From purchases to politicians, don't let choice-supportive-bias ruin your finances.
- Have you ever made a purchase and it turned out to be a total piece of junk, but you put more money into it because, “as God is my witness, I’m going to make it work!?”
- Have you ever voted for a politician, realized you made a huge mistake, but still defended them no matter how much of an idiot they are?
- Have you realized you said or did something really stupid, but doubled down on it, just because.
Well, you may be suffering from choice supportive bias: positively supporting your choice, regardless of how awful it was.
Throwing good money after bad.
Throwing good money after bad is a result of choice supportive bias. It's when you waste more money on something that you already know to be a bad investment. God help me, I will use myself as an example.
My first car.
My first car was a 1983 Volkswagen Santana. Light grey cloth mothballed interior, bad paint job, shocks that made an awful squeaking sound, an exhaust system that leaked through the floorboard, a shredded ceiling interior, a speedometer that only went to 60 km/hr and it burned a litter of oil a week.
I purchased this car for $700. A hell of a deal, so I thought.
- Within the first month, the back passenger window didn’t roll up, so I spent $350 to repair it.
- The next month, I needed a wheel alignment and new tires, $300.
- My buddy then told me that I bought a lemon (terrible car). And I should sell it, and quit throwing good money after bad. But I only make good purchases, and no one was going to tell me it was bad!
- Two months after that, $400 for an alternator and $40 for a battery.
- One month after that, $300 to replace the shock absorbers.
- At this point, five minutes later, I was out $700 for the car and $1,390 for the repairs.
I was in denial.
I told my friends that this was a great car despite some “bad luck.” I even spent $300 to make it “look” better to support the illusion of a good car, even though it was mechanically in disrepair.
I drove it for another four months, and finally one day it stranded me in the middle of nowhere. I spent $150 towing it 236 km. The compression and oil rings on two pistons needed replacement. The mechanic estimated around $2,000 for the repair.
Finally I had to admit that I bought a piece of shit car that was killing me financially. So I sucked it up and paid $50 to tow the car to the junkyard.
All and all, I spent $1890 in repair/towing costs on a $700 vehicle, because I couldn’t admit early that I made a mistake and I was hobbled by choice-supportive-bias.
My story was about a car, but you can use this for a bad business deal, too expensive of a house, student loan debt, etc… Cutting your losses early on and admitting you made a mistake can save you a lot of money in the long term even though there is short-term emotional pain.
Stay frosty people. Thanks for reading.