Everyone makes mistakes or suffers from bad luck from time to time. But too often, people dig their heels when the tide is shifting against them, rather than getting back on course — especially when they feel they've invested too much time, money or effort to make a change.

This phenomenon is known as the sunk cost fallacy, and if you're not careful, it can keep you from reaching your financial goals. 

In economics, a sunk cost is an expense that has already been spent, and there's no way to recoup the costs. For example, if you start watching a TV show and don't like it, you can't get that time back. It's a sunk cost. 

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A sunk cost fallacy then occurs if you lean into the sunk cost by putting more resources toward it, even though that doesn't recoup what's already lost. So if you keep watching that TV show and pay for another month of streaming because you've "invested too much time," spending more time and money does nothing to get your original time and money back. Instead, it often leads to more losses, as you could end up watching more of a show you don't enjoy, rather than switching to something you'd like.

This issue can also pop up in more serious ways financially, such as leaning into sunk costs with investments, large expenses or career choices.

A major way that the sunk cost fallacy hurts finances is by causing investors to stay committed to a misguided investment for too long or even allocate more to chase losses. 

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