What’s SWOT Got To Do With It?

What’s SWOT Got To Do With It?

On the surface, SWOT is a jumble of letters that have seemingly little to do with your personal finances. Dig a little deeper,and you’ll see that these letters aren’t just a bad result in Boggle. Standing for Strengths, Weakness, Opportunities, and Threats, it’s an analysis strategy that can help assess and reorganize your financial situation.

SWOT Analysis

What is it?

It’s a way of thinking through a problem. It was first developed in the 60s by Albert Humphrey, a business and management consultant, at the Stanford Research Institute. Originally, the acronym was SOFT, derived from this wordy definition:

“What is good in the present is Satisfactory, good in the future is an Opportunity; bad in the present is a Fault and bad in the future is a Threat.”

Over time, it evolved into the succinct SWOT we know and love. SWOT Analysis isn’t just used by the world’s top financial planners and marketing experts. It’s a detailed action plan that can be applied to any situation, big decision, career move, or life goal. It’s a way of outlining the issue at hand (whatever it may be), so you can understand where you stand and what you need to do to achieve your goals.

Why Use it?

Along with a budget, it’s one of the best financial tools you can have at your disposal. It’s especially helpful when you’re faced with financially uncertain times or when you feel overwhelmed by your choices.

A recent survey conducted by GOBankingRate ssuggests financially uncertain times have become less of an exception and more a rule for most Americans. It reveals roughly half of Americans (49%) live paycheck-to-paycheck.Whether you fall in this category or not, it’s important to know there are online borrowing options to help with your situation.

With every dollar of their paycheck tied up with regular payments, they don’t have enough left over to cover anything they weren’t expecting. A car breakdown, a parking fine, or a trip to the clinic has the power to cripple them. Even the holidays—which come every year—can be too much for their budgets.

For many of these individuals, a cash advance covers their cash shortfalls, as these small dollar loans are ideal for short-term bills and non-recurring emergencies. Some products, like MoneyKey installment loans, offer a slight extension on the typical repayment terms, offering more time for borrowers to pay back these loans.

Convenient though they may be, installment loans are not a permanent solution to larger financial issues. They only bridge the gap between paychecks and minor cash shortages. Chronic debt requires long-term solutions from a financial advisor.

Another 61% of those surveyedby GOBankingRatesdon’t have enough in emergency savings to cover 6 months’ worth of expenses in case of a sudden job loss or health scare. Though they’re better off than those relying on payday loans, they aren’t completely safe.

Without a safety cushion of savings, it’s easy to feel stressed out about your finances and your future.Unfortunately, the majority of us don’t make good decisions when we’re stressed. Anxiety affects the way we can plan, assess consequences, and process thoughts rationally. It can convince us to make rash decisions that promise immediate relief, without realizing our reckless behavior lands us in even hotter water.

When used correctly, SWOT Analysis can act as a soothing balm to your anxiety. By going through the strengths, weaknesses, opportunities, and threats of a decision, you’re forced to break down the problem and its possible solutions carefully. You think things through rationally, step-by-step, in order to complete your analysis.

You need a level head to make practical decisions, so remember the SWOT Analysis method the next time you have a big financial decision to make. All you need is a pen and paper to get started and the time to go through your problem slowly. Try it out and break down your options. When done correctly, these four simple letters can help you through any tough decision.