Today, I'm going to write about the basic steps involved in making a smart buying decision. It's easy to get caught up in the excitement of buying something you really want, like a new car, a television, or new clothes. But eventually the excitement fades away, and you're left making the payments.

Buying products and services involves making decisions. This is true whether you're buying a new car or a loaf of bread. And making wise buying decisions can mean the difference between reaching your financial goals and always being short of cash.

In this post, we will look at the basic steps of smart buying, which include how to distinguish needs versus wants, how to shop for the best deal, and how to negotiate the best price.

Regardless of price or product complexity, good decision-making skills will pay off. Depending on when you buy, where you buy, and how you buy, a loaf of bread can cost $1.29 or $4.29. A car that costs $20,000 at one dealership might be available someplace else for hundreds or thousands less. Obviously the stakes are lower when you are only buying a loaf of bread, but the process of smart buying and decision-making is the same.

The slide above lists seven steps to making a wise buying decision. Let's walk through each one. . . .

Every product or service you buy is designed to solve a problem: a loaf of bread solves hunger; cars provide transportation. But the way you define the problem can have a huge impact on how you solve it. If you define your problem as "I need a new car" then your only solution is to buy a new car. But if you can define your problem as "I need reliable transportation" then this opens the door to alternatives, like using public transportation, carpooling, buying a used car, or riding your bike or walking.

Wise buying is all about making good decisions. And in order to make good decisions, you need to know your options. So after you define your problem, the next step in wise buying is making a list of all possible choices -- everything you can think of. Remember, we're not evaluating yet, we're just making a list of everything we can think of to consider. The key is to have as many alternatives as possible. More complex and important purchases--like buying a car or a home--require more alternatives.

It's important to be able to tell the difference between needs and wants. You may want a new car, even though taking the bus will get you where you need to go. Or you may want a new television, even though your old one still works. These factors are important in Helping You Achieve Your Goals.

Many people get into trouble when they confuse what they "want" with what they "need." As soon as you decide you "need" something, then other alternatives for solving your problem are taken off the table. Your mind is made up and the decision-making process is over.

Sometimes it's helpful to make a chart to define things as wants versus needs. The slide above shows a sample wants versus needs checklist for purchasing a vehicle. Click on the link below to download a wants versus needs checklist that you can use for making your own purchasing decisions.

Once you've written down all the alternatives for solving your problem, it's time to gather as much information as you can. Remember, the best way to make your money go farther is to always get the best deal you can find. That means doing your homework.

For instance, when buying a car you should have pricing for makes and models that interest you, the value of your current vehicle, interest rates for your financing options, and pre-approval from your bank for the loan.

And remember, you can't rely solely on sellers for product information. They have an incentive to give you only the information that is favorable to them. You want to seek out reliable independent sources for information, such as the Kelly Blue Book and Edmunds.com web sites for car buyers.

After you've done your homework with independent sources, the next step is to shop around. This involves gathering information from different sellers, so you can decide who is offering the best deal. This doesn't always mean the lowest price (a $5,000 car that runs for a week is not a better deal than a $10,000 car that runs for 5 years).

When you comparison shop you should take a look at things like the product's features, durability, warranty, and styling, as well as price. Your best buy is the alternative that gives you the quality and features you need at the lowest possible price.

The key to comparison shopping for big ticket items, like vehicles, is to make the seller provide you with the information you need. For instance, always get the seller to give you a firm price. That way you can compare their price with other sellers, and with what you know the item is worth. Second, never tell the seller what you can afford to pay, or that's what the seller will charge you. If you're buying a vehicle, avoid discussion of a trade-in until after you have a firm price on the vehicle you're buying. That way, you can compare your seller's offer for your used vehicle to what you know it's worth. And don't discuss financing until you have a firm price on both vehicles. Then use the APR to compare the cost of the seller's financing to what you know you can get elsewhere.

Choosing the best alternative isn't that hard when you're buying a loaf of bread. But it can be very difficult when you're buying more costly and complex products or services. That's when it's especially important to make a wise buying decision. Sometimes it helps to make a list of the features you're looking for, and then determine which alternatives meet your needs. For example, the slide above shows a chart that can help you make the final choice when you're purchasing a car. Click on the link below to download a blank decision-making chart that you can customize for your own major purchases.

Choosing the best alternative isn't that hard when you're buying a loaf of bread. But it can be very difficult when you're buying more costly and complex products or services. That's when it's especially important to make a wise buying decision. Sometimes it helps to make a list of the features you're looking for, and then determine which alternatives meet your needs. For example, the slide above shows a chart that can help you make the final choice when you're purchasing a car. Click on the link below to download a blank decision-making chart that you can customize for your own major purchases.

Being a good negotiator comes naturally to some people, but a lot of us have to work hard at it. Here are some tips to help you be a good negotiator:

Know the fair price of what you are buying.
Never tell the seller what you can afford.
Make the seller offer a price first.
Negotiate each part of the deal separately.
Let the seller know you have other options.
Be prepared to walk away from a bad deal.
Don't let yourself be rushed.

Knowledge is power. Do your homework, and control the situation by knowing your needs and wants, and what your alternatives are. You'll be amazed at how much easier it is to make a wise decision.

Time to recap this topic. Wise buyers know that regardless of price or product complexity, using good decision-making skills can pay off.

There are seven steps to smart buying:

First, define the problem. What will the product or service solve?

Second, identify alternative ways of solving the problem, but don't evaluate them yet. The more important the purchase, the more alternatives you should have.

Third, separate your needs from your wants. This will save you money because you can eliminate options that, while nice to have, cost extra money.

Fourth, gather information about your alternatives from reliable, independent sources.

Fifth, comparison shop for the best deal. Which alternative gives you the quality you desire at the lowest possible price?

Sixth, decide on the best alternative, based on your criteria.

And finally, negotiate the best deal.