Friday, March 11, 2011

Recognizing Sunk Costs

I have been a very busy bee working on my February/March project of the office, and I'm pleased to say that it's finally starting to come together!  I'm putting the final touches on the organization, and then we're actually going to paint the room, so I'm holding off on the final pictures for that.  I'm planning to post "the reveal" by the end of March.  I'll then plan to spend April working on the office closet, including a makeover for my filing cabinet.

However, I wanted to pop on here and update you all on my progress, as well as to talk about an article I recently read on one of my new favorite financial sites, LearnVest, about sunk costs.

The article talked about how people in general often feel obligated toward things because they've paid for them.  I suppose we feel the need to justify the money we have spent.  Since I work in finance and keep myself on a strict budget, I can definitely relate to that feeling of "wasting" money.

The point of the article is that we just need to take a step back and realize that we've already spent the money, anyway, regardless of what action we take in the future.  This applies in many ways to clutter and organization.

For example, I'm sure you can think of some things you have around your home that you are keeping even though you don't use it regularly or necessarily love it.  Maybe you think, "I might wear those pants someday."  Or, "I paid a lot for that lamp - I can't just get rid of it!"  These thoughts either lead us to display things that don't really reflect our passions, or store things that (realistically) we would rarely use.

These things are sunk costs.  Do these excess items really do us any good?  Do they help move us towards our goals?  If not, maybe it's time for them to go.

Now, unless you just bought something and you're within the return policy for a store, you're probably not getting your money back.  However, there are options so you don't have to literally throw the items away.  You can donate items to charities, which would offer you a tax deduction.  Or, you could sell the items and regain some of the money, if you feel the time you'd put into a sale is worth it.

Both of those things make me feel better about letting go of items.  I know that I am making room for things that will be much more beneficial and useful to me.  In fact, I have sold of a lot of items while working on my office project, which has provided me with extra money that I could add to my budget to really make this project something beyond what my minimal budget would have done.  However, even I took a step back and realized that some items just didn't have much value to take the time to sell, so I acknowledged the sunk costs and donated them instead.

This does take some conscious effort - you have to actively want to eliminate the excess to accomplish this - but it's worth it in the end.  I think it also gets easier the more you do it.  You realize it doesn't pain you like you might have thought.  However, this is definitely something I'll continue to keep in mind as I continue in my organizing quest throughout the year!

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