A financial scenario is one possible version of your money. It combines income, expenses, debts and investments so you can ask a useful question such as, “What if I work four days?” or “What if I put another $50 a week towards debt?”
A scenario is not a forecast you have to believe. It is a safe place to test an idea.
A helpful way to use scenarios
- Build a baseline that is close to life now.
- Duplicate it.
- Change one important assumption in the copy.
- Compare the remaining money and projections.
Worth knowing: Two honest scenarios usually teach you more than one very detailed scenario.