The process of building your financial plan is about looking at an ideal case scenario and the actions we need to take to get closer to this ideal.

However, we know that life isn’t ideal. Life gets in the way and whilst we really should plan for the best, we also need to consider building alternative plans which enable you to model different scenarios.

If you’re building your own financial plan, here’s the alternative scenarios you should consider when stress testing and considering your financial plan.

What if I need more income than I expect?

Whilst we can make some assumptions about the income you might need, it’s often difficult to work out what we’re actually going to spend until we’re in the next phase of our lives.

Looking at a number of assumptions about the income you need might provide you with some reassurance that you can spend more than you think, or a confirmation that you can’t.

However whilst all financial plans are based on assumptions and we need to be aware of this, having a number of ‘what if’ scenarios when we’re thinking about making changes can be really useful.

What if I stop employed work earlier or later?

Often, if we’ve built a plan which allows financial independence at a specified age the scenario we’re asked to build most often is…

“What happens if I decide to stop work earlier?”

However also the opposite might be true. You might want to continue to work because you’re enjoying yourself, but want to understand the positive impact longer term work might have on your financial plan and you might want to understand what this works out.

Both of these are entirely valid ‘what if’ scenarios we’ve built for clients.

What if I get a shock in my financial plan?

Part of my role as a financial planner is to be a practical pragmatist. Whilst building an optimistic, hopeful financial plan is important, the other side is also true. Building plans which take into account negative changes are important too. 

This might include ill health, loss of income, death or divorce. It might include replacing a high value item like a Car or a new boiler. All of these factors can and arguably should be costed into a financial plan.

So, when you’re speaking to your financial adviser and he’s building your financial plan. Make sure you’re not only considering the optimistic core plan but looking at the impact of other changes you might want to make or are forced on you.

Then you can have a far greater peace of mind knowing that whatever happens in your life, you’ve got a plan which works.