Sunk cost is economics, and finance is a cost that is incurred and unrecoverable.
As an individual, you pursue a certain line in your career there is need of certifications that entails a different level of educational qualifications, professional bodies that require additional courses and competencies to be gained, and, the skills and competencies required to undertake duties and responsibilities of a certain role. All these amounts to an investment as money and time are not recoverable, hence a sunk cost.
It comes a time when one realizes that the career path they are on no longer works for them, this may be attributed to factors such as lack of growth path in that career, discovering that the career path is not fulfilling to them, the discovery of other interests and passions that are more rewarding and fulfilling and wondering is it worth it all. Many a time we come across these eureka moments in different aspects of our lives and decide.
The decision to continue pursuing a certain path, be it a career, investment, or relational based on the number of resources invested, is identified as a sunk cost fallacy. One’s decision-making is biased and leans towards investing more future resources in this case time into a situation where a prior investment has already been made. This leads to the usage of more resources, hence increasing the sunk. Hence, the larger the sunk cost, the stronger the bias toward the investment and the harder it becomes to put an end to.
Sunk cost is a gift from your former self. The question is, do you accept that gift? Seth Godin.
Once you view this as a gift, you can appreciate the benefits gained from the career, investment, or relationship. This view will assist you in moving towards less biased decision-making. A good place to start is to conduct a thorough self-audit on all investments in your life, financial, time, physical, psychological, and emotional resources. These audits will give a clear picture of the levels of resources used in each aspect. With the data gained, you can now analyse the level of investment against your goals and aspirations. Where you find disparity, address them by not being held back by the sunk cost. By doing this exercise, you can align resources to your future goals and aspiration. This way you escape from being held hostage by your sunk cost.