Financial SWOT Analysis

Today, I thought I would do my financial swot analysis.

What is a financial swot analysis, you ask?

In simple terms, it is deep dive into your financial strengths and weaknesses. It is also a way to figure out what opportunities exist which you have not exploited yet to the maximum. Finally, it is also about recognizing possible threats that could derail your money goals, at least temporarily.

My Financial Swot Analysis

I am hugely aware of the financial goals I have laid out for myself and what I need to do to achieve these. I have a plan of how I want to achieve those. How did I make this plan? By doing a financial SWOT analysis.

It is important that I am aware of the strengths that I have that will help me move towards those goals and the weaknesses that may slow me down. Similarly, I need to recognize opportunities I have in order to be able to leverage them to their maximum. Recognizing threats and taking action may be the difference between achieving goals and not achieving them.

This exercise was a lovely exercise in financial self-awareness for me. I have used Ryan Guina’s article as the basis of this post. Do read his original article.

Financial Strengths

A financial strength is anything that reinforces your current financial situation or helps you get closer to your financial goals.

Helpful questions to ask yourself: What are the strong areas of your finances? Do you have a positive monthly cash flow? Are you paying extra on your debts? Are you debt free? Did your income recently increase?

My biggest strength is that I have worked in the finance (banking) industry for close to two decades. Another strength is my education. I have an MBA in finance and a Bachelor’s degree in economics.

The work experience and my education ensure that I know more than just a thing or two about money and finance.

They have helped me remain curious and excited about new things. I learn quickly.

I am debt free and have been for most of my life. My credit card bill is paid in full every month before the due date.

As a consumer, I am extremely conscious of any expenditure that I make. Nearly all expenses are budgeted for every month. Sudden, unplanned, unbudgeted spending is not my thing. Rarely, if ever, when I do buy something without giving it much thought – know that I would end up regretting it.

Large expenses (Christmas, birthdays, annual insurance payments, travel etc) are set up as monthly funds, so I do not have to provide for them all at once.

Weaknesses

What is holding you back from reaching your financial goals? It could be debt, a lack of income or earning potential.

Helpful questions to ask yourself: Have you maxed out your income potential in your current job? Are you in debt? Are you upside down on a car or house loan? Do you live paycheck to paycheck?

My income took a nosedive in the recent past. It has almost dried up. This is the single biggest weakness in my ability to achieve the financial goals I have set out for myself.

READ MORE: Why I quit working and have no regrets?

Opportunities

Opportunities are actions you have not yet taken, or at least not yet maximized on.

Ask yourself these, and similar questions: Do you have a skill you can leverage into a paying gig, such as consulting, tax preparation, freelance writing? Do you have any hobbies that might bring in revenue? Some examples include arts & crafts, refereeing youth sports, writing, landscaping, woodworking, and more. Can you get a promotion at work or volunteer to work extra hours for overtime? What about investment opportunities?

Building alternate streams of income is a huge untapped opportunity for me. There is potential for me to earn from different sources. One of these is setting up my own freelance writing gig. All it requires is hard work, dedication and having a plan.

Determine Financial Threats

Threats are external forces that you may not always be able to control or eliminate. However listing them down can help you to identify and address them proactively, draw up contingency plans to deal with unforeseen events.

External factors to consider: Are you in danger of losing your job? Is your mortgage rate about to reset to a higher APR? What are the current economic factors that may affect your job/investments/income streams?

Medically, I suffer from migraines. There are days when I am completely debilitated and unable to perform. There are times when I lose all motivation to work. I get demotivated and find it difficult to work. Both these have the potential to be big wasters of my time. Each unproductive day that passes is an opportunity lost.

Economically, inflation is a threat. Oil prices are galloping increasing prices all around. I must budget this in my plans

Also, there is huge competition in the field of freelance writing since the entry barriers are very low. Pricing is competitive. Another writer with lesser skills and experience could easily low-ball me.

What to do with your financial SWOT analysis?

Just doing the SWOT analysis is not going to get you anywhere or help you achieve anything. This is only the starting point.

In order to help improve your financial situation, you need to find a way to leverage your strengths and opportunities and mitigate weaknesses and threats.

I know what I need to get cracking on. Do you?

What are your financial strengths and weaknesses? Do a financial SWOT analysis
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4 Comments

  1. Karis | Don't Dream, Just Travel

    October 10, 2018 at 6:32 pm

    Lots of great ideas here and not something I considered when starting my own business. Thank you for sharing your knowledge! Now, to go and put it into practice!

    1. pennies4cents

      October 11, 2018 at 9:39 am

      Absolutely – otherwise this exercise goes waste, right. That is the beauty of doing a financial SWOT analysis – it throws up actionables for oneself.

  2. Sally Pau

    October 10, 2018 at 9:52 pm

    This is very helpful! I’ve used SWOT analysis for marketing, but didn’t realize how it can help with finances! Thanks for sharing!
    Sally
    http://www.mypracticalblog.com

    1. pennies4cents

      October 11, 2018 at 9:41 am

      You are right. The tool is so versatile and throws up plenty of actionables for oneself. Try doing it for your money and see what you come up with. Let me know how it goes.

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