Create a Simple SWOT Analysis for your Financial Life

Personal Finance / Tuesday, January 30th, 2018

To most business majors (who actually did their coursework), they should be fairly familiar with case studies of Michael Porter. Although, he did not create it, business majors should also be familiar with the SWOT analysis. For those unfamiliar, the SWOT analysis is a simple, yet effective, structured business method to help understand the current stats and your attributes. With a completed framework, you can focus on utilizing your strengths and weaknesses to full advantage. Although this is normally for a business purpose – primarily in aiding decision making, I believe this could also be used as a tool for personal finance. After all, you are your own company and no one else should be more focused on success than YOU!

I believe that the more objective and honest effort put forth into the analysis, the more useful it will become. As with any practice – garbage in, garbage out. If utilized properly, it might help you gain a whole new perspective. Being able to see a visual barometer of your current state will aid you in planning out your goals, as well as your strategy for the future.

What is a SWOT Analysis?

SWOT stands for Strengths, Weaknesses, Opportunities and Threats.
  • Strengths – items that would help you succeed (abilities, knowledge, connections)
  • Weaknesses – items that is currently holding you back (lack of resources, knowledge, etc.)
  • Opportunities – what can you take advantage of that is currently not utilized.
  • Threats – items which could affect your livelihood due to uncontrollable factors
There are 2 factors:

Internal factors (Strengths, Weaknesses) Things you can control
External Factors (Opportunities and Threats) Things you can’t control

Most of these are pretty self-explanatory, so I will leave you to it on how to interpret what should be going into which categories.

How to get started?

Go get a piece of paper, a pencil and an eraser. Or go download a SWOT analysis spreadsheet like this one. You can fill it in electronically or print it out. Up to you.

Brainstorm and jot down a small list of items you can think of regarding your own personal finance life (maybe like 4-7 items each category). Once you have a decent size list – I would say at least 10 to 20ish items total, you should start putting them into each category. If you have a spouse or significant other, this might actually be a fun exercise to do together. (You might be surprised if your answers differ and a good conversation could stem from this.)

Once you have placed all your items into each SWOT category, and you can start prioritizing its importance in each of the areas. A fun exercise!!!

Below is a sample of a completed SWOT analysis:

What to do now that it’s done?

Analysis it the SWOT analysis by using a basic gap analysis. Figure what you are able to do to utilize your strengths and check if you are able to fix your weaknesses. Understand what you can and cannot do. Check if there are people who can aid you in your journey.

After all that….put it on your fridge.  Otherwise, put it up somewhere else or tuck it away somewhere safe so you may compare with your future self – a year or so and see if you had made any progress. It would be a good idea to put it at an easily accessible location. You may also check if any of the environment factors may have change. Perhaps, your weaknesses are now strengths and that more opportunities are available. Life is never stagnant.

The goal of this exercise is to get your brain moving and make you aware of your current situation. It also helps promote discussion or find lesser noticeable weaknesses which  require help in remedying. Hopefully, the exercise will provide some perspective of where you’re at overall and help you allocate your resources more efficiently or give you a road-map on improvement.

Generally, I still have issues speaking with my significant other regarding topics of personal finance. She is more of a visual learner than a person who can just simply talk about it. Having a tool like this is helpful in aiding and fostering discussions. For others, simply writing it out helps their brain process things more vividly.

There is always something you can continue to improve on – which is why this exercise is useful. It also helps keep a written record to document improvements. The best part is it doesn’t require some insane mathematical analysis (a la Good Will Hunting) or a whole lot of time commitment.

Try this simple exercise and the outcome might surprise you. If you would like to check out more article related to financial independence, you could always check out the FI introduction series.


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