Do you make financial decisions in the short,
medium or long term?

You can decide what to do with your money in different ways. You can plan for the short, medium or long term. Once you have made your weekly or monthly budget and you have some spare money you are then in a position to make that choice.

If you decide on the short term, you will spend the spare money on something you would like or need immediately.

If you decide on the medium term, you might save for a new car or washing machine. You will plan over a fixed period of time - either you will save a small amount of money every week, or you will take out a loan that you can repay over a fixed period of time, for example over 3-5 years.

If you decide on the long term, you plan for a long financial commitment or for a long term plan. Such a long term commitment could be a mortgage. Another example of a long term plan is to save for retirement or to pay for your children's further education.

Whichever way you decide, you should keep in mind that you might need money for a rainy day. If you use all your money in the short term and something unforeseeable happens you could find yourself facing considerable financial difficulties. So always make sure that you take these unforeseeable events into consideration.

Below are some examples of unplanned events which will require money to put right. Read the cases and then list some of the advantages and disadvantages of each of the solutions.

Car repairs
Your car fails its MOT. In order for it to pass you need to pay around £150 for repairs.

You do not have this money at the moment. Do you:

• take out a loan and pay for the repairs?
• not get the car fixed?

New washing machine
Your washing machine breaks down. In your family you have four children under the age of 10 years old so it is really important that you are able to wash their clothes regularly. You do not have any spare cash to buy a new washer. Your options are:

• go to the launderette
• rent a washer
• pay to get the washing machine repaired
• buy a washer on six months interest-free loan
• buy a washing machine from a catalogue
• get a loan that charges interest.

Replacement carpets
A pipe bursts and floods your ground floor. Your carpet needs to be thrown away along with your sofa. You do not have house contents insurance. Your options are:

• remove the carpet and sofa but do not replace immediately
• buy a new carpet and sofa on six months interest-free credit
• buy from a catalogue
• get a loan payable with interest to buy a new carpet and furniture
• go and visit your local furniture exchange.

How you plan affects your finances. These examples have shown that you can get into severe financial difficulties if you don’t plan ahead. If you consider these events in your medium and long term plans, you can avoid financial problems so always try to be aware of your different short, medium and long term financial needs.