A SWOT analysis is a method used to examine current performance and form better strategies moving forward. It’s often used in a professional setting to evaluate a business model or individual performance.
But a SWOT analysis is a tool that has wide applications — including personal money management.
Named for its focus on strengths, weaknesses, opportunities, and threats, the SWOT method can help you better understand your current financial situation. Even better, you can use your insights to form smart money strategies that will protect and grow your wealth.
How is a SWOT analysis used for personal finance?
The first two words in the acronym, strengths and weaknesses, are generally grouped together as positive and negative internal factors that affect a situation — in this case, your personal money management. These come from you, and are things you can directly control.
Opportunities and threats are the positive and negative external possibilities that could affect your finances. These are often outside of your control, but identifying them can help you match your course of action.
A SWOT analysis helps you understand how your personal choices and behaviors combine with external forces to either hurt or help your finances. Analyzing your money this way will give you a holistic view of your current net worth, and a 360-degree view on what will grow — or shrink — that wealth.
How to use the SWOT method
Using this strategy is helpful to honestly assess your current net worth and money management. You’ll get an idea of where you are now and what’s coming up in the near future.
First, create a SWOT analysis template to jot down your notes. Grab a blank piece of paper and create two columns. Label one “Internal” and the other “External.” In the Internal column, you’ll list your strengths and weakness. In the External column, add your opportunities and threats.
Here are some things to consider as you work through your SWOT analysis template.
Money strengths and weaknesses
Your financial strengths are the things you’re already doing well, but can keep building on to do even better. An honest look at your money weaknesses can help you mitigate problems they create and, hopefully, prevent them in the future.
Some questions to consider when analyzing your personal financial strengths and weaknesses include:
- Income: Do you have a high income relative to your living costs? What is your income potential? Does your income vary month-to-month or is it reliable?
- Financial resources: What are the assets that you have on-hand? How are they allocated to different financial goals?
- Liabilities or debts: What debts do you have? What is a drain on your finances?
- Money habits: What financial habits do you repeat every month? Which are healthy and which are harmful?
- Financial knowledge: Do you know enough about money to confidently make decisions? What have you learned a lot about recently? What are financial topics you don’t know much about?
- Money attitudes or beliefs: How do you feel about your finances? What stories do you tell yourself about your money? How are past experiences affecting your current financial approach?
As you walk through these questions, think about any external feedback you’ve received about your personal money management. For example, maybe people comment on your spending habits, either pointing out that you shop a lot or noticing your frugal nature.
This can inform your analysis by helping you notice things about your personal money management that you otherwise wouldn’t.
Financial opportunities and threats
Next, you’ll want to identify your financial opportunities and threats. Finding threats will help you mitigate financial risk with responsible actions. Seeing financial opportunities can help you choose the right time to make smart financial moves.
Consider the following areas as you think through your financial opportunities and threats:
- Income: Is your job stable or at risk? Can you get a raise in the coming year? Are there opportunities to get a side hustle or otherwise diversify your income?
- Living costs and expenses: Are your costs of living increasing or decreasing? What new costs are you facing that you haven’t had in the past?
- Tools: What financial tools are available to make money management easier? What resources can you use to improve your financial knowledge?
- Financial products: Are your financial products worth the cost? Are there products you could use to improve your finances, like refinancing or investments? Can you access or qualify for these products?
- Economy: How is the economy expected to perform in the next year or more? How will this affect costs of borrowing? Your investments? Prices of major purchases?
Using a SWOT analysis to grow your wealth
Once you’ve gone through the process of analyzing your finances with the SWOT method, you probably have some general ideas to implement that could build your wealth.
However, it can be helpful to revisit your list of strengths, weaknesses, opportunities, and threats and list some specific action items that would help you capitalize on a positive or offset a negative.
For strengths, look for ways to do more with your money. You could use your high cash flow to work toward financial goals, or devote more time to a side hustle to generate even more income.
With weaknesses, consider how you can stop these from dragging your finances down. Make a plan to tackle weaknesses like high debts or frivolous spending that are holding you back from your goals.
When looking at opportunities, think of ways you can position yourself to take advantage of these in the next year. Consider how opportunities can play to your strengths or be used to overcome weaknesses.
Likewise, strengths can be used to avoid threats — and you’ll want to make sure you’re aware of threats that could be worsened by your financial weaknesses.
When you want to do better with your money but can’t seem to figure out how to do it or where to start, a SWOT analysis can be extremely helpful. The approach can help you be more objective about your finances, get past your emotions around money, and logically sort through positives and negatives.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|