Creating Routes

Avoid the Sunk Cost Fallacy: Make the right choice

Falacia del costo hundido

I’ll finish this awful movie, so I’ll get the entire value of the movie ticket that I paid”. We all have been there: Either with food, events, or even study programs.

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This way of thinking is called the “Sunk cost fallacy” and after reading this blog post you’ll be the one making your own choices and not the sunk cost fallacy monster.

John’s Journey

Once upon a time there was John, a guy who had just graduated from a traditional study program, he was full of life and ready to start his new job. 

Every day he went to his office with all the willingness to do his best even though he started realizing that there was not much growth in the area that he had studied.

One day he realized that his best friend, Bill, was making big bucks and climbing the corporate ladder with ease in another company in a different field: programming. 

Because of that, John started getting frustrated and started working harder and harder, but without results because the opportunities in his field were scarce.

Because of that, he started making excuses about having chosen the wrong career and being stuck there forever. He already had a traditional major, therefore, programming was out of his perimeter.

Until finally Bill convinced John that programming was for everybody and people from all different backgrounds were putting aside their majors and entering the coding field.

It was time for John to accept that it was better to let go all those hours and effort spent in his traditional field and move on.

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The sunk cost fallacy sometimes makes us stay in things that we might be better off leaving. All because you’re “too invested in something to just quit” or because you’re afraid to be socially labeled as “a quitter”.

There is an easy way out

Once you label your emotions, you’re far more able to control them, according to Daniel Coleman in his book Emotional Intelligence

And as counterintuitive as it sounds, the decision-making process is emotional, not rational, according to several books, one of them being Emotional Intelligence. 

Therefore, just by recognizing that the Sunk Cost Fallacy entered the game in your decision-making process, you’re better able to control it and make decisions more pragmatically. 

As Julia Gales said in her Youtube video: At least having the Sunk Cost Fallacy on your radar means that you have the opportunity at least to push past that and make the choice that instead will lead to better outcomes.


  • Decisions are made based on emotions.
  • Sunk Cost Fallacy disables us from making the choices with better outcomes. 
  • Forget about being too invested in something.

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Treat yourself like a business


In this article I’ll show you that, for better or worse, we all are in business. You’ll walk out of this blog post with a damn useful tool to rock and make successful your personal finances.

Revenues and profits are not only for businesses, we also have cashflows coming in every month.

On one side you have inflows: income from net salary or side hustles. On the other side, you also have the counterpart, outflows: expenses (food, rent, gas, clothes, etc.).

Subtracting inflows minus outflows we get the sweet sweet profit. Having $0 profit is synonym of just making ends meet or living paycheck to paycheck. And as a business, having constantly negative profit (also known as loss) means going bankrupt.

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Here is the plot!

Dividing the profit by the amount of hours worked you get profit/hour worked.

At this point you are wondering: And what the heck do I do with that? With this indicator you can calculate how many hours of work an object or service is worth. Allow me to explain better how much that $50 dinner really cost.

Running the numbers

Our imaginary friend, John, earns $3000 a month after taxes. John works on average 168 hours a month (21 working days * 8 hours a day). After paying all the monthly expenses he keeps $1000 in profit (John’s monthly expenses are $2000). Therefore, his profit/hour-worked is $5.95/h ($1000/168h). For the sake of simplicity let’s round it up to $6/h.

John would have to work approximately 8 hours (one entire day) to pay for the $50 dinner! You can obtain that by dividing $50 (the dinner cost) by 6 (profit/hour-worked), which is more or less 8 hours. In other words, one entire day of work gets expensed in a $50 dinner. Is it worth it? It depends on how badly John wants that dinner.

You have the control

Time is your most important asset as we saw in this article, and it’s non-refundable. We can take back money, relationships, or even health, but not time.

Here you have a calculator that helps you calculating how many hours of your life is worth it that product or service that you want to buy:


  • We are all in business and it’s better to have profit than losses.
  • One good indicator of your day-to-day operations is profit/hour.
  • Every time you pay for a good or service, indirectly, you pay with time (your most important asset).

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High return investments that beat the market

When investing, we tend to focus our attention on the annual return of securities such as stocks or bonds. 

Watch out! That is just the tip of the iceberg: taxes, commissions, fees, maintenance and even inflation could hinder the expected annual return.

It could impede the return so much that we could think of not investing at all.

Running Italian numbers


In Italy, if you decided to invest in the well-known S&P 500 index through an ETF, you would have to pay: 26% of your annual return + 80€ annually of other legal fees + 60€ annually for maintenance cost + commissions if you decided to sell the ETF.

Let’s suppose you were to invest 10.000€ (not a small number) in the S&P500 that has an annual average return of 7% (700€ annual return). 

That’s how the expenses would look like:

Taxes (26%)182€
Legal fees80€

Your return for one year would be €700 – €322 = €378. Moreover, if you decided to cash in the ETF, you would have to subtract the commission cost.

In other words, for locking up 10.000€ for one entire year, you’d receive 378€. It is really sad, isn’t it?

Actually, if you invested just 1.000€, you would end up losing money!

Thinking outside of the box

You want to invest, right? That’s why you’re reading this blog post.

However, you really want to see your money working for you, not for the bank or the government.

Well here are some outside-of-the-box ideas:

Passive investments

  • Electric bikes or scooters: Comparing the upfront cost of this device to the annual expense of public transit, you could have an annual return of over 100%. Hypothesizing that the monthly pass costs 50€ and the electric bike or scooter 500€.
  • Gym equipment: Depending on the annual membership cost, you could use that money to buy workout equipment for your home. In that way, you would recover your investment in just one year (100% return).
  • Led bulb: Depending on your electricity bill, not only it’s better for the environment, but also for your pocket. 
  • Coffee machine: Spending 150€ in a coffee machine to not buy more coffees on the go is one of the most conventional and useful pieces of advice.
  • Solar panels: On one hand, you lower the electricity bill; on the other, you get tax deductions.
  • Bottle of water: If you buy one bottle of water a day for 0,50€ every working day, it adds up to €110 annually (hypothesizing 220 workdays a year).
  • Buy a car and rent it to a friend so he can do UBER or a similar service.

Not so passive investments

  • Buy a car and drive for UBER whenever you like. I’m pretty sure that in a year you would make more than 378€ (even considering gas, insurance, and maintenance cost).
  • Buy a normal bike, or an electric bike and deliver food whenever you want with apps like Uber Eats and Glovo.
  • Rent out a bigger place and do Airbnb with the extra room, if it’s legal.

Even though is less accountable, invest in your education:

  • Certifications
  • Language skills
  • Books
  • Courses to improve negotiation skills

If you really like your side hustle, buy or improve the equipment. Here are some examples:

  • Cooking and selling homemade bread or pastry.
  • Painting nails or doing make-up.
  • Streaming on Twitch.
  • Doing Youtube videos.
  • Growing and selling plants.

In other words, you could scale up your side hustle with the money you were thinking to invest in financial securities. 

In that way, you could have a bigger cash flow.

I’m pretty sure the cash flow would increase more than 370€ a year for every €10.000 invested.

Finally, my dream goal: If you had enough money, you could buy a house or an apartment and rent it out.


Remember, first take a good look at the initial down payment (including commissions and legal fees) + mortgage + bills + expected rate of vacancy.

This investment option would dilute your liquidity. However, it is worth pursuing it if you think your conditions would remain the same.


Investment options are out there in a variety of ways. Even if we don’t see them. 

Unless you plan to invest a sizable amount of money in financial securities, first think about other viable investment options.

If you do not run the numbers first, you could end up helping the bank and the government to get rich at your expense.