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Welcome to another edition of the 1% Habits Newsletter!

This is where you’ll get up-to-date information on small wins to improve your habits, productivity, and life satisfaction. 

Let’s get to it…

📈 How to Ditch the Sunk Cost Mindset

Do you often find yourself continuing on a path that doesn't feel right, only because you’ve already invested so much time or money into it?

You might strongly dislike what you’re doing, but you feel like you have to stay the course because you’ve already gotten this far. And, because of humans’ natural aversion to loss, this mindset is not uncommon.

If this sounds familiar, then you’re probably dealing with the negative consequences of the “sunk cost fallacy” mindset.

In today’s email, I will explain why the sunk cost mindset can be dangerous. Then I will detail seven ways to help you overcome this way of thinking.

My Experience with the Sunk Cost Fallacy

Let’s start with a slightly embarrassing trip down memory lane to a decade ago when my girlfriend (now my wife) and I embarked on an epic hike to the bottom of the Grand Canyon.

We spent the night at the Phantom Ranch and fell head over heels for their legendary Phantom Ranch Stew.

Naturally, I decided to bring a piece of that culinary magic back home. Armed with an Internet recipe and boundless enthusiasm, I set out to recreate the stew.

But, as they say, the road to culinary disaster is paved with good intentions—and a tablespoon of cloves instead of a teaspoon.

Yes, you read that right.

What was supposed to be a heartwarming stew turned into a pungent concoction that was barely palatable.. Not wanting to subject her to this aromatic abomination, I decided to consume the leftovers myself.

For a WHOLE week.

My reasoning?

I had invested so much time and effort into making that stew, it seemed a shame to waste it.

In hindsight, I was a textbook case of the sunk cost fallacy. Rather than acknowledging my mistake and tossing the stew, I stubbornly soldiered on, spoonful by painful spoonful.

Lesson learned: Sometimes, it's better to let go of a mistake and chalk it up to experience.

And, I'm proud to report, I've never confused teaspoons with tablespoons since!

So, What is the Sunk Cost Fallacy?

In business and economics, a “sunk cost” refers to any cost that has been paid and cannot be recovered. When you make decisions based on trying to make this money back, then you’re thinking with a sunk cost fallacy mindset.

For example, if you spent a lot of time and money on a business venture that is clearly not going well, it may be hard to admit defeat. However, the psychological drive to recover things that you’ve lost is a strong motivator that can cause you to continue to make bad decisions.

Now, the sunk cost fallacy mindset can also have a negative impact in your personal life.

For example, let’s say you decide to stop eating junk food but you still have a few frozen pizzas, a container of cookies, and a giant bag of candy at home.

With a sunk cost mindset, instead of trashing these unhealthy foods or giving them away, you eat the junk food because you have already spent money on them.

So why is it easy to succumb to the sunk cost mindset?

Well, one reason is people have stronger emotional connections to things they've lost (including time) than they do to the things they've gained.

Their mantra is...

“I already have too much invested, so I might as well keep going!”

However, the important thing to remember is that the time and money that you have already spent is already gone and can’t be recovered. But any additional resources that you choose to forego are still in your control.

If you’re midway through a terrible movie, will you stand by your decision to watch it because you’ve already purchased the ticket? 

Or will you do the sensible thing by walking out and doing something that you actually enjoy?

Sure, your money is gone--but that doesn’t necessitate wasting even more of your time.

Or, consider this example,

“I might as well stay in this toxic relationship because I’ve already invested so much time and emotion into this person.”

The more time you spend in a relationship with a sunk cost mindset, the more difficult it will become to leave. So now that you understand how and why sunk cost fallacies occur, let’s talk about ways to overcome this mindset in your personal life. 

If you get these right, you will save a lot of time, money, and heartache in the long run.

#1. Keep Track of Your Investments

Whether it’s your time or money, it’s important to know how much you’ve invested into a particular idea or area of your life.

Then be ruthless and cut things out that don’t bring you value.

When it comes to cutting your losses, it’s important to think about what you have to gain instead of what you’ve already lost.

It's not hard to let go if you make an honest effort to focus your decisions toward the future rather than the past.

Pause for a minute and consider what you could gain by cutting your losses now versus the additional losses you could incur if you kept moving forward.

If the future looks brighter without the project at hand, then do some damage control and let it go.

#2. Know Your Long-Term Goals

It’s important to have established long-term goals and make your decisions based solely on what you want to accomplish in life.

You can review these goals daily or create a vision board to visually represent what you want.

The critical thing is to constantly remind yourself about what’s really important.

This will help you take action based on the things you want in the long-term rather than what you may lose in the short-term.

Avoid making decisions that are based only on the present moment without looking at what’s best for your future.

(You can use the goal planner worksheets to map your long-term plans.)

#3. Develop Creative Tension

You develop creative tension when you are able to describe your vision and your current reality, but there is a clear gap between the two. This gap leads to an energetic and motivational tension that must be resolved.

Think about stretching a rubber band. The more you stretch it, the more tension it creates. The rubber band continues to get tighter and tries to pull back to resolve this tension.

Now, imagine that your right hand is your vision, your left hand is your current reality, and you are pulling a rubber band in opposite directions with both hands.

The larger the gap is between your hands (representing your vision and your reality), the more tension the rubber band will create, and the stronger your motivation will be to reduce the tension.

Like your hands in this metaphor, you need to engage both sides of your brain, or have “opposing” advisers as a means of checks and balances to develop creative tension.

#4. Get the Facts, Not the Hearsay

Have you ever felt like your vision is worth more than the money you have to pay for it?

Maybe you realize you have spent a lot of money, but believe that one day it will all pay off. If this is keeping you hanging onto what may be a lost cause, make sure you stick to the facts.

You may try to convince yourself that your dream will become a reality, but as you are doing that, make sure to analyze the things that you are absolutely certain of instead of only the things that you are hoping will happen.

It is also important to not give in to external forces. Other people may be urging you to continue what you are doing, or you may even be pushing yourself too hard because you don't want to disappoint other people. Ignore this type of hearsay.

#5. Let Go of Personal Attachments

People have a tendency to stick to an original plan even if it’s clearly going downhill, simply to avoid change.

It’s hard to let go of anything that has taken up your time and money, especially if you‘ve developed some sort of emotional attachment to it.

Let go of your fear of waste and failure.

Just remember that the world is constantly evolving, and not all of your ideas will be good ones. This mindset will help ease your grip on something that you know in your heart is doomed.

#6. Practice Mindfulness

When you can focus on living in the present moment, you will concentrate less on what has happened in the past.

This will help you detach from any losses you’ve incurred, and resist the sunk cost mindset.

Take time to recognize the new information that comes up that suggests a change needs to be made. This will help you realize the long-term benefit of some decisions that may seem wasteful in the short term.

Practicing mindfulness will reduce your likelihood of making decisions based on your emotions, and help you focus on the things that are ultimately meaningful.

(And if you want to get started with this concept, then here are 64 mindfulness activity cards that can help you develop this practice.)

#7. Admit Your Mistakes and Move On

Finally, it’s important to acknowledge your loss in time or money, then commit to moving on.

Having the ability to accept your mistakes and learn from them is an important part of making better decisions for the future.

To grow as a person, you have to be honest with yourself, even if the truth hurts.

You can't control the past, so it doesn't make sense to ruminate on your mistakes.

Learn from your mishaps and keep going.

That’s the essence of what’s commonly known as a “growth mindset”

So, bottom line:

The sunk cost fallacy mindset doesn’t just lead to poor decisions—it can also impact your life on a larger scale.

And, the bigger the decision, the easier it is to fall prey to the sunk cost fallacy mindset.

Hopefully today’s email will help you avoid making this mistake throughout your life.

⚙️1% Habit Idea

Today’s 1% habit relates to the sunk cost fallacy because it helps you “let go” of the temptation to spend more money in your life. 

Receiving a never-ending stream of print catalogs with discounts and promotions often leads to unnecessary spending.

Saving 20% on a purchase isn’t saving any money at all if you spend $100 to save that $20. You didn’t save $20, you spent $80. Keep that in mind the next time you receive a catalog or coupon that’s full of “savings.”

If you’re serious about eliminating needless spending from your life, then one of the simplest ways to do this is to get rid of junk mail and catalogs.

How to Get Started

I’d consider this to be an ongoing habit that will require consistent effort every month if you want to get rid of all unwanted mail.

You see, whenever you offer up your mailing address for coupons of “free stuff,” these companies can sell your information to third-party vendors.

This means that if you’ve signed up for dozens of offers, then you’ll need to build a habit where you regularly opt out from the various places that are responsible for sending junk mail.

Get started by using a service like Catalog Choice, which eliminates most unwanted mailings. Usually it’ll take a month or so for the various companies to follow through on your request. Then you can use the following steps to make sure you’re completely off these unwanted lists:

● Go to DMACHOICE.org to get rid of unwanted magazines and newsletters.

● Go to OptOutPrescreen.com (US only) to get rid of unwanted credit card offers.

● Write to the mail preference service (for the US or the UK) to opt out your name from the major mailing list.

● Avoid placing your address on surveys, product warranty cards, and raffles.

● Ask individual senders to remove you from their mailing lists.

● Request to make your personal information confidential in the county and state database.

● Add a “No Junk Mail” or “No Free Papers” sign on your mailbox.

● Sign up to receive statements and bills electronically.

Sure, these steps require a lot of effort. But if you work at it a little bit every week or month, then you can forever eliminate the tide of worthless catalogs, and junk mail.

🗂️ The Resource Roundup

📑 Life Without Design Is Erratic - Are you constantly busy but rarely feel fulfilled? In this thought-provoking video, Ryan Holiday explores Seneca’s idea of “busy idleness” and shares insights on finding true purpose and inner stillness, helping you break free from the endless cycle of activity without direction.

😶‍🌫️ The Virtue of Being Forgotten - What would it mean to truly erase your digital past? This article explores the concept of the "right to oblivion," examining the ethical and societal implications of reclaiming privacy in an age where everything is preserved online.

🎲 Robinhood Admits It’s Just a Gambling App - Curious about how political betting could impact future elections? This article dives into Robinhood’s move to introduce presidential betting, unpacking the risks, ethics, and potential influence on voter perception and behavior.

📈 How to Clear Your Backlogs - Overwhelmed by a mountain of unfinished tasks? This podcast breaks down effective methods to tackle backlogs, helping you reduce stress, boost productivity, and take charge of your to-do list.

💸 Rich in Life Lessons - Packed with wisdom for anyone striving to live a fuller, more intentional life, this article distills 20 impactful life lessons to guide you toward true fulfillment. It’s a powerful reminder that real wealth extends beyond money to embrace time, health, relationships, and a meaningful connection with yourself.

That’s it for today.

I hope you have a great start to your week!

Cheers,

Steve Scott