In any situation, looking at the strengths, weaknesses, opportunities and threats can be a valuable tool in making the right decision. In this week’s episode, we apply this method to finances. Tune in to see how you can use SWOT analysis in your financial journey:

Strengths

In the world of investing, developing strengths is critical to achieving your long-term goals. Host Andrew Baxter explains that learning new skills is vital in order to acquire strengths in the money and investing space. Undertaking anything new can be difficult and jumping in the deep end blind and without any strategy or skills can lead to major issues. Taking the time before starting to learn some of the skills that you’re likely to need down the track will not only make the early stages smoother, but will help you excel in the future. These may even be small things along the way, which may not make a big difference for each individual piece but when you gradually stack these on top of each other this can build to a very large arsenal of skills. Even simple things like budgeting properly can allow you to create the cashflow you may need down the track. Keeping an emergency fund is also a huge strength as life will not always be easy and having a contingency in place to protect you when the chips are down can give you a boost in the long run.

Weaknesses

Post-Christmas, many people regret the amount that they’ve spent over the period and find themselves playing catch up. Host Andrew Baxter explains that overspending is one of the most common traps and generally speaking, greatest weaknesses for people when it comes to managing their finances. Although it comes from a place of kindness, the consequences can be that you’re putting yourself and your family under a little bit of pressure to recoup the spending. Social media tends to have some input of pressuring parents into spending copious amounts on their kids so they come down the stairs on Christmas morning and see a big pile of gifts under the tree. Although every parent would like to be able to do this, it is not always sensible and can cause some harm. Instead of paying the price after, you could make an effort to put some cash aside throughout the year purely for the purpose of spending up at Christmas time. This way, you may not be able to enjoy as many nice and expensive things throughout the year, but it will really take the sting out of spending heavily for Christmas and allow you to enjoy it just that little bit more.

Opportunities

When you have the strengths in place and you’re working on your weaknesses, the next step is being able to recognise opportunities when they appear. Host Andrew Baxter, as a major proponent of budgeting, explains that budgeting is once again the underlying key to being able to not only see the opportunity but to grasp it. Budgeting can allow you to firstly create the free cash flow you need in order to facilitate the investment to seize the opportunity when its present. If your concern is not being able to recognise the opportunity to begin with, experience and prior knowledge and understanding of different fields can equip you with the skills you need. Many times, once someone spots a chance to do something great, their lack of action or knowledge in the past can be what limits their capacity to take advantage of it. 

Threats

The current economic landscape presents everyone with some threats to their financial positions. Higher interest rates and inflation are major pain points for everyday people as they are directly impacted. Host Andrew Baxter points out that those with debt are hurt the most when it comes to higher interest rates, while that higher interest rate environments can also threaten jobs. It’s best to be aware of the threats rather than blocking them out so that you can formulate a strategy to endure them.