What’s a forecasting scenario?

You may have heard of the proverb: “The best way to predict the future is to create it”. That’s what creating forecasting scenarios is about.

<aside> 🧑‍🏫 A forecasting scenario is a simulation of the future based on assumptions of your future cash flows: income, expenses, savings, investments…

It’s used to understand the consequences of a decision you consider taking.

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The future is uncertain and uncertainty can be scary. So the best to control the uncertainty of this world is to create scenarios to see how things would play out.

Example

You want to invest £1100 this year and want to plan that ahead to make sure it’s a realistic goal.

<aside> 🧑‍🏫 Scenario planning is the most robust decision-making tool for your financial decisions

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The main outcomes to check when creating a scenario are:

• Will you run out of money? See the forecasted balance
• Will you remain cash flow positive? See the forecasted Free Cash Flows

See

How do I know my plans are realistic?

How to create a forecasting scenario with Nova?