Should you ignore history?

by Herbert K. Daroff, J.D., CFP, AEP

Mr. Daroff is affiliated with Baystate Financial Planning, in Wellesley, Ma., and is a contributing editor to this magazine. Connect with him by e-mail: [email protected]

It is often said ‘those who fail to learn from history are doomed to repeat it’. Actually, the quote is, ‘Those who cannot remember the past are condemned to repeat it,’ by George Santayana.

How much did you pay for the first gallon of gasoline that you put in the car? What did you pay this week? How much did your last semester of college cost? What does your alma mater charge now? Does that mean that fuel prices and/or education expenses will continue to rise, at those rates? It does not, but what should your financial plan include for those expenses?

Gasoline prices may increase, but the engines are much more efficient, and many vehicles use energy sources other than gasoline. At older ages, you may drive less. Your financial plan needs to run “what if” scenarios so that you don’t sacrifice current standard of living because you are over-estimating the cost of your standard of living in the future. But, you also need to be careful not to under-estimate these costs during retirement.

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