Bill signed up for a gym in January. It costs 30 euro per month. He went four times in January, twice in February, and once in the first week of March before stopping entirely. He is considering cancelling.
He has already paid for January and February. Cancelling now means those 60 euro were wasted. Keeping the membership means at least he has the option to go.
The sunk cost fallacy is the tendency to continue an investment because of resources already committed, rather than because of future value. The 60 euro Bill has already paid are gone regardless of what he decides today. They are not recoverable. They should not influence the decision.
The correct question is not: did I waste the money I already spent? The correct question is: given what I know now about how often I actually go, is 30 euro per month a rational allocation going forward?
He goes twice more in March to feel better about the decision. Then he cancels.
The ledger closes the gym entry with a total cost of 90 euro across three months and a utilisation rate of seven visits. Cost per visit: 12.86 euro.
The tip
When deciding whether to continue something, remove what you have already spent from the calculation. The past cost is the same whether you continue or stop. Only the future cost differs.
Sunk cost analysis, March 2025: gym membership cancelled after 3 months. Total cost: 90. Visits: 7. Cost per visit: 12.86. Forward saving: 30 per month. The sunk cost did not influence the outcome. The delay did.
Bill is 24. Every episode, we read his personal ledger through accounting eyes. / FY 2025 ledger