SWOT Analysis & Your Financial Plan

 In Financial Improvement, Financial Review, Goals, Personal Finance

Remember all those New Year’s resolutions for your personal finances? We are a little over half way through 2018, a good time to assess your progress. This week, I will outline the “SWOT analysis”, a method to evaluate your success towards an objective.By performing SWOT analysis on a particular goal, we can determine where we must modify or adjust our actions to bring us closer to victory.

SWOT analysis applies when you’ve made a decision and taken action. If you are stuck in the decision making phase and have yet to take action, do not employ SWOT as an evaluation tool, instead try the OODA Loop methodology. In “OODA Loop Your Financial Plan”, I discuss this analytical tool designed to speed up your decision making within the financial planning realm.

According to Wikipedia, a SWOT analysis is, “a strategic planning technique used to help a person or organization identify the Strengths, Weaknesses, Opportunities, and Threats related to business competition or project planning.” Applicable to assess a financial planning objective, I utilize the SWOT analysis with clients. It provides a framework to discuss a client’s core strengths and weaknesses, and brainstorm what opportunities may help or threats which may inhibit the success of their financial planning goal. Here I provide the framework  for applying SWOT analysis to your financial plan.


What are the strengths of your financial plan?

Strengths are both internal and external. Internal strengths are specific to your situation; Such as your ability to live within a strict budget or delay immediate gratification in lieu of a long term financial goal. External strengths are outside your control but still strengthen your financial plan; Things like the successful growth of your company’s stock, or your residential purchase in a high growth real estate market.

Internal and external strengths can include things such as:
  • A healthy emergency fund
  • No consumer or student debt
  • Healthy investment returns over a period of time

It is important to evaluate your strengths because they provide the foundation to launch your next goals forward. For instance, if you already have an emergency fund, you do not have to worry about dedicating cash flow towards building one. Instead, you can direct your financial resources towards accomplishing other objectives such as funding retirement or college savings.


What are the weaknesses in your financial plan?

When addressing your weaknesses, do not just list them; look for active solutions. (For a more detailed application of decision making and problem solving, apply the OODA loop.) Weaknesses can be addressed actively, through improvement, or passively, by avoiding certain behaviors.

Different then “Threats” (discussed below), weaknesses are ongoing and foreseeable problems you routinely encounter. They are failures in your financial planning environment that can be addressed through modifying your behavior. Threats, are unforeseeable and/or uncontrollable circumstances that can derail your success unrelated to your behavior.

Weaknesses are things such as:
  • Too much debt service hindering any ability to save
  • No emergency fund, causing you to borrow on credit for emergencies
  • Leaving all your investments in cash

What can you improve. Improve short term weaknesses such as paying off your car loan, student loan, or other debt within a defined time frame, or putting more money in immediate savings. Improve your long term weaknesses by making immediate, but possibly minor changes, such as increasing your retirement contributions a percentage or two, or making an extra principal mortgage payment annually.

What can you avoid. In the realm of financial planning, avoiding things is as important as what you can improve to achieving your goals. Avoid things like leaving your investments in cash and taking on credit card debt.

It is vital that once you identify these weaknesses, whether they are personal behaviors that need modification or structural issues that need restructuring, make a plan to address them immediately.


What are the foreseeable opportunities you could use to benefit your financial planning?

Do not mistake opportunities as market timing or luck. They are situations you encounter and can take advantage of because you are financially responsible and have prepared.

Some opportunities are more personal to your situation. Things like an upcoming raise or bonus you can dedicate to a goal. Or maybe your company is offering stock at a discount and it is a great investment.

Opportunities also include broader market trends. Maybe you have set aside some cash to invest when there is a downturn in the real estate or stock market. Look into the next year of your foreseeable financial life, and identify a few rewarding opportunities you could potentially participate in that would move your financial goals further along.


What could cause a threat to your financial plan?

We all face obstacles along our path to achieve our financial planning objectives. Different from weaknesses, which are based on your own behaviors or environment, threats are things you cannot control but still impact your plan. They may be your personal circumstances or emergencies that arise unexpectedly.

Threats can include things such as:
  • Large amounts of debt at high interest rates
  • Negative cash flow
  • Disability or injury hindering our ability to work

Any successful financial plan will address these threats. In the case of negative cash flow, we may focus on budgeting and overall lifestyle. If student loans or consumer debts are an issue, it might be time to refinance or consolidate. The impact a disability or need for long term care has on your planning efforts can also be addressed through work or private coverage.


In any area of life, it is important we evaluate and reevaluate our plans routinely so we can modify and adapt any necessary changes. SWOT analysis is simple (fourth law of combat), straightforward, and can be applied to a singular goal to achieve a tactical win. Singular goals are things like buying a second home, paying for a child’s college, or paying off debt. Or you can use SWOT analysis to evaluate your entire financial plan to determine your status in the strategic victory of financial freedom.

Author: Jenny Erdmann

Jenny is owner of Chisholm Financial Planning & Investments. She loves discipline, freedom, America, and financial planning. She can be found getting after it at work or on Coronado island enjoying the sunshine with Lucy, the best dog in the world and Chisholm's mascot.
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