Recently at work I was asked to create a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) for my staff pharmacists. The idea being to come up with a development plan for succession within our store. Doing this exercise got me thinking about completing a SWOT analysis for my current path to FIRE.
I’ve found a SWOT analysis to be applicable to a variety of situations. For work, I was able to use my analysis to set both short and long-term development goals for my pharmacists. We were then able to develop an action plan to figure out where to focus our attention. This activity basically allows you to look at something objectively from a broad perspective and then dive in to the details and develop your plan of attack.
BEGIN WITH A GOAL
To keep from spinning your wheels, have in mind a goal you are trying to achieve. This will help guide your analysis as you work through each section.
Imagine being at the top of a steep, winding mountain road and you need to quickly get to the bottom of the mountain. While getting to the bottom is the ultimate goal, the SWOT analysis serves as your road map, showing you the straightaways where you can hit the gas, but also letting you know where the danger spots are that could send you over a cliff if you aren’t careful.
I did a SWOT analysis for our family goal of FIRE. Here’s what I found.
- Income. As a two professional household we enjoy a nice income. Not only has it allowed us to pay off all debt including our mortgage, but we are able to save large amounts each month.
- Early head start. While I just recently discovered the idea of FIRE we were already saving 15% for retirement since we graduated pharmacy school in 2011. Coupled with several years of fantastic market returns, we have a great head start on our nest egg.
- Debt free. Being debt free is a double edged sword. Not only does it free up more money each month to save and invest, but it also lowers our expenses. The math behind FI is based on your expenses. By not having any payments we have a lower annual spending, which in turn lowers how much money we need to be considered financially independent.
- Half of our net worth is in our home. The problem with this is that the equity in our home does little to help us on our way to FI. Sure we could always downsize in house and keep this as a rental to generate some passive income, but that’s not likely to happen. We worked very aggressively for 6 years to pay off the mortgage, but we also bought at the mid to upper level of home price in the area. Had we bought cheaper, we could have had an extra few years to invest.
- Part-time schedule for my wife. After our first son was born my wife cut back from 40 hours to 32 hours per week. She maintained that for 4 years and through another child so that we could pay off our mortgage. Now that we can check that off the list, she will be cutting back even further to 24 hours per week at the end of summer. This will do so much for our quality of life, but it comes at a cost; both short-term and long-term.
- Save more. We’ve recently bumped up our saving percentage. I hate to keep referring back to paying off the mortgage (hey, did I mention we paid off our mortgage?), but not having a payment each month allows us to invest more. I’m always looking for things in the budget that can be cut (sheesh, I sound like my employer’s CFO!) and allocate the money to investing instead.
- Work more. No this isn’t some ploy to get my wife to read this post in hopes that she will go back up to 40 hours per week. I already tell her that every day!
- Side hustle. I’m very happy that I started this blog. It’s been a great way for me to organize my thoughts and goals in one place and help keep them straight. And you never know, I may just be able to squeeze some extra income out of it some day.
- Bear market. Since we’ve been investing we’ve been exposed to an extremely long bull market. A bear market and several years of negative returns would definitely lengthen the time frame to FI. Though not a huge factor right now, it’s definitely a more applicable threat to those only a year or two away from FI.
- Growing family. Adding a third kid to the mix means more expenses, the biggest of which would be another 529 account to fund. Although we don’t know if our family is done growing, and I wouldn’t choose to not have more kids simply based on how it impacts our timeline to FI, it’s still a consideration.
- Job stress. As a retail pharmacist I work in a very high stress environment. I enjoy the pace and the organized chaos that comes with each day, but I fear that at some point (possibly before reaching FI) that the stress may get to the point where I don’t enjoy my job. I don’t foresee a drastic career change, but cutting back on hours is a possibility.
OK great, now what?
Now to analyze your analysis (huh?). Your strengths are just that. It’s a “pat yourself on the back” category. It’s the report card full of straight A’s that you get to hang on your fridge. Keep on, keepin’ on.
When it comes to weakness, chances are you knew what those were and already have damage control in place to minimize their impact. The same thing goes with threats. If you complete a SWOT analysis every 6-12 months your weaknesses and threats probably won’t change. An occasional new threat might pop up from time to time, but by and large these won’t change. And since they don’t change that often you should be able to have a contingency plan in place for how to minimize the impact.
The real fun comes with your opportunities. You should the most of your time in this area. Focus 90% of your effort here. Want to save more? Comb through the budget and figure out how you can make it happen. Want a side hustle? Find your passion and figure out how to turn that into an income. Think like an entrepreneur. Take a risk; get outside of your comfort zone and see what happens. The opportunities are 100% controllable so the power lies within yourself. See what you can do to move the needle!
I found this SWOT analysis to be quite helpful. It’s probably not worth doing more than once or twice a year, but I think you’ll be surprised by what you come up with.
What’s your biggest threat? How about opportunities?