MSE’s Academy of Money
MSE’s Academy of Money

Start this free course now. Just create an account and sign in. Enrol and complete the course for a free statement of participation or digital badge if available.

Free course

MSE’s Academy of Money

6 A decision-making model to take control of spending decisions

Having examined the various internal and external influences on spending decisions, it’s time to take control of how you go about spending money. There are a few simple steps that can help you make good (or at least better) choices of products and services.

Watch Video 3 on the four-step decision-making model.

Download this video clip.Video player: Video 3 A decision-making model to take control of spending decisions
Skip transcript: Video 3 A decision-making model to take control of spending decisions

Transcript: Video 3 A decision-making model to take control of spending decisions

Making sound financial decisions, including those when you’re buying big-ticket items requires a clear and coherent plan. Let’s see how a four-step decision-making model can help with spending decisions. Step 1 is where you assess your finances. The budgeting and taxation model will help with this.
Try to identify items in your weekly, monthly, or annual budget where you’re paying too much. Can you get a better deal? This may involve looking at internet comparison sites, studying personal finance web sites or sections in newspapers, or simply talking to your family and friends.
Step 2 is where you identify what you’re going to do to improve your finances once you’ve assessed them. You may be paying too much for your gas and electricity, and you might think the best course of action to take is to switch energy supplier. Cancelling membership of clubs and societies you don’t really use, changing the supermarket you use, or moving to a new insurer could all save you money too.
But before making a change, it’s often worth approaching your existing supplier to see if it can offer you a better deal. Don’t be shy about haggling here. Compare any deal it offers with those offered by alternative suppliers to make sure you’re making the right decision, whether that’s to switch or stay.
Step 3 is, on the face of it, the easy bit. Simply act on your decision, say terminating your existing energy deal and signing up to a new supplier. For some utility services, there are sites that do this for you. But this is the stage where inertia, where you put off a financial decision, or stalling, perhaps from misplaced loyalty to an existing supplier can interfere with good decision making. So don’t delay and don’t stall if you want to get a better deal and help your finances.
Step 4 is the final stage of the decision-making model. Once you’ve acted, don’t just sit back. Make sure you review the decisions you’ve made. For example, has switching supermarkets saved you money? Is the new gym really offering better value for your money than the one you used before?
Reviewing your decisions is vital. Only then will you know for sure if the action taken was wise. If not, you may need to start again at step 1. Really, you should always be using the four-step model with the process of assessing, deciding, acting, and reviewing becoming a routine process for managing your finances effectively.


End transcript: Video 3 A decision-making model to take control of spending decisions
Video 3 A decision-making model to take control of spending decisions
Interactive feature not available in single page view (see it in standard view).

Activity 8 Making spending decisions

Timing: Allow approximately 5 minutes for this activity

Think back to a recent major purchase you made – perhaps a car, a household appliance, a new computer. Having watched the video, if you were now to make a similar spending decision would you approach it differently?

To use this interactive functionality a free OU account is required. Sign in or register.
Interactive feature not available in single page view (see it in standard view).


Clearly the answers are personal to you. The key questions are:

  • Did you do some market research before buying?
  • Did you take time to locate the best deal?
  • Did you then act promptly to buy the product?
  • Did you negotiate the terms of the deal, including the price?
  • Were you prepared to switch services when buying such products as insurance products, and utility, internet and mobile phone services?
  • Are you using the outcome to guide you when making your next major purchase?

All this may seem like a bit of a chore – but you may be amazed how much you can save each year by applying this four-step model.

Next you have a short quiz before examining how the four-step model can help when it comes to buying insurance products.


Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has 50 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to University-level study, we offer two introductory routes to our qualifications. You could either choose to start with an Access module, or a module which allows you to count your previous learning towards an Open University qualification. Read our guide on Where to take your learning next for more information.

Not ready for formal University study? Then browse over 1000 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus371