What is a Good Example of Scenario Development?

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Scenario Development

How to do Scenario Development & Plan for Anything

Suppose that you are age 55 and have accumulated a net worth of over $3 million from a life of hard work. Your children have all graduated from college, have jobs, and are no longer dependent on you. You want to explore some of the possible opportunities available for the rest of your life.

After a few coaching meetings with a financial life planner you remember that you always wanted to teach law. However, you never thought you could afford to do it because it only paid about ⅓ of your current income, and that would not have been enough to support your family’s goals when they were younger.

Your wife always hoped that you would stop working a little earlier in life. When you first met you spent summers in Europe and she would like to return to that lifestyle. You mentioned to your advisor that if you could afford it, you’ve always wanted to help families with disabled children that were not as fortunate as you and your family.

Your advisor runs these scenarios for you to consider with the following results:

Scenario 1: Continue working in your current career until age 65.

Result: Leave an estate worth over $20 million to your children and charities.

Scenario 2: Stop current career and take a teaching position.

Result: Leave an estate worth over $10 million to your children and charities.

Scenario 3: Same as Scenario 2, but spend summers in Europe.

Result: Leave an estate worth over $5 million to your children and charities.

Scenario 4: Same as Scenario 3, but give all your excess funds to charity while you are alive.

Result: Spend all your net worth in your lifetime.

Discussing the potential financial outcomes of these alternatives can help you proactively refine what you value most at this stage in your life, and help you choose a path with passion and confidence. It will also expand your thinking to new possibilities that you may have never considered – scenario development.

The scenario development process is developing alternative scenarios to support you in dealing with what you’re dealing with. First, you want to try to identify the driving forces, then you want to identify the critical the critical uncertainties – so what are the biggest trends that are impacting you and your organization. Then you want to create alternate scenarios, so basically four different worlds based on those extremes, and then discuss the implications or the paths of each of those. So what will that mean for your organization and how will it impact you?