The Case for Cutting Your Losses

Recently my significant other revealed the following four pieces of related information:

  • She has a monthly membership with a massage therapist
  • As part of this membership she accrues massages, which rollover when not used
  • She has an enormous number of massages accrued…
  • Because she pretty much never goes to the massage therapist

When I suggested that she cancel the membership, citing the fact that she’s spending money on a service she doesn’t use, she replied that she can’t cancel the membership until she’s used up her accrued massages.

“If I cancel, I lose all of those massages,” she explained. “I’ll waste all that money.”

So currently her plan is not to cancel the membership, but to somehow use up this ludicrous backlog of massages and then cancel.

“But you keep accruing new massages every month,” I noted. “You see how this plan is a bit flawed.”

“I'm aware,” she replied. “You should write about this.”

“Tell other people to not do what you’re doing?”


Challenge accepted.

Spending money is a bad way to save money

I think we probably all know someone with the old car that keeps breaking down. They spend a lot of money fixing the transmission and then the brakes go. “Well, I spent all that money on the transmission. I have to keep the car and pay for the brakes or I waste all that money I spent on the transmission.”

It’s a cycle we all fall into occasionally. It’s similar to the mentality that keeps gamblers at the table when the cards are routinely not in their favor. I have to make up what I’ve lost. When money is tight (and even when it isn’t) it’s hard to walk away from a sunk cost. For most of us, every penny counts. That’s why it’s so hard to let go.

But the truth is that smart money management is much less about always making the right choices, and much more about understanding when to say “No more” and taking things in another direction.

Learning to say goodbye

You will continually lose money throughout the course of your life. It’s inevitable. What compounds this problem is our inability to let go. Until the moment when we finally accept our loss, there’s still that glimmer of hope. It won’t all have been in vain.

Again, it’s what keeps gamblers going. If you feed a quarter into a slot machine and nothing comes out, it’s lost. But it doesn’t feel like a loss unless we get up and walk away from the machine. If instead we stay there and put in another quarter, we haven’t lost yet – in fact, we may still win.

In gambling, this is the road to going bust. In life, it simply leads to more and more wasted money. The solution is simple in design, but difficult in execution – learn how to walk away.

Walking away is difficult because of the emotions involved, which is why you should attempt to remove some of that emotion. Take the example of stock market gurus, most of which make decisions driven entirely by data. They create algorithms and let math tell them when to buy and when to sell.

Forget the feeling of loss. Let math tell you what to do. In the case of the massage membership, I’d tell my significant other (were she so inclined to listen) to sit down and plot out this massive pile of massages she’s amassed. How often can she realistically go for a massage? How long will it take to use up her rollover massages? How much will she have spent in additional membership fees in the meantime?

Math tends to paint a stark picture. The numbers can help you separate from the anxiety that comes from loss. It doesn’t make walking away any less painful, but at the very least it helps you to understand how much more painful not walking away will be.

Wasting money stinks, but you know what stinks even worse? Wasting more money.

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.