Financial Scenario Planning: Test Big Decisions Before You Make Them

What is financial scenario planning?

Financial scenario planning is the practice of building multiple versions of your financial future — each representing a different set of decisions — and comparing them side by side to understand the real financial impact of each choice.

Think of it as a flight simulator for your finances. Before a pilot flies a real plane, they practice in a simulator where they can make mistakes, test edge cases, and build confidence. Financial scenario planning does the same thing for major life decisions: you simulate the impact before you commit to the real thing.

When scenario planning is most valuable

The decisions that most benefit from financial scenario planning are the irreversible or expensive ones:

• Buying vs. renting a home — the largest financial decision most people make
• Changing jobs or careers — especially if the change involves a pay cut now for better prospects later
• Starting a business — modelling the lean years before the business becomes profitable
• Having children — the combined impact of reduced income (parental leave), higher expenses, and education costs
• Taking a sabbatical — what does a one-year break from work actually cost in long-term wealth?
• Early retirement — can you afford to retire at 55 instead of 65? What needs to change?

How to build a financial scenario

A financial scenario is a complete snapshot of your finances under a specific set of assumptions. To build one, you need:

1. A baseline scenario — your current financial situation with no changes. This is your reference point.
2. A decision scenario — the same situation but with the change applied. If you're modelling buying a house: add the mortgage payment as an expense, add the property as an asset, remove the rent expense, deduct the down payment from savings.

Run both scenarios forward 5, 10, or 20 years. Compare the projected net worth, cash flow, and goal achievement at each point in time.

The buy vs. rent scenario: a worked example

This is the most common use case for scenario planning. Here's how to set it up:

Baseline (rent):

• Monthly rent: €1,400
• Current savings: €80,000 (that would have been the down payment, kept invested)
• Investment return: 7% annually

Alternative (buy):

• Down payment: €80,000 (depletes savings)
• Mortgage payment: €1,100/month (less than rent, but you also pay maintenance/insurance)
• Property value appreciation: 3% annually
• Maintenance/insurance: €300/month

Run both forward 20 years. In the rent scenario, your €80,000 grows to approximately €310,000 and you've had slightly higher monthly costs (rent vs. mortgage + fees). In the buy scenario, your property has appreciated significantly but you've had maintenance costs and your portfolio had a 20-year head start missed.

The answer depends entirely on local property appreciation rates, rent vs. mortgage ratios, and investment returns — which is why you need to model your specific situation rather than rely on general advice.

The career change scenario

A common scenario: you're considering a career change from a well-paid but unfulfilling job (€75,000/year) to a more rewarding but lower-paid one (€50,000/year) with better growth prospects.

Model both: current trajectory vs. taking the pay cut. The buy scenario shows a dip in savings rate for 2–3 years, but if the new career provides faster income growth (say, 8% vs. 3% annually), the crossover point — when the new career starts earning more — might be year 7 or 8. After 15 years, you might actually be ahead.

Or the crossover never comes, and the career change costs you €300,000 in lifetime earnings. You can know this before you decide, not after.

How many scenarios should you model?

Typically 2–4 scenarios per decision is optimal:

• Baseline: current trajectory
• Conservative option: the safer, lower-risk choice
• Ambitious option: the higher-reward, higher-risk choice
• Compromise: something in between (useful when two options seem close)

More than 4 scenarios tends to create confusion rather than clarity. Pick the choices that matter most and model those.

Scenario planning in MyRunway

MyRunway is built around the scenario concept. Each scenario is a complete, independent snapshot of your finances. You can create up to 2 scenarios on the free plan, 5 on Premium, and 10 on Pro — and compare them side by side on the same chart.

Creating a new scenario takes minutes: duplicate your baseline, apply the changes for the decision you're modelling, and the forecast updates automatically. The side-by-side view shows you exactly where the scenarios diverge and which one leaves you in a better position at any point in time.