To build wealth, you have to be a smart shopper.  Here are the 4 rules we follow that help us make smart purchases:

#1 Identify Needs Before You Need Them.

#2 Target buying things when the price is the lowest.

#3 Only make purchases that help you live your best life. 

#4 Always pay cash.  Never buy on credit.

A good example of how we put these rules into practice is when we went Black Friday shopping this past weekend.  We spent more money than we usually do in a 72 hour span.  But it wasn’t mindless, crazy spending.  There was a lot of methodology to the madness.

These are the rules we followed to shop smart, and buy a bunch of stuff we’ve either needed, or wanted, when the price was the lowest.

First:  We identified our needs so we could plan ahead.

You will spend a lot more money when you’re forced to make a purchase when it’s urgent, rather than having months to prepare for the purchase.  So our first trick of shopping smartly, is identifying our needs before we need them.  This way we can target making our purchases when the prices are the lowest, rather than being at the mercy of retail stores who present their products at the highest prices.

For example, my wife and I love to ski in the winter.  To save money over the last few years, I have been using an old pair of my mother’s goggles. But for the last few years, I have wanted my own pair of goggles.  I’ve avoided buying my own goggles for two reasons:  1) A nice pair is expensive!  2) We’ve been busy using all of our extra cash to buy more important assets like real-estate, stocks, and cash for our emergency fund, which will eventually become a cash-printing machine for us.

But as I’ve been buying all these assets, I have always wanted to buy my own pair of nice ski goggles.  But my problem was I didn’t want to pay $100+ for goggles that I’ll only use a few times a winter.

But this year, as our wealth has continued to grow, I realized I can afford some of the luxury items I’ve always wanted. When I saw the Black Friday ad for our local outdoors store this last week, I figured it was a good time to explore that purchase.  On Friday morning, we drove to the store, and I found this nice pair of ski goggles that usually retailed for $100+ in the clearance bin for $30.  Nice!

It’s exactly what I was looking for, at the price I wanted to pay.  By postponing this purchase, I  was also able to get ourselves in a financial position where we own more assets, and it was easier to afford them.  And by waiting for the black Friday sale, I was able to find a pair of last year’s model thrown into the clearance bin.

Second:  We target buying things when the price is the lowest.

I also bought a massive, extremely-cool saw this weekend!!!  I bought the saw not because I need it right now.  But because I am sure I’ll need it in the future, and it was on a screaming deal right now.  This is why I bought it:

Over the last 15 years, I have learned a lot about myself through experimentation, and trial and error.  One thing that I’ve learned is that I like owning, and improving real estate.  Home projects are fun for me.  It’s physically challenging, relaxing, and it’s a side-business that makes me a lot of money.  Because of the sense of purpose and achievement I’ve feel owning real-estate, it is highly likely that I will find a way to own more real-estate in my future.

But owning more real-estate also means that more home projects are on the way.  Because of this, I’m always looking for an excuse to update the tool collection I use and own.  Two years ago, I bought an average miter saw at a liquidation sale.  That saw has worked well, but I’ve always regretted not buying the bigger version in the picture above.

So for the last 2 years, I have been on the lookout for my dream saw.  It wasn’t an urgent need, so I’ve been patient searching for the best possible price.  These saws are normally $500+.  The price I wanted to pay was about half that.  So when I saw Home Depot’s black Friday ad displaying my dream saw for $299, I got excited because I could finally justify buying one after 2 years of waiting.  (On top of the low price, I’m fairly certain I can sell my old  saw on Craigslist for $150, which means I’d only have to pay $150 for my dream saw that should last a lifetime.)

It took me 2 years of planning, shopping, and waiting.  But in the mean time, I got a lot of money invested, and I think that’s the ultimate trick to shopping smartly:  Wait as long as you possibly can for the items you want to buy, and invest as much money as you can as you wait.  Then, when the prices are lowest, buy the things you’ve wanted at the lowest possible price.

Third:  We only buy it if it will help us live our best life.

We try not to buy crap!  That’s the biggest piece of advice we can give you if you want to shop smartly:  Only buy things if you’re going to use them often, and for a long time!!!

We try to follow 3 firm shopping rules.  We don’t buy things if they cause any of these three things to happen in our lives: 1) The purchase slows our journey to our goals down.  2) The purchase turns into junk sitting in our house that we don’t want. 3)  The purchase costs us money that we could have spent on other adventures that would have made us happier.

We believe the only reason to shop at all is to help you buy the things you need to live your best life.  That means if you’re pondering making a purchase to cure boredom, or fill an empty feeling of inadequacy inside of you, then it’s probably a purchase you don’t need to make.   You will be just fine without it.  If you do buy it for these reasons, you’ll probably end up regretting the purchase in the long run anyway.

Fourth:  We never buy things if we don’t have the cash to pay for it.

There’s only one thing that we’re willing to take a loan out for, and that’s real estate because we can make money on that debt.

But for everything else:  We only buy things with cash.  That means before we buy anything, we spend days, months, or years saving our cash so that we can afford everything we buy with little financial risk involved.

While on twitter this weekend, I saw someone tweet about black Friday.  They said: “Remember, financial bloggers that are buying things on sale actually have the cash to pay for them!!!  They’re not making any of these purchases on credit!!!”  A bunch of people liked it.

It was kind of a revolutionary moment for me to realize that most people don’t have the cash to buy the things they want.  Financing things is such a foreign concept to me that I didn’t even realize a large percentage of the population lives this way.  And these people probably look at me just as weird for actually saving my money to avoid debt and buy things with cash.  But I’ve learned that life is a lot easier and more peaceful when you don’t have debt or monthly payments to worry about.  The smart way to shop is to save all the cash you can.  Then, only buy what you can afford with the cash you have in the bank.

Keep your financial life simple, so you can focus on achieving your most challenging dreams.  One of the easiest ways to keep your financial life simple is by learning how to shop smart.  What rules do you follow that help you shop smart?

Please share your thoughts in the comment section below so that you can inspire someone reading this after you! (Anonymous comments are fine.)

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