When confronted with adversity, it’s not uncommon for many of us to internalize the situation, beating ourselves up over things we can’t control. Why do we do it? Emerging research has been tracking the phenomenon of self-deprecation over societal influences, and the results are interesting. When people become preoccupied with things they can’t control, they often suffer needlessly from depression and anxiety, and tend to disassociate themselves from their friends and loved ones. Unfortunately, today’s shaky economy provides aLOTof opportunity to focus on things we can’t change. But, there is good news. You can alleviate some of your financial stress by reevaluating your relationship with money.
Why should you change your relationship with money? – Because things change. More important, you change. One of man’s greatest skills is his ability to adapt, but we rarely do so effectively in the face of a financial challenge. It may be human nature to repeat the patterns we’ve grown accustomed to, but things change too quickly in the financial world – we have to evolve with it. If we don’t, we’ll end up wasting our hard-earned money, worried about things we can’t control.
Changing your relationship with money is a lot easier than you might think. Fortunately, there’s a tool from the business world that can help you redefine your financial relationship. A SWOT analysis, S-W-O-T, is an exercise that promotes the critical thinking skills necessary to alleviate financial strain. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats, and this type of analysis is conducted whenever a business encounters a situation that could impact their bottom line. For instance, if new legislation will impact the products or services offered by a company, it will conduct a SWOT analysis to gauge how they can offset any meaningful revenue losses. Key stakeholders will evaluate what they do better than anyone else – in our example, what they lack in relation to their competitors, what opportunities may be presented because of the change, and the threats presented by the legislation. This line item assessment helps to create a broader strategy, and build confidence to help meet whatever is on the horizon.
Conducting your own SWOT analysis is usually a piece of cake. You only need a pencil and paper, an open mind, and a fair sense of reality. Similar to a business, you’ll need the stakeholders in your household to be involved, so gather the family and have a frank discussion about your financial situation. When you’ve come to a consensus on the issues, start to assign them to the appropriate category. For instance, you may agree that you do a fantastic job of saving and bargain hunting – great strengths to have. Conversely, your family may have issues managing high levels of credit card debt, which is a common weakness found in our current economy. Another very important part of the analysis is looking inside and outside the household for threats. Threats come in many shapes and sizes, and may be unique to your family. For instance, one of the major breadwinners may work in an industry that is on the decline, or within a company that is struggling. Could they be laid off or face a salary reduction? Although the threat may not be immediate, it is credible and you have to factor that into your strategy.
One of my favorite parts of a SWOT analysis is finding opportunities. In this section of your plan you can focus on ways to reduce expenses or generate more income. One of my favorite Cambridge stories was when one of our counselors helped an elderly individual who was facing foreclosure. They lived on a parcel of land they weren’t fully using, but it was zoned for agriculture. The counselor recommended they use the land for that purpose. Well, talk about your happy endings. Not only did the individual avoid foreclosure and start a roadside farm, they hired two people to help. Now that’s an opportunity that pays itself forward. What opportunities are waiting for you? Now may be the best time to find out.
You don’t have to stress over money, but it’s very easy to get comfortable behind the 8-ball. Don’t let that happen. You can change how you look at the world, your family, and your financial situation by understanding the challenges in your path and creating a strategy to offset any impact they may have. If you want some help developing your SWOT analysis, contact one of our counselors today. Until next time, I’m Thomas Fox for Cambridge Credit Counseling.