losses and move on. On this episode of The Retirement Answer Man, I\\u2019m going to walk you through a number of areas where you might be your biggest retirement obstacle because of a bias you have regarding sunk costs. Intrigued? I hope so. Let\\u2019s do it!

Sunk cost bias can keep you stuck when you don\\u2019t need to be.

There are many reasons we won\\u2019t give up on things that are clearly not taking us in the direction we desire, but one of the most prevalent is what is called \\u201csunk cost bias.\\u201d It\\u2019s when we have invested so much in the direction of a failing effort that we\\u2019re unwilling to give up all that investment. In reality, that\\u2019s probably the very best thing we could do because it will enable us to move on to more profitable things. If you\\u2019re unwilling to admit it you might be holding yourself back from the opportunity to make a bad situation into a better one. This episode is full of examples of how sunk cost bias can cost us and includes a couple of tips to help you get past the losses and move ahead to your goals.

Do you need to cut a loser investment out of your portfolio?

Sometimes sunk cost bias can be an issue when it comes to investing. Maybe it\\u2019s a particular stock or opportunity that we spent a lot of time researching or examining and then finally took the plunge to invest in. But over time it\\u2019s become apparent that the investment we thought was going to be such a great opportunity has turned out to be a real loser. It\\u2019s hard to cut that investment loose because it reminds us that we misjudged it in the first place - and to cut it loose would be an admission of failure. But hey, we all make mistakes, right? Maybe it\\u2019s time to cut it loose, get out of your own way, and start using the funds you have left to build something better?

Are you being loyal to your company or are you holding yourself back?

Many people stay at the company they\\u2019ve been at for years simply because they have invested a good deal of their life in it. I understand that, but when you do so - no matter how you\\u2019re treated, no matter what changes have come to the company in terms of compensation, benefits, leadership, training, and more - you may be sticking around because it\\u2019s easier to stay than it is to go - and that\\u2019s a form of what is called \\u201csunk cost bias.\\u201d I think you deserve more than that so on this episode I\\u2019m going to give you some ideas of how you can get past those kinds of SCB obstacles to move yourself, your career, and your life forward.

To overcome sunk cost bias, get yourself some clear goals.

Nothing helps you unpack the baggage that comes with sunk cost bias (the belief that you\\u2019ve put too much into something to give up on it now) than having clearly defined goals. Once you\\u2019re able to say exactly what you\\u2019re shooting for you\\u2019ll be able to look at the things that pertain to that category and evaluate whether they are serving your goal or keeping you from it. You\\u2019ll be surprised how the simple act of setting clear goals can help you clarify what\\u2019s holding you back so you can get rid of it. Sunk cost bias is my topic on this episode of The Retirement Answer Man.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

• [0:28] A personal example of why you are your biggest obstacle to a successful retirement.

WHAT DOES THAT MEAN? SEGMENT

• [4:46] What are \\u201csunk costs?\\u201d
• [6:13] An example of sunk cost.

HOT TOPIC SEGMENT

• [9:07] The sunk cost issue even impacts the current Presidential election.

PRACTICAL PLANNING SEGMENT

• [10:32] What is sunk cost bias and what can you do about it?
• [13:46] How sunk cost bias can impact the realm of investing.
• [19:19] Career choices can be impacted by SCB as well.
• [20:34] Your lifestyle decisions can also be negatively impacted by sunk cost bias.
• [22:20] The power of goals in overcoming sunk cost bias.
• [23:37] Accepting your own mistakes and proneness toward them is powerfully important.
• [24:15] Discover your perfect picture of what you want to happen so you can build a plan based on possibility.

TODAY\\u2019S SMART SPRINT SEGMENT

• [27:03] In the next 7 days identify something you\\u2019ve avoided that no longer fits where you are headed.

THE HAPPY LAB SEGMENT

• [28:18] Dealing with your SCB can make you internally happier, step at a time!

RESOURCES MENTIONED IN THIS EPISODE

Test \\u201c6 shot\\u201d to \\u201c33444\\u201d to get the \\u201c6 Shot Saturday\\u201d email series.

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