Eva took a €4,000 holiday last year and felt guilty about it for months. The same year she moved to a nicer flat that costs €150 a month more, and has not thought about it since.
Her projection has an opinion about which of those mattered. Over 30 years, invested at a 6% real return instead of spent, the holiday would have become about €23,000. The rent would have become about €146,000. The decision she worried about was the small one.
That comparison is a what-if scenario. The post on financial projections built the baseline: today’s numbers, played forward under a range of growth assumptions. This post uses that baseline to test decisions before you make them.
Look at the gap from your baseline, not the end balance
A scenario is your projection with one input changed to answer one question. The useful number is not the new ending balance, which is uncertain anyway, but the delta: how far this one change moves the result compared with your baseline. Comparing the delta isolates the effect of the changed input, because both runs use the same assumptions; its size can still change with the growth rate or the time horizon.
What repeats moves a plan more than what feels expensive
Costs that repeat are much bigger than they look. €150 a month (a nicer flat, a car payment, higher childcare) over 30 years at 6% real is worth around €146,000. Asked to guess first, most people say something nearer €50,000.
One-off costs are much smaller than they feel. Eva’s €4,000 holiday is worth about €23,000 at year 30: real money, but a sixth of what the rent costs. Guilt tracks how noticeable a purchase is; the arithmetic tracks how often it repeats. The mental accounting post covers why the two come apart.
A rough test for any cost over 30 years at 6% real: a one-time cost times about 6, a monthly cost times about 1,000. The holiday: €4,000 × 6, about €24,000. The rent: €150 × 1,000, about €150,000. It is a sketch for comparing choices, not a precise figure.
Time is lopsided. The projections post showed the cost of starting late. It applies to every scenario: €200 a month more, started five years late, produces roughly 30% less by year 30, because the lost years are the ones with the most time to compound.
Quick check: over 30 years at 6% real, which costs more, a €6,000 car upgrade once or €50 a month more insurance?
The insurance. By the rough test, €6,000 × 6 is about €36,000, while €50 × 1,000 is about €50,000.
Which inputs move a decision most
Most scenarios turn on a handful of inputs:
- Monthly savings. Often the most sensitive input you control: €200 a month more for 30 years at 6% real is worth roughly €195,000; €500 a month roughly €487,000.
- The growth assumption. Scenarios often show that the decision depends more on the growth rate assumed than on the decision itself, which is why many people run each scenario at a low and a middle rate.
- A large one-off event: a house, a wedding, a child’s university, a career break.
- The retirement date. Five years earlier or later is usually much larger than intuition suggests, because those are often the highest-contribution and highest-compounding years of the plan.
- Where you live, which is really a bundle: cost of living, currency, tax and which tax-advantaged accounts you can use. A later post treats it in depth.
Smaller items (a €30 subscription, a modest side income) matter for this year’s cash flow but rarely change the 30-year picture much.
Placing a one off event in a plan
A one-off event belongs at the year it happens, as a single amount, not spread out as a monthly cost. A €40,000 house deposit in year 4 drops the line at year 4 and leaves it to compound from the lower point; a career break might remove two years of contributions in years 6 and 7. The useful thing to look at afterwards is how the line recovers, or whether it does: an event early in the plan costs more by year 30 than the same event late, because it removes money that had the most time to grow.
Change one thing at a time
Changing three things at once answers “should I make this whole change?” but says nothing about which part matters. Eva earns €4,000 a month after tax, spends €3,000 and saves €1,000. She is weighing a job in a cheaper city that pays 10% less.
Taken whole, the move adds €200 a month to her savings. Taken apart, the cheaper city adds about €600 a month and the pay cut takes back €400. Run each change alone, then together, and compare: usually one effect dominates, sometimes they cancel, occasionally they compound, and you cannot tell without pulling them apart.
Why to run the bad case first
A plan that only works in the base case is fragile. A common order is the baseline first (current numbers, the middle growth rate), then the downside case (low growth, lower income, an unplanned large expense), then the upside (higher growth, a promotion, side income). If the downside still lands somewhere acceptable, the plan is robust. If it does not, that is useful information, and arguing with the assumptions until the downside looks better hides it. What counts as acceptable depends on your buffers, your job security and who depends on you.
Many people run the upside first because it feels good. It rarely changes a decision; the downside shows whether you can live with one.
Before you decide
A common sequence: write down the one decision you are facing as a change to one input; run it against the baseline at a low and a middle growth rate and note the delta; if it bundles several changes, split them; then run the bad case. A scenario is support before a decision, not a justification after it.
Which cost in your life repeats every month without you noticing it any more?