Thus, the more we invest in something, the harder it may be to let it go (even if it turns out to be a terrible investment). I'm sure that you can think of a time where you continued to stick with something for the sole reason that you had already put a lot of money or effort toward its completion – we all have. And to be clear, sometimes that can be a good thing (i.e. finishing your degree, climbing a difficult peak, etc.).
However, the "sunk cost fallacy" can become an issue with saving money, because subconsciously, our minds may be thinking about the money we have lost in the past and urging us to try to get that investment back.
It's going to take some effort.
The human brain is a powerful tool, and as such, each of the behaviours I mentioned will not be easy to counteract. Learning how these behaviours may affect you in a saving capacity is only the first step – the next is making sure to put in the effort on a daily basis to overcome these obstacles. However, because these behaviours are all propagated by the mind, simply understanding the "why" behind what we do is an important place to start. I believe in you, and know you can succeed.
1 Copeland, C., Helman, R. and VanDerhei, J. (2015). April 2015 Issue Brief – The 2015 Retirement Confidence Survey: Having a Retirement Savings Plan a Key Factor in Americans' Retirement Confidence. Employee Benefit Research Institute and Mathew Greenwald & Associates. Retrieved from EBRI.org.
2 Elias, S. (March 4, 2014). First Americans Lived on Bering Land Bridge for Thousands of Years. Scientific American. Retrieved from ScientificAmerican.com.
3 Williams, G. (October 21, 2013). Why Can't We Just Save More and Spend Less. MSN Money. Retrieved from Money.MSN.com.
4 n.a. (2016). The Power of Habit: Charles Duhigg. Retrieved from TheWeekMagazine.Tumblr.com.
5 Griffin, D. (2016). Planning for the Future: On the Behavioral Economics of Living Longer. Prudential Challenge Lab. Retrieved from BringYourChallenges.com.
6 n.a. (2015). Temporal Discounting. Psychlopedia. Retrieved from Psych-It.com.
7 Brandon, E. (February 26, 2014). New Merrill Edge® Mobile App Uses 3D Technology to Put Retirement Planning in Your Hands. U.S. Bank of America Newsroom. Retrieved from BankofAmerica.com.
8 n.a. (September 12, 2013). Orangutans Make Future Plans, A Behavior Once Thought Only Human. UPI. Retrieved from UPI.com.
9 Steele, B. (January 24, 2014). Think Ahead: Robots Anticipate Human Actions. Cornell Chronicle. Retrieved from News.Cornell.edu
10 n.a. (2015). Behavioral Concepts: The Sunk Cost Fallacy. Behavioral Economics. Retrieved from BehavioralEconomics.com.
Investing involves risk including possible loss of principal.
The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.